Analysis of the Hotel Industry in Malaysia

Analysis of the Hotel Industry in Malaysia CHAPTER 1 INTRODUCTION 1.1 Overview Basically, this chapter is an introduction of the research topic. In the Section 1.2, it briefly introduces the background of this study. Introduction of hotel industry in Malaysia is included in Section 1.3. Next, problem statements are explained in Section 1.4 while the research objectives are laid out in Section 1.5. Besides, Section 1.6 and Section 1.7 have included the scope of study and the significance of this study respectively. Lastly, Section 1.8 is about the explanation of the organization of this study with a flow chart attached depicting the tasks to be carried out. 1.2 Background of Study In todays increasingly competitive and complex business environment, being sustainable in the business arena is no longer the mission of any of the organization, but to grow. Competitive advantage gives organization to shield and isolate itself temporary from the intensive competitive environment. This advantage could be taken away when competitors improved their products or services that potentially make more appealing to customers. Therefore, organization requires a never-ending process of continuous improvement. The word kaizen has been used by Japanese for describing this ongoing process of unending improvement by setting and achieving of ever-higher goals that involves both managers and workers (Imai, 1996; Heizer Render, 2006). Over the years, organizations from every industry keep coming out new products, either with a different exterior or equipped with better and more advanced features. For example, todays mobile phones have almost the same function as a computer except with a smaller screen and size, auto industry comes out cars that strongly emphasize on performance, safety, comfortably, elegance and so forth. Same thing goes to services, organizations come out with services that are tailored to every customers. As a result, this provides what the customers are really wanted and undoubtedly, customer satisfaction increased. For instance, Tune Hotels has made all services as optional, from breakfast, air-conditioned room to water-heated bathroom (TuneHotels.com, 2009). All of these are normally being provided as a package in any other hotels. As a consequence, customers have the right to select which services they want and they are being charged according to what services they have selected. To sum it u p, organizations in 21st century are being very innovative in serving their customers. Instead of merely come out with novel products and services, organizations have to look into the quality issue of the products or services produced. Customers will never be satisfied if the products or services they received have no quality, regardless of how novel and unique it is. Here we need to look into quality issue. According to Blankenship and Petersen (1999), W. Edwards Deming is known most widely for his work in quality management. Demings 14 points help Japan in achieving very high levels of quality in products and turn out to be a great shock for the westerners because Japanese goods were perceived at low quality and cheapness before this. He used statistics to examine production processes for flaws and greatly influenced Japanese industry as it rebuilt in the years after World War II. Today, TQM is a popular topic for quality management. TQM is called total because it entire the whole organization, from the supplier to customer (Sharmma, 2008). In other words, TQM talks about the satisfaction of customer, supplier, and employee. Furthermore, quality assurance systems such as statistical process control, quality control and better conformance quality are lined to better business performance (Dick, 2000). Other than that, people in todays world are relatively concern with the quality of the products and services they purchase. With the advancement of Information Technology (IT), gathering information regarding quality for various products has no longer a time-consuming task. All of this information can be gathered with only a few clicks. For that reason, quality has become one of the considerations at customers pre-purchase stage. Since the quality has become more and more important nowadays, a non-govermental organization (NGO) named International Organization of Standardization (ISO) has published the ISO 9000 series of quality standards at year 1987 (Dick, 2000). The ISO 9000 series of international quality system standards provides a framework for a basic quality assurance system and a good starting point for achieving total quality (Evan Lindsay, 1999). Generally speaking, businesses can base the development of their products and services on reference documents which have broad market relevance. This, in turn, means that they are increasingly free to compete on many markets around the world. As on the customer side, the worldwide compatibility of technology which is achieved when products and services are based on International Standards brings them an increasingly wide choice of offers (ISO, 2009). By implementing TQM, both the organizations and customers can enjoy ever greater benefits. From the aspect of organizations, in reality, both the tangible and intangible ones are offered by TQM, such as cost savings for the employer and greater job satisfaction for the employee (Gunasekaram, Goyal, Martikainen, Yli-Olli, 1998). According to Shemwell, Tavas, Bilgin (2008), the key to sustainable competitive advantage lies in delivering high quality service that will in turn result in satisfied customers. In addition, Dick (2000) has proven that better quality does have a consistent positive relationship with improved business performance. Figure 1.1: Two Ways Quality Improves Profitability (Adapted From: Heizer and Render, Operations Management, 2006.) Also, Heizer and Render (2006) says profits can be increased by improved quality as the figure depicted above. Firstly, improved quality generally leads to both sales gains and reduced cost. This is because improved response, higher prices and improved reputation are all make sales gain happened. Moreover, reduction of cost happens when productivity increases, rework and scrap costs decreases and warranty costs decreases. Therefore, profits will be increased when expenditures (costs) have been lowered and revenue (sales) has been increased. 1.3 Hotel Industry in Malaysia As a sub-sector to services sector, tourism has an increase in foreign exchange earnings from RM17.3 billion in year 2000 to RM46.1 billion in 2007 (Bank Negara Malaysia [BNM], 2008). It shows that tourism had a growth in its revenue for 166% in a period of only 7 years. This is largely due to the effects of campaigns â€Å"Visit Malaysia Year† (Poon Low, 2005) and â€Å"Cuti-cuti Malaysia†. Up-to-date, tourism has recorded total receipts of RM49,561.2 million for the year 2008, an increment of RM3,491.2 million from year 2007 (Tourism Malaysia Corporate, 2009). Spillover effects have been generated by the increase in tourism activities into other sectors of the economy. In other words, the steadily growth of tourism industry has contributed to the growth of all related industries and businesses. These included hotel industry, retail businesses, restaurants and transportation (Bank Negara Malaysia [BNM], 2008). Hotel industry plays a very important role in complementing tourism as it provides accommodation to travelers and tourists. Nevertheless, hotel industry has been a major player in the growth of the Malaysian economy, which contributing approximately 50 percent of the nations real GDP (Awang, Ishak, Radzi, Taha, 2008). As today, there are approximately 105 hotels with different ratings and sizes in Kuala Lumpur alone (Malaysian Association of Hotels [MAH], 2009). This has shown that Kuala Lumpur has an incredibly high density of hotels. Here the problem arises, how is the hotel industry in Kuala Lumpur cope with the never ending increase of tourists and travelers? In this context, it seems not possible to provide more rooms by simply adding the number of hotels in Kuala Lumpur. This is because the land area of Kuala Lumpur has only 244km ², meaning that there will be 1 hotel in every 2.3km ². In this sense, hoteliers have to find other ways to increase their productivities. In recent years, governments from all over the world have been putting more and more emphasis in developing services industry in their countries. They are all now aware of the unique characteristic of services and its importance in supporting a countrys economic growth. Business services showed the strongest growth in terms of value added and economic productivity (Wirtz Ehret, 2009). Theoretically, any organization in developing countries must endeavor continuously to improve productivity in order to increase profitability (Oluleye Olajire, 2001). As a consequence to the Malaysia economy, a higher amount of GDP will be recorded, more and more employment will be provided and so on. Hence, these have made hotel industry as a key sub-sector to services industry and these social responsibilities should not be overlooked by hoteliers in Malaysia. 1.4 Problem Statements In general, Malaysian will have perception saying that things made by western countries and Japan have higher quality, things from China have no quality and so forth. This is partially true in reality, majority of the Malaysians opt to buy import goods where there is an option for them. Therefore, local made products are usually having less supports from Malaysian as it has been perceived to be low quality in terms of unreliable and unattractive (Damodaran, 2009). This shows that local made products have lesser competency even in local market. Consequently, government encourages both the manufacturer and services provider to look seriously in quality issue by giving several incentives (Malaysian Rubber Export Promotion Council [MREPC], 2009). However, the outcomes of it are not up to the expectation. This may due to the inadequate research carry out in Malaysia. Thus, organizations especially the small size ones will definitely lack of information when trying to implement quality man agement system. Kuala Lumpur is one of the major cities in Malaysia with an estimated of 1.6 million of population at the year 2005 (KL City Plan 2020, 2009) and it is to be said as the fastest growing region in Malaysia. This figure says that Kuala Lumpur is the most densely populated district in Malaysia. Moreover, Kuala Lumpur has a vast number of tourists and it increases over years. Just to name a few, its major tourist destinations include Dataran Merdeka (the Independence Square), House of Parliament, the Istana Budaya, the Istana Negara (National Palace), the Kuala Lumpur Tower, the Muzium Negara (National Museum), Petaling Street and etc (Tourism Malaysia, 2009). With the limited land that Kuala Lumpur has, it is almost impossible to build more hotels in order to cater the increasing number of tourist in the near future. Therefore, several actions have to be taken in order to best serve the tourists with the limited number of hotels in Kuala Lumpur. This is to ensure that the receipts from tourism will not be negatively affected while the hotel industry can continuously contribute significantly to GDP. As time goes by, Human Resource Management (HRM) has become a popular topic than ever before. Organizations have understood the importance of employees (human resources). At the same time, empirical research studies have been done by researchers to further understand and prove those theories related to motivate and compensate employees. Dessler (2005) says that employee satisfaction and performance are positively related. Therefore, hoteliers must understand the importance to maximize their employee satisfaction as this could lead to greater business performance. However, by solely compensating employees with both monetary and non-monetary rewards has its limitation. Performance will stop increasing when the problem arises are not come from employees but the management. For instance, it could be lacking a well-planned system in executing tasks, ineffective communications in organization and so forth. In other countries, TQM has been so popular for a period of time as it helps organiz ations to achieve even higher of performance. In other countries, plenty of research studies have been carried out to investigate which TQM factors are the most influential to the particular country. Unlike in Malaysia, the number of TQM study that can be applied is limited and lacking of guidelines for hoteliers is still a major problem. Someone could say that hoteliers can simply use the findings from other countries as a guideline for implementing the TQM. But, there is always a high possibility that those mentioned as important factors are not important in Malaysia, when compared to the original country that the research is carried out. In other words, it is imperative to understand the applicability of the findings from other countries. The applicability of some of the findings from research still remains questionable. For example, information and analysis, one of the TQM factors is said to be extremely important to developed and developing countries but it is not persuasive enough to apply on third world countries. This is because they probably lack of necessary infrastructure. Therefore, it can be said that Malaysias hoteliers are actually lack of a blueprint when initially applying TQM to their respective hotels. In other words, hoteliers may not known which factors of TQM can generally lead to better performa nce in the Malaysia. Furthermore, with the limited of number of such research available to Malaysia, it has nothing to show hoteliers how strong the impact of TQM factors is to labor productivity, thus lack of motivation to change their routine and ways of doing business. When this occurs, Malaysia hotel industry can never be improved, previously owned competitiveness can be competed away and GDP can be affected. 1.5 Research Objectives The general objective of this study is to identify the impact of each of the selected TQM factors towards the labor productivity. Next, it is then to be expressed in term of its level of correlation between each of the independent variables and the dependent one. Therefore, this result could be used by the Malaysia hoteliers in increasing their labor productivity as these findings will show which of the independent variables plays a more important role in achieving higher labor productivity in the Malaysia context. The following objectives are specifically derived from the problem statements: To identify the relationship between the chosen independent variables and dependent variable; To investigate the level of impact for each of the chosen TQM factors towards labor productivity; To determine whether high TQM commitment hotels will generally generate higher labor productivity than the low TQM commitment hotels; and To provide insights and recommendations for improvement to Malaysias hoteliers at the end of the research. 1.6 Scope of Study The scope of this study covers a discussion on TQM as well as the importance of productivity. As the scope of both TQM and productivity are broad, this study will primarily focus on the aspect of TQM factors and labor productivity. Besides, this study investigates the relationship between selected TQM factors and labor productivity. Theoretically, those selected TQM factors is to be said to have influences on the labor productivity. Therefore, this research is also carried out with the intention to identify the degree of impact of the selected TQM factors towards labor productivity, either a stronger or a weaker one. Moreover, this research is intended to provide useful and relevant findings for hoteliers in Malaysia, in order to achieve the ever higher labor productivity in Malaysia hotel industry. Therefore, it is targeted to hoteliers in Malaysia primarily located in Kuala Lumpur. Lastly, a questionnaire has been included in this study and carried out on hoteliers of Kuala Lumpur in order to measure the impact of TQM factors towards labor productivity. 1.7 Significance of Study The importance of this study is to explore the relationship between the selected TQM factors and labor productivity in the context of Malaysia hotel industry. Similar research studies have been done to prove the relationship between the TQM factors and productivity. However, most of it were not focusing on the hotel industry. Some of them might have focused in hotel industry, but the issue of applicability remains noticeable. For that reason, this study is focusing in the Malaysia hotel industry as an applicable guideline and reference for the Malaysia hoteliers. Besides that, this study will be able to contribute relevant information to the Tourism Malaysia Promotion Board (Malaysian Ministry of Culture, Arts and Tourism). In Section 1.3, it shows the importance of tourism is to the nation GDP. Furthermore, hotel industry is relatively important to the country as an accommodation means for tourists to visit Malaysia. In addition, through this study, government is now able to identify unsuitable approaches and strategies. Therefore, essential action such as coming out new incentives scheme can be taken to effectively replace the old ones. Thus, national resources can be distributed and used even more effective and efficient than ever. As to hoteliers, this study helps to lighten their worries when first implementing the TQM as they are now getting more supporting evidence from this study. According to Yesawich (1997), building customer loyalty is one of the biggest challenges for the hotel industry. Successfully implemented TQM contributes to customer satisfaction. From customer satisfaction, loyalty and profits are positively related. In other word, TQM can potentially overcome one of the biggest challenges in hotel industry. At the same time, organizations can enjoy the benefits from TQM such as creating competitive advantage, providing unique services and so forth. 1.8 Organization of Study The organization of this research study comprises of 5 chapters. This research study begins with Chapter 1 that covers the introduction for the chosen topic. It consists of the background of study and hotel industry in Malaysia. Next, problem statements, research objectives, scope of study and the significance of study are laid out in different section. Lastly, organization of study that shows the overall flow of this study ends the Chapter 1. Chapter 2 provides the literature review for the chosen topic. It includes all the related empirical studies that have been done by the previous researchers. Several of viewpoint, definition and argument have been included in this chapter as well. For instance, different point of views from different researchers for the same variable can be found here. Chapter 3 outlines the overall methodology being used in this research study. It shows the research framework together with the explanation and hypothesis of the framework. Besides, data collection method, sources of data, sampling method and sampling size will be discussed in separated section. Furthermore, there is the outline of the questionnaire development and scaling techniques before discussion of data analysis and measurement close the chapter. Chapter 4 discusses the findings and the results of this research study. Therefore, all related chart, graph, data will be included in this chapter. This chapter basically ends with the interpretation and discussion regarding all of the findings. Finally, conclusions and recommendations will be formed and given to readers. It concludes which TQM factors have a stronger effect and vice versa. Besides that, limitations of this study will also be included. The following figure shows the overall outline of this study. Figure 1.2: Flow Chart of Study CHAPTER 2 LITERATURE REVIEW 2.1 Overview This chapter develops and provides the foundation for this research study. Previous works done by other researchers that relate to labor productivity, total quality management, customer focus, human resource management, information analysis, leadership and strategic management are all presented in this chapter. Besides, in order to gain a better understanding of this research, viewpoints from different researchers are then compare and contrast in this chapter. 2.2 Labor Productivity In the 21st century, productivity growth plays an important role in GDP growth of any nation. According Chapman, Murray Mellor (1997), the use of sales per employee has been widely used to measure labor productivity for individual companies. Besides, Sauian (2002) says that in knowledge-based economy, competitive advantage can be maintained through â€Å"high productivity† and efficiency. In the other way round, labor productivity is an important element used to gauge competitiveness in producing goods and services (Sauian, 2002). Moreover, Hoffman Mehra (1998) argues that high productivity effects are impossible to sustain without a quality-based process-oriented environment which emanates from the support of employees, upper management, and the organization. Malaysia registered a productivity growth of 2.9 percent from RM 48,113 in year 2007 to RM 49,526 in year 2008. Furthermore, productivity contributed 62.2 percent while employment contributed 37.8 percent to the GDP growth of 5.98 percent. This growth surpassed several major countries of the Organization for Economic Co-operation and Development (OECD). As shown in Figure 2.1, the Rep. of Korea recorded a productivity growth as much as 3.6 percent, the USA (2.1 percent), the Japan (0.8 percent), the Australia (0.4), the Germany (0.1 percent) and the rest had zero or negative growth (Malaysia Productivity Corporation [MPC], 2009). Figure 2.1: Productivity Growth of Malaysia and Selected OECD Countries, 2008 (Adapted From: MPC, Annual Productivity Report 2008) Thomas (1994) defined the simplest form of labor productivity (LP) as the hours of work divided by the units of work accomplished. In general, LP is a measure of output from a production as per unit of input. Therefore, it can be expressed as: LP From the above formula, LP consists of the total output and total input. It can be in terms of a particular production, a department, an organization or even a nation. In general, if we want to increase productivity, it is necessary to increase the systems output, if the input is to remain constant. Similarly, if the systems output is to maintain the status quo, then we need to utilize less input. From a different aspect, if both output and input are increased, then it is mathematically obvious that the rate of increase of output should be higher than the rate of increase of input, if productivity needs to be improved (Sauian, 2002). Therefore, in order to achieve higher LP, input and output should be manipulated in various ways. Schonewille (2001) said the effectiveness of training is lower compared to initial education when comes to contributing to labor productivity. Even thought training has smaller effects on labor productivity, still the estimated coefficient is positive (Schonewille, 2001). A number of researchers have proven the positive impact of quality on productivity, whereas both can influence positively profitability (Bylund Lapidoth, 1994). This relationship has been generally accepted within the manufacturing industry (Chase Aquilano, 1995). However in reality, LP is a much more complex phenomenon which largely depends on quite diverse factors such as workers competence, motivation, supervision and so forth. Also, management does affect LP (Enshassi, Mohamed, Mayer, Abed, 2007). Chapman and Al-Khawaldeh (2002) has investigated the relationship between TQM implementation and labor productivity in industrial companies in Jordan, as shown in Figure 2.2. The results of data analysis indicate that there is a positive relationship between TQM (and each TQM element) and labor productivity. Interestingly, it is found that companies with ISO 9000 certification has high positive slope whereas companies without ISO 9000 certification has low positive slope. 2.3 Total Quality Management (TQM) TQM emerged in the mid-1980s in response to Japans invasion of US markets with their high quality-low price automobiles and electronic products. Quality has been defined differently as conformance to requirement (Crosby, 1979), fitness for use (Juran, 1979), continual improvement (Deming, 1982) and as define by customers (Ford, 1990). Whereby, Spitzer (1993) called TQM â€Å"the only source of sustainable competitive advantage†. Also, TQM is continually satisfying agreed customer requirements at lowest cost through harnessing everyones commitment (Burton Franckeiss, 1994). In theory, TQM seems to assure performance improvement for any organization. But, in practice, TQM works for some organization and not for others (Terzioski, 2006). According to Chapman and Al-Khawaldeh (2002), TQM is a key strategy for maintaining competitive advantage and is a way of managing organizations to improve its overall effectiveness and performance towards achieving world-class status. During the last two decades or so, simple inspection activities have been replaced or supplemented by quality control, quality assurance has been developed and refined, and now most companies are working towards TQM (Dale Bunney, 1999). Dale (1999) indentifies four discrete stages: inspection, quality control, quality assurance and TQM, as shown in Figure 2.2. Figure 2.3: The four levels in the evolution of Total Quality Management (Sources: Adapted from Dale Bunney, Total Quality Management Blueprint, 1999) Inspection is defined as â€Å"activities such as measuring, examining, testing or gauging one or more characteristic of an entity and comparing the results with specified requirement in order to establish whether conformity is achieved for each characteristic† (BS EN ISO 8402, 1995). Quality control is defined as â€Å"operational techniques and activities that are used to fulfill requirements for quality† (BS EN ISO 8402, 1995). Quality assurance is defined as â€Å"all the planned and systematic activities implemented within the quality system and demonstrated as needed to provide adequate confidence that an entity will fulfill requirements for quality† (BS EN ISO 8402, 1995). TQM is the highest level which involves the application of quality management principles to all aspects of the business, including customers and suppliers. It is then defined as the management approach of an organization, centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, and benefits to all members of the organization and to society (BS EN ISO 8402, 1995). A number of research studies have been carried out to investigate the impact of TQM factors and implementation (Sila Ebrahimpour, 2005; Khan, 2003; Terzioski, 2006). Miller (1993) reported that success with TQM depends on the facilitating conditions. Leadership, human resource management and some other TQM factors are found to have positive impact on business results (Sila Ebrahimpour, 2005). Therefore, these findings can be reasonably useful in assisting managers so that they can allocate resources to improve their typical routines to obtain the best results. Next, five TQM factors have been selected as the independent variables for this study, namely (1) Customer Focus, (2) Human Resource Management (HRM), (3) Information and Analysis, (4) Leadership and (5) Strategic Planning. It is said that customer focus pays more attention on the customers whereas the rest of TQM factors have focused on the internal aspect of the organization. As for HRM, it focuses on the practices involved in carrying out the â€Å"people† of a management position. Information and analysis is said to be the information and communication technology used to further enhance labor productivity as automation has been widely used. Leadership is important as it creates synergy for achieving favorable business results whereas strategic planning is a set of process undertaken in order to develop a range of strategies that will contribute to achieve organization direction. Further elaboration and review for each variable will be discussed in different sub-section lat er. 2.3.1 Customer Focus According to Dean and Bowen (1994), customer focus is as important as many other TQM practices to organizational performance. Being customer-focused keeps us aware of quality, or rather it focuses our quality initiatives on what really matters to the customers (Cox, 1997). Also, Piercy (1995) says that TQM has too much focused on the internal aspect of the organization and much less attention on the customers. Customer satisfaction begins by discovering precisely what customers want and gearing every practice to their exact expectations (Kearney, 1994). Customer focus has changed mass production to mass customization. In addition, being far from depersonalizing the world, technology has the power to return us to being treated as individuals while getting all the benefits inherent in large-scale enterprise (Cox, 1997). Sousa (2003) pointed out the importance of customer focus lies in the fact that it is the starting point of any quality initiative. However, it has not received enough attention from quality management researchers (Cai, 2009). In the final decade of twentieth century, the term, customer-centered competition has been introduced. Customer-centered company is a company that focuses on customer developments in designing its marketing strategies and on delivering superior value to its target customers (Kotler Armstrong, 2008). It is common to hear the statement â€Å"customer is always right† in any organization. This could be the trend that organization is to focus on customer needs to be customer-led, to be market-oriented, to care for customers and so forth (Piercy, 1995). These are to make total customer satisfaction a strategic foundation for achieving competitive advantage (Kearney, 1994). Customer focus has been therefore defined as the degree to which firms continuously satisfy customer needs and expectations (Philips, Chang, Buzzell, 1983). The difference between customer focus and customer understanding is, according to Lagrosen (2001), mainly a matter of perspective. Customer focus means the activities of the companies are intended to benefit the customer but the customer is seen from the companies own perspective. Therefore, effects are usually being made to gain information about the customers needs and wants, although always in a set framework that originates in the companies view of the product and its features. Whereby, customer understanding needs perspective to be shifted. It means the company needs to gain entry to the customers own perspective and adopt the customers framework of viewing the product (Lagrosen, 2001). Cai (2009) found that organizational customer focus affects customer relationship practices, which subsequently influence production performance and customer satisfaction, and production performance and customer satisfaction lead to financial outcomes. Ooi, Bakar, Arumugam, Vellepan, and Loke (2007) says TQM practices such as teamwork, reward and recognition, customer focus and organizational trust are positively associated with job satisfaction within their organization. For instance, customer focus was found to have a direct influence on emplo Analysis of the Hotel Industry in Malaysia Analysis of the Hotel Industry in Malaysia CHAPTER 1 INTRODUCTION 1.1 Overview Basically, this chapter is an introduction of the research topic. In the Section 1.2, it briefly introduces the background of this study. Introduction of hotel industry in Malaysia is included in Section 1.3. Next, problem statements are explained in Section 1.4 while the research objectives are laid out in Section 1.5. Besides, Section 1.6 and Section 1.7 have included the scope of study and the significance of this study respectively. Lastly, Section 1.8 is about the explanation of the organization of this study with a flow chart attached depicting the tasks to be carried out. 1.2 Background of Study In todays increasingly competitive and complex business environment, being sustainable in the business arena is no longer the mission of any of the organization, but to grow. Competitive advantage gives organization to shield and isolate itself temporary from the intensive competitive environment. This advantage could be taken away when competitors improved their products or services that potentially make more appealing to customers. Therefore, organization requires a never-ending process of continuous improvement. The word kaizen has been used by Japanese for describing this ongoing process of unending improvement by setting and achieving of ever-higher goals that involves both managers and workers (Imai, 1996; Heizer Render, 2006). Over the years, organizations from every industry keep coming out new products, either with a different exterior or equipped with better and more advanced features. For example, todays mobile phones have almost the same function as a computer except with a smaller screen and size, auto industry comes out cars that strongly emphasize on performance, safety, comfortably, elegance and so forth. Same thing goes to services, organizations come out with services that are tailored to every customers. As a result, this provides what the customers are really wanted and undoubtedly, customer satisfaction increased. For instance, Tune Hotels has made all services as optional, from breakfast, air-conditioned room to water-heated bathroom (TuneHotels.com, 2009). All of these are normally being provided as a package in any other hotels. As a consequence, customers have the right to select which services they want and they are being charged according to what services they have selected. To sum it u p, organizations in 21st century are being very innovative in serving their customers. Instead of merely come out with novel products and services, organizations have to look into the quality issue of the products or services produced. Customers will never be satisfied if the products or services they received have no quality, regardless of how novel and unique it is. Here we need to look into quality issue. According to Blankenship and Petersen (1999), W. Edwards Deming is known most widely for his work in quality management. Demings 14 points help Japan in achieving very high levels of quality in products and turn out to be a great shock for the westerners because Japanese goods were perceived at low quality and cheapness before this. He used statistics to examine production processes for flaws and greatly influenced Japanese industry as it rebuilt in the years after World War II. Today, TQM is a popular topic for quality management. TQM is called total because it entire the whole organization, from the supplier to customer (Sharmma, 2008). In other words, TQM talks about the satisfaction of customer, supplier, and employee. Furthermore, quality assurance systems such as statistical process control, quality control and better conformance quality are lined to better business performance (Dick, 2000). Other than that, people in todays world are relatively concern with the quality of the products and services they purchase. With the advancement of Information Technology (IT), gathering information regarding quality for various products has no longer a time-consuming task. All of this information can be gathered with only a few clicks. For that reason, quality has become one of the considerations at customers pre-purchase stage. Since the quality has become more and more important nowadays, a non-govermental organization (NGO) named International Organization of Standardization (ISO) has published the ISO 9000 series of quality standards at year 1987 (Dick, 2000). The ISO 9000 series of international quality system standards provides a framework for a basic quality assurance system and a good starting point for achieving total quality (Evan Lindsay, 1999). Generally speaking, businesses can base the development of their products and services on reference documents which have broad market relevance. This, in turn, means that they are increasingly free to compete on many markets around the world. As on the customer side, the worldwide compatibility of technology which is achieved when products and services are based on International Standards brings them an increasingly wide choice of offers (ISO, 2009). By implementing TQM, both the organizations and customers can enjoy ever greater benefits. From the aspect of organizations, in reality, both the tangible and intangible ones are offered by TQM, such as cost savings for the employer and greater job satisfaction for the employee (Gunasekaram, Goyal, Martikainen, Yli-Olli, 1998). According to Shemwell, Tavas, Bilgin (2008), the key to sustainable competitive advantage lies in delivering high quality service that will in turn result in satisfied customers. In addition, Dick (2000) has proven that better quality does have a consistent positive relationship with improved business performance. Figure 1.1: Two Ways Quality Improves Profitability (Adapted From: Heizer and Render, Operations Management, 2006.) Also, Heizer and Render (2006) says profits can be increased by improved quality as the figure depicted above. Firstly, improved quality generally leads to both sales gains and reduced cost. This is because improved response, higher prices and improved reputation are all make sales gain happened. Moreover, reduction of cost happens when productivity increases, rework and scrap costs decreases and warranty costs decreases. Therefore, profits will be increased when expenditures (costs) have been lowered and revenue (sales) has been increased. 1.3 Hotel Industry in Malaysia As a sub-sector to services sector, tourism has an increase in foreign exchange earnings from RM17.3 billion in year 2000 to RM46.1 billion in 2007 (Bank Negara Malaysia [BNM], 2008). It shows that tourism had a growth in its revenue for 166% in a period of only 7 years. This is largely due to the effects of campaigns â€Å"Visit Malaysia Year† (Poon Low, 2005) and â€Å"Cuti-cuti Malaysia†. Up-to-date, tourism has recorded total receipts of RM49,561.2 million for the year 2008, an increment of RM3,491.2 million from year 2007 (Tourism Malaysia Corporate, 2009). Spillover effects have been generated by the increase in tourism activities into other sectors of the economy. In other words, the steadily growth of tourism industry has contributed to the growth of all related industries and businesses. These included hotel industry, retail businesses, restaurants and transportation (Bank Negara Malaysia [BNM], 2008). Hotel industry plays a very important role in complementing tourism as it provides accommodation to travelers and tourists. Nevertheless, hotel industry has been a major player in the growth of the Malaysian economy, which contributing approximately 50 percent of the nations real GDP (Awang, Ishak, Radzi, Taha, 2008). As today, there are approximately 105 hotels with different ratings and sizes in Kuala Lumpur alone (Malaysian Association of Hotels [MAH], 2009). This has shown that Kuala Lumpur has an incredibly high density of hotels. Here the problem arises, how is the hotel industry in Kuala Lumpur cope with the never ending increase of tourists and travelers? In this context, it seems not possible to provide more rooms by simply adding the number of hotels in Kuala Lumpur. This is because the land area of Kuala Lumpur has only 244km ², meaning that there will be 1 hotel in every 2.3km ². In this sense, hoteliers have to find other ways to increase their productivities. In recent years, governments from all over the world have been putting more and more emphasis in developing services industry in their countries. They are all now aware of the unique characteristic of services and its importance in supporting a countrys economic growth. Business services showed the strongest growth in terms of value added and economic productivity (Wirtz Ehret, 2009). Theoretically, any organization in developing countries must endeavor continuously to improve productivity in order to increase profitability (Oluleye Olajire, 2001). As a consequence to the Malaysia economy, a higher amount of GDP will be recorded, more and more employment will be provided and so on. Hence, these have made hotel industry as a key sub-sector to services industry and these social responsibilities should not be overlooked by hoteliers in Malaysia. 1.4 Problem Statements In general, Malaysian will have perception saying that things made by western countries and Japan have higher quality, things from China have no quality and so forth. This is partially true in reality, majority of the Malaysians opt to buy import goods where there is an option for them. Therefore, local made products are usually having less supports from Malaysian as it has been perceived to be low quality in terms of unreliable and unattractive (Damodaran, 2009). This shows that local made products have lesser competency even in local market. Consequently, government encourages both the manufacturer and services provider to look seriously in quality issue by giving several incentives (Malaysian Rubber Export Promotion Council [MREPC], 2009). However, the outcomes of it are not up to the expectation. This may due to the inadequate research carry out in Malaysia. Thus, organizations especially the small size ones will definitely lack of information when trying to implement quality man agement system. Kuala Lumpur is one of the major cities in Malaysia with an estimated of 1.6 million of population at the year 2005 (KL City Plan 2020, 2009) and it is to be said as the fastest growing region in Malaysia. This figure says that Kuala Lumpur is the most densely populated district in Malaysia. Moreover, Kuala Lumpur has a vast number of tourists and it increases over years. Just to name a few, its major tourist destinations include Dataran Merdeka (the Independence Square), House of Parliament, the Istana Budaya, the Istana Negara (National Palace), the Kuala Lumpur Tower, the Muzium Negara (National Museum), Petaling Street and etc (Tourism Malaysia, 2009). With the limited land that Kuala Lumpur has, it is almost impossible to build more hotels in order to cater the increasing number of tourist in the near future. Therefore, several actions have to be taken in order to best serve the tourists with the limited number of hotels in Kuala Lumpur. This is to ensure that the receipts from tourism will not be negatively affected while the hotel industry can continuously contribute significantly to GDP. As time goes by, Human Resource Management (HRM) has become a popular topic than ever before. Organizations have understood the importance of employees (human resources). At the same time, empirical research studies have been done by researchers to further understand and prove those theories related to motivate and compensate employees. Dessler (2005) says that employee satisfaction and performance are positively related. Therefore, hoteliers must understand the importance to maximize their employee satisfaction as this could lead to greater business performance. However, by solely compensating employees with both monetary and non-monetary rewards has its limitation. Performance will stop increasing when the problem arises are not come from employees but the management. For instance, it could be lacking a well-planned system in executing tasks, ineffective communications in organization and so forth. In other countries, TQM has been so popular for a period of time as it helps organiz ations to achieve even higher of performance. In other countries, plenty of research studies have been carried out to investigate which TQM factors are the most influential to the particular country. Unlike in Malaysia, the number of TQM study that can be applied is limited and lacking of guidelines for hoteliers is still a major problem. Someone could say that hoteliers can simply use the findings from other countries as a guideline for implementing the TQM. But, there is always a high possibility that those mentioned as important factors are not important in Malaysia, when compared to the original country that the research is carried out. In other words, it is imperative to understand the applicability of the findings from other countries. The applicability of some of the findings from research still remains questionable. For example, information and analysis, one of the TQM factors is said to be extremely important to developed and developing countries but it is not persuasive enough to apply on third world countries. This is because they probably lack of necessary infrastructure. Therefore, it can be said that Malaysias hoteliers are actually lack of a blueprint when initially applying TQM to their respective hotels. In other words, hoteliers may not known which factors of TQM can generally lead to better performa nce in the Malaysia. Furthermore, with the limited of number of such research available to Malaysia, it has nothing to show hoteliers how strong the impact of TQM factors is to labor productivity, thus lack of motivation to change their routine and ways of doing business. When this occurs, Malaysia hotel industry can never be improved, previously owned competitiveness can be competed away and GDP can be affected. 1.5 Research Objectives The general objective of this study is to identify the impact of each of the selected TQM factors towards the labor productivity. Next, it is then to be expressed in term of its level of correlation between each of the independent variables and the dependent one. Therefore, this result could be used by the Malaysia hoteliers in increasing their labor productivity as these findings will show which of the independent variables plays a more important role in achieving higher labor productivity in the Malaysia context. The following objectives are specifically derived from the problem statements: To identify the relationship between the chosen independent variables and dependent variable; To investigate the level of impact for each of the chosen TQM factors towards labor productivity; To determine whether high TQM commitment hotels will generally generate higher labor productivity than the low TQM commitment hotels; and To provide insights and recommendations for improvement to Malaysias hoteliers at the end of the research. 1.6 Scope of Study The scope of this study covers a discussion on TQM as well as the importance of productivity. As the scope of both TQM and productivity are broad, this study will primarily focus on the aspect of TQM factors and labor productivity. Besides, this study investigates the relationship between selected TQM factors and labor productivity. Theoretically, those selected TQM factors is to be said to have influences on the labor productivity. Therefore, this research is also carried out with the intention to identify the degree of impact of the selected TQM factors towards labor productivity, either a stronger or a weaker one. Moreover, this research is intended to provide useful and relevant findings for hoteliers in Malaysia, in order to achieve the ever higher labor productivity in Malaysia hotel industry. Therefore, it is targeted to hoteliers in Malaysia primarily located in Kuala Lumpur. Lastly, a questionnaire has been included in this study and carried out on hoteliers of Kuala Lumpur in order to measure the impact of TQM factors towards labor productivity. 1.7 Significance of Study The importance of this study is to explore the relationship between the selected TQM factors and labor productivity in the context of Malaysia hotel industry. Similar research studies have been done to prove the relationship between the TQM factors and productivity. However, most of it were not focusing on the hotel industry. Some of them might have focused in hotel industry, but the issue of applicability remains noticeable. For that reason, this study is focusing in the Malaysia hotel industry as an applicable guideline and reference for the Malaysia hoteliers. Besides that, this study will be able to contribute relevant information to the Tourism Malaysia Promotion Board (Malaysian Ministry of Culture, Arts and Tourism). In Section 1.3, it shows the importance of tourism is to the nation GDP. Furthermore, hotel industry is relatively important to the country as an accommodation means for tourists to visit Malaysia. In addition, through this study, government is now able to identify unsuitable approaches and strategies. Therefore, essential action such as coming out new incentives scheme can be taken to effectively replace the old ones. Thus, national resources can be distributed and used even more effective and efficient than ever. As to hoteliers, this study helps to lighten their worries when first implementing the TQM as they are now getting more supporting evidence from this study. According to Yesawich (1997), building customer loyalty is one of the biggest challenges for the hotel industry. Successfully implemented TQM contributes to customer satisfaction. From customer satisfaction, loyalty and profits are positively related. In other word, TQM can potentially overcome one of the biggest challenges in hotel industry. At the same time, organizations can enjoy the benefits from TQM such as creating competitive advantage, providing unique services and so forth. 1.8 Organization of Study The organization of this research study comprises of 5 chapters. This research study begins with Chapter 1 that covers the introduction for the chosen topic. It consists of the background of study and hotel industry in Malaysia. Next, problem statements, research objectives, scope of study and the significance of study are laid out in different section. Lastly, organization of study that shows the overall flow of this study ends the Chapter 1. Chapter 2 provides the literature review for the chosen topic. It includes all the related empirical studies that have been done by the previous researchers. Several of viewpoint, definition and argument have been included in this chapter as well. For instance, different point of views from different researchers for the same variable can be found here. Chapter 3 outlines the overall methodology being used in this research study. It shows the research framework together with the explanation and hypothesis of the framework. Besides, data collection method, sources of data, sampling method and sampling size will be discussed in separated section. Furthermore, there is the outline of the questionnaire development and scaling techniques before discussion of data analysis and measurement close the chapter. Chapter 4 discusses the findings and the results of this research study. Therefore, all related chart, graph, data will be included in this chapter. This chapter basically ends with the interpretation and discussion regarding all of the findings. Finally, conclusions and recommendations will be formed and given to readers. It concludes which TQM factors have a stronger effect and vice versa. Besides that, limitations of this study will also be included. The following figure shows the overall outline of this study. Figure 1.2: Flow Chart of Study CHAPTER 2 LITERATURE REVIEW 2.1 Overview This chapter develops and provides the foundation for this research study. Previous works done by other researchers that relate to labor productivity, total quality management, customer focus, human resource management, information analysis, leadership and strategic management are all presented in this chapter. Besides, in order to gain a better understanding of this research, viewpoints from different researchers are then compare and contrast in this chapter. 2.2 Labor Productivity In the 21st century, productivity growth plays an important role in GDP growth of any nation. According Chapman, Murray Mellor (1997), the use of sales per employee has been widely used to measure labor productivity for individual companies. Besides, Sauian (2002) says that in knowledge-based economy, competitive advantage can be maintained through â€Å"high productivity† and efficiency. In the other way round, labor productivity is an important element used to gauge competitiveness in producing goods and services (Sauian, 2002). Moreover, Hoffman Mehra (1998) argues that high productivity effects are impossible to sustain without a quality-based process-oriented environment which emanates from the support of employees, upper management, and the organization. Malaysia registered a productivity growth of 2.9 percent from RM 48,113 in year 2007 to RM 49,526 in year 2008. Furthermore, productivity contributed 62.2 percent while employment contributed 37.8 percent to the GDP growth of 5.98 percent. This growth surpassed several major countries of the Organization for Economic Co-operation and Development (OECD). As shown in Figure 2.1, the Rep. of Korea recorded a productivity growth as much as 3.6 percent, the USA (2.1 percent), the Japan (0.8 percent), the Australia (0.4), the Germany (0.1 percent) and the rest had zero or negative growth (Malaysia Productivity Corporation [MPC], 2009). Figure 2.1: Productivity Growth of Malaysia and Selected OECD Countries, 2008 (Adapted From: MPC, Annual Productivity Report 2008) Thomas (1994) defined the simplest form of labor productivity (LP) as the hours of work divided by the units of work accomplished. In general, LP is a measure of output from a production as per unit of input. Therefore, it can be expressed as: LP From the above formula, LP consists of the total output and total input. It can be in terms of a particular production, a department, an organization or even a nation. In general, if we want to increase productivity, it is necessary to increase the systems output, if the input is to remain constant. Similarly, if the systems output is to maintain the status quo, then we need to utilize less input. From a different aspect, if both output and input are increased, then it is mathematically obvious that the rate of increase of output should be higher than the rate of increase of input, if productivity needs to be improved (Sauian, 2002). Therefore, in order to achieve higher LP, input and output should be manipulated in various ways. Schonewille (2001) said the effectiveness of training is lower compared to initial education when comes to contributing to labor productivity. Even thought training has smaller effects on labor productivity, still the estimated coefficient is positive (Schonewille, 2001). A number of researchers have proven the positive impact of quality on productivity, whereas both can influence positively profitability (Bylund Lapidoth, 1994). This relationship has been generally accepted within the manufacturing industry (Chase Aquilano, 1995). However in reality, LP is a much more complex phenomenon which largely depends on quite diverse factors such as workers competence, motivation, supervision and so forth. Also, management does affect LP (Enshassi, Mohamed, Mayer, Abed, 2007). Chapman and Al-Khawaldeh (2002) has investigated the relationship between TQM implementation and labor productivity in industrial companies in Jordan, as shown in Figure 2.2. The results of data analysis indicate that there is a positive relationship between TQM (and each TQM element) and labor productivity. Interestingly, it is found that companies with ISO 9000 certification has high positive slope whereas companies without ISO 9000 certification has low positive slope. 2.3 Total Quality Management (TQM) TQM emerged in the mid-1980s in response to Japans invasion of US markets with their high quality-low price automobiles and electronic products. Quality has been defined differently as conformance to requirement (Crosby, 1979), fitness for use (Juran, 1979), continual improvement (Deming, 1982) and as define by customers (Ford, 1990). Whereby, Spitzer (1993) called TQM â€Å"the only source of sustainable competitive advantage†. Also, TQM is continually satisfying agreed customer requirements at lowest cost through harnessing everyones commitment (Burton Franckeiss, 1994). In theory, TQM seems to assure performance improvement for any organization. But, in practice, TQM works for some organization and not for others (Terzioski, 2006). According to Chapman and Al-Khawaldeh (2002), TQM is a key strategy for maintaining competitive advantage and is a way of managing organizations to improve its overall effectiveness and performance towards achieving world-class status. During the last two decades or so, simple inspection activities have been replaced or supplemented by quality control, quality assurance has been developed and refined, and now most companies are working towards TQM (Dale Bunney, 1999). Dale (1999) indentifies four discrete stages: inspection, quality control, quality assurance and TQM, as shown in Figure 2.2. Figure 2.3: The four levels in the evolution of Total Quality Management (Sources: Adapted from Dale Bunney, Total Quality Management Blueprint, 1999) Inspection is defined as â€Å"activities such as measuring, examining, testing or gauging one or more characteristic of an entity and comparing the results with specified requirement in order to establish whether conformity is achieved for each characteristic† (BS EN ISO 8402, 1995). Quality control is defined as â€Å"operational techniques and activities that are used to fulfill requirements for quality† (BS EN ISO 8402, 1995). Quality assurance is defined as â€Å"all the planned and systematic activities implemented within the quality system and demonstrated as needed to provide adequate confidence that an entity will fulfill requirements for quality† (BS EN ISO 8402, 1995). TQM is the highest level which involves the application of quality management principles to all aspects of the business, including customers and suppliers. It is then defined as the management approach of an organization, centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, and benefits to all members of the organization and to society (BS EN ISO 8402, 1995). A number of research studies have been carried out to investigate the impact of TQM factors and implementation (Sila Ebrahimpour, 2005; Khan, 2003; Terzioski, 2006). Miller (1993) reported that success with TQM depends on the facilitating conditions. Leadership, human resource management and some other TQM factors are found to have positive impact on business results (Sila Ebrahimpour, 2005). Therefore, these findings can be reasonably useful in assisting managers so that they can allocate resources to improve their typical routines to obtain the best results. Next, five TQM factors have been selected as the independent variables for this study, namely (1) Customer Focus, (2) Human Resource Management (HRM), (3) Information and Analysis, (4) Leadership and (5) Strategic Planning. It is said that customer focus pays more attention on the customers whereas the rest of TQM factors have focused on the internal aspect of the organization. As for HRM, it focuses on the practices involved in carrying out the â€Å"people† of a management position. Information and analysis is said to be the information and communication technology used to further enhance labor productivity as automation has been widely used. Leadership is important as it creates synergy for achieving favorable business results whereas strategic planning is a set of process undertaken in order to develop a range of strategies that will contribute to achieve organization direction. Further elaboration and review for each variable will be discussed in different sub-section lat er. 2.3.1 Customer Focus According to Dean and Bowen (1994), customer focus is as important as many other TQM practices to organizational performance. Being customer-focused keeps us aware of quality, or rather it focuses our quality initiatives on what really matters to the customers (Cox, 1997). Also, Piercy (1995) says that TQM has too much focused on the internal aspect of the organization and much less attention on the customers. Customer satisfaction begins by discovering precisely what customers want and gearing every practice to their exact expectations (Kearney, 1994). Customer focus has changed mass production to mass customization. In addition, being far from depersonalizing the world, technology has the power to return us to being treated as individuals while getting all the benefits inherent in large-scale enterprise (Cox, 1997). Sousa (2003) pointed out the importance of customer focus lies in the fact that it is the starting point of any quality initiative. However, it has not received enough attention from quality management researchers (Cai, 2009). In the final decade of twentieth century, the term, customer-centered competition has been introduced. Customer-centered company is a company that focuses on customer developments in designing its marketing strategies and on delivering superior value to its target customers (Kotler Armstrong, 2008). It is common to hear the statement â€Å"customer is always right† in any organization. This could be the trend that organization is to focus on customer needs to be customer-led, to be market-oriented, to care for customers and so forth (Piercy, 1995). These are to make total customer satisfaction a strategic foundation for achieving competitive advantage (Kearney, 1994). Customer focus has been therefore defined as the degree to which firms continuously satisfy customer needs and expectations (Philips, Chang, Buzzell, 1983). The difference between customer focus and customer understanding is, according to Lagrosen (2001), mainly a matter of perspective. Customer focus means the activities of the companies are intended to benefit the customer but the customer is seen from the companies own perspective. Therefore, effects are usually being made to gain information about the customers needs and wants, although always in a set framework that originates in the companies view of the product and its features. Whereby, customer understanding needs perspective to be shifted. It means the company needs to gain entry to the customers own perspective and adopt the customers framework of viewing the product (Lagrosen, 2001). Cai (2009) found that organizational customer focus affects customer relationship practices, which subsequently influence production performance and customer satisfaction, and production performance and customer satisfaction lead to financial outcomes. Ooi, Bakar, Arumugam, Vellepan, and Loke (2007) says TQM practices such as teamwork, reward and recognition, customer focus and organizational trust are positively associated with job satisfaction within their organization. For instance, customer focus was found to have a direct influence on emplo