Total quality management practices, competitive strategies and financial performance: the case of the Palestinian industrial SMEs

Abstract

The purpose of this paper is to examine the relationship between Total Quality Management (TQM) practices, competitive strategies - cost leadership and differentiation- and firm performance in the Palestinian economy. Within this study total quality management has been conceptualized as soft and hard practices, in congruence with the literature. An empirical analysis based upon an extensive validation process was applied to refine TQM, competitive strategies and financial performance scales. Data were collected through surveying 202 in Palestinian industrial small and medium enterprises (SMEs). Structural Equation Modeling was carried out to test the anticipated relationships. Results derived from this study show that TQM practices have indirect, positive and significant relationship with financial performance through competitive strategies. In addition, a direct, positive and significant relationship between competitive strategies and financial performance was observed. Results derived from this study might help managers to implement TQM practices in order to effectively allocate resources and improve financial performance.