Market competitiveness and quality performance in high-contact service industries

Purpose - The purpose of this paper is to explore conceptually and examine empirically the impact of market competitiveness on employee satisfaction, service quality, and customer satisfaction in high-contact service industries. Design/methodology/approach - An empirical study was conducted in high-contact service shops in Hong Kong. Dyadic data were collected from 210 high-contact service shops and were analysed using structural equation modelling. Findings - The results confirm that market competitiveness has a direct impact on service quality, not employee satisfaction. The findings also reveal that service quality affects customer satisfaction, which in turn leads to employee satisfaction, forming a "quality-customer satisfaction-employee satisfaction cycle". Practical implications - The results recommend that firms take a long-term perspective towards investment in understanding the competitiveness of the market. Such an understanding helps managers identify and implement appropriate quality-improvement activities, such as establishing quality standards, providing appropriate job description to service employees, and adopting a customer-oriented strategy, leading to enhanced customer satisfaction and employee satisfaction in a cyclic manner. Originality/value - This study contributes to a detailed understanding of how service firms should strategically respond to market competitiveness.