A Dissertation Proposal Submitted to The Arab Academy of Science & Technology

& Maritime Transportation

A Dissertation Submitted in partial fulfillment of the requirements of

The Doctorate Degree in Business Administration (DBA)

"The Role of Corporate Performance Management (CPM)

In Sustaining Competitive Advantage:

A Case Study in the Petrochemicals Industry in Egypt"

Supervised By:

Prof. Dr. Fareed EL Naggar

By:

Khaled Ahmed AKL

January 2014

ACKNOWLEDGEMENT

I would like to thank my supervisor, Professor Dr. Fareed EI Naggar, who has guided

me throughout my dissertation with his patience and knowledge. He was always willing

to help, Thank you for all the time and support that you have provided.

I thank all my professors and colleagues at the Arab Academy for Science and

Technology; it has been really a learning experience.

Thanks to my family, who has provided a lot of time and effort during the time of this

research and who actually sacrificed a lot for the completion of this work.

Finally, I thank all my friends, colleagues, and everyone who really wished for this

research to be completed.

ABSTRACT

Petrochemicals products are driven from the natural resources (oil crude and natural

gas). The processing of the oil crude and natural gas indicates a high return and

value added that could reach 15 to 30 times for the intermediate and final products

consecutively compared to the raw natural resources value. In the present era of

emerging intense global competition, corporate are facing increasingly

knowledgeable and demanding customers and activist shareholders which have

changed the competitive environment from competition based on ability to invest in

and manage physical assets to competition based on knowledge and the ability to

develop and make use of intangible and soft assets.

The objective of this research is to study the role of the corporate performance

management to sustain the competitive advantage in the petroleum sector, especially

in the petrochemicals industry in Egypt as one of the newly established businesses

that has a high value added and faces a severe competition, to sustain its competitive

advantage that will be through a case study.

Based on the literature review, five hypotheses were developed and a research

framework was proposed. It consists of six constructs; the sustainable competitive

advantage, the corporate performance management, the customer value, the market

orientation, the service quality and the innovation in technology.

ii

A questionnaire was prepared and tested, then, a survey was conducted to collect

data, from corporate managers, working in the field of the petrochemicals, 250

employees within five companies were contacted, either by email or during the

companies' visits, 162 valid responses were received, that represents a response

rate of 64.8%.

Reliability tests, factor analysis and correlation analysis were conducted on the data

collected to test reliability, validity, and to test the research hypotheses. The results

suggested that; there is a significant path from service quality, market orientation, and

innovation in technology and customer value to corporate performance management.

There is strongly support among all constructs on sustaining competitive advantage.

Moreover, this research aims at developing a set of recommendations for the

decision makers and the various stakeholders. Recommendations are directed

towards increasing the awareness about market orientation, innovation in technology,

customer value, and service quality to increase the overall corporate performance

and competitiveness of organizations.

Keywords: Corporate Performance Management (CPM), Sustaining Competitive

Advantage (CSA) , Customer Value, Market Orientation, Innovation in Technology,

Service Quality, Petrochemical Industries.

III

ACKNOWLEDGEMENT

ABSTRACT

TABLE OF CONTENTS

LIST OF TABLES

LIST OF FIGURES

LIST OF ABBREVIATIONS

CHAPTER ONE

1- Research Background

1-1 Introduction

TABLE OF CONTENTS

1-2 Research Problem

1-3 Research Objectives

1-4 The Proposed Research Variables

1-5 Research Hypotheses

1-6 Research Methodology

1-7 Research Limitations

1-8 Research Plan

CHAPTER TWO

2- The Petrochemicals Industry in Egypt and Its Competitive Edge

ii

iv

viii

x

xii

1

4

6

6

8

8

10

10

2.1 Introduction 11

2.2 Petrochemical Products in Egypt and Local I Global Demand 11

2.3 Egyptian Petrochemicals Industry Competitive Edge 15

2.4 Regional and Global Petrochemicals Industry Competition 18

2.5 Key Performance Indicators for Petrochemicals Industry Sttccess 21

iv

2.6 The Need for Corporate Performance Management Framework 22

CHAPTER THREE

3- Literature Review: Performance Management and Sustainable

Competitive Advantage

3.1 Introduction

3.2 Definitions of Corporate Performance Management

3.3 Importance of Corporate Performance Management

3.4Performance Measurement Systems

3.5 Evolution of the Corporate Performance Management

Frameworks

3.6 The Strengths and Weaknesses of the Performance

Management Frameworks

3.7 The Common Characteristics of Performance Management

Frameworks

3.8 Possible Pitfalls Existing in Performance Measurement

3.9 Constructing the Actual Measures within a Performance

Management Framework

3.10 The Best Performance Management Practice

3.11 Making it Work: Overcoming the Barriers to Performance

Management

3.12 Introduction about the Sustainable Competitive

Advantage (SCA)

3.13 Sustainable Competitive Advantages (SCA)

3.14 Sources of Sustainable Competitive Advantages (SCA)

v

23

25

29

31

37

48

51

54

58

59

63

67

69

70

3.15 The Relationship of SCA to Other Strategy Concepts

CHAPTER FOUR

4- Research Methodology and Design

4. 1 Introduction

4.2 Research Problem

4.3 Research Objective

4.4 The Research Variables

4.5 The Proposed Research Conceptual Framework

4.6 Research Hypotheses

4.7 Measuring Instruments

4.8 Pilot Study

4.9 Population and Sampling

4.10 Target Number of Responses

4.11 Survey Method

4.12 Summary

CHAPTER FIVE

5- Data Analysis, Discussion and Findings

5.1 Introduction

5.2 Respondent Characteristics

5.3 Assessment of Measurement Models

5.4 Assessment of Structural Research Framework

5.5 Testing Hypothesis

5.6 Discussion and Findings

vi

74

79

79

80

81

87

89

91

100

102

103

105

105

107

107

108

116

120

122

CHAPTER SIX

6- Conclusion, Recommendations and Future Research

6.1 Introduction

6.2 Conclusion

6.3 Recommendations

6.4 Directions for Future Research

REFERENCES

APPENDIX A - Survey Questionnaire

vii

124

124

126

126

128

136

LIST OF TABLES

Table 2-1 Egyptian Petrochemical Companies Data as of year 2013 14

Table 3-1 Results and Determinants Model 39

Table 3-2 The aspects of the perspective dimension 43

Table 3-3 The aspects of the focus dimension 43

Table 3-4 The Aspects of the Purpose Dimension 44

Table 3-5 Common Characteristics of Performance Management 51

Frameworks

Table 3-6 Common Characteristics (Hone) 52

Table 3-7 Specification of Characteristics develop a dynamic performance 53

measurement system

Table 3-8 Themes of Good Performance Measures 58

Table 3-9 Relevant Concepts and Definition of Sustainable 68

Competitive Advantage

Table 4-1 Survey Item: Sustainable Competitive Advantage 94

Table 4-2 Survey Item: Corporate Performance Management 95

Table 4-3 Survey Item: Innovation in Technology 96

Table 4-4 Survey Item: Service Quality 97

Table 4-5 Survey Item: Customer Value 98

Vlll

Table 4-6 Survey Item: Market Orientation 99

Table 4.7 Cronbach's Alpha Scores for Survey Instrument Subscales 102

Table 4-8 Minimum Sample Size 104

Table 5-1 Respondents Characteristics 107

Table 5-2 Factors Loading 115

Table 5-3 Constructs' Correlations 116

Table 5-4 Fit Indices of Structural Research Models 117

Table 5-5 Parameter Estimates of Structural Research Models 119

Table 5-6 Hypotheses Testing 121

ix

LIST OF FIGURES

Figure 1-1 Petrochemicals Industry Value Added 1

Figure 2-1 Development in the Egyptian Petrochemicals Industry (2002-2015) 13

Figure 2-2 Egypt's Petrochemicals Trade Balance (2010-2011) 13

Figure 2.3 Egyptian Geographic Location as Competitive Edge 17

Figure 2.4 Egyptian Energy Cost as Competitive Edge 17

Figure 2.5 Egyptian Relative Economical & Political Risk Rating 18

Figure 2.6 Global Petrochemicals Polyolefin's Player 18

Figure 3-1 The SMART Pyramid 38

Figure 3-2 The Balanced Scorecard Frame work 40

Figure 3-3 Value for Money I Business Process Model 45

Figure 3-4 The EFQM Business Excellence Model 46

Figure 3-5 The Performance Prism 47

Figure 4-1 The Proposed Research Conceptual Framework 88

Figure 5-1 Measurement Model of Service Quality 109

Figure 5-2 Measurement Model of Innovation in Technology 110

Figure 5-3 Measurement Model of Customer Value 111

Figure 5-4 Measurement Model of Market Orientation 112

Figure 5.5 Measurement Model of Corporate Performance Management 113

x

Figure 5.6 Measurement Model of Sustainable Competitive Advantage

Figure 5.7 Hypothesized Structural Research Model

Figure 5.8 Alternative Structural Research Model

xi

114

118

120

API

BI

Bse CPM

EFQM

GPPS

HIPS

KPls

LOPE

LPG

MENA

PE

PET

PP

PS

PVC

SCA

Sidpec

LIST OF ABBREVIATIONS

Advanced Performance Institute

Business Intelligence

Balanced scorecard

Corporate Performance Management

European Foundation Quality Management Excellence Model

General Purpose Polystyrene

High Impact Polystyrene

Key Performance Indicators

Low-Density Polyethylene

liquefied petroleum gas

Middle East and North Africa

Polyethylene

Polyester

Polypropylene

Polystyrene

Poly vinyl chloride

Sustainable Competitive Advantage

Sidi Kerir Petrochemicals

xii

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THE ROLE OF CORPORATE PERFORMANCE MANAGEMENT (CPM) IN SUSTAINING COMPETITIVE

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