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LIST OF TABLES
LIST OF FIGURES
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
1.1.1 Market Orientation and Business Performance
1.1.2 Modern Aspects of Market Orientation
1.1.3 Market Orientation in the Food and Beverage Industry
1.2 Research Problem
1.3 Research Questions
1.4 Objectives of the Study
1.5 Significance of Study
1.6 Limitations of the Study
1.7 Chapter Organization
CHAPTER TWO: LITERATURE REVIEW
2.1 Definitions of Market Orientation and Business Pefrormance
2.1.1 Market Orientation
2.1.2 Business Performance.
2.1.3 The Relationship between Market Orientation & Business Performance
2.2 The History of Market Orientation
2.3 Kohli's and Jaworski's View on Market Orientation
2.3.1 Antecedents of Market Orientation
2.3.2 Consequences of Market Orientation .
2.4 Narver‟s and Slater‟s View of Market Orientation
2.4.1 The Three Behavioral Dimensions
2.4.2 Long-term Focus and Performance
2.5 Similarities & Differences-Views of Narver & Slater vs. Kohli & Jaworski
2.6 Market Orientation: Moderators and Barriers
2.7 Implementing a Market Orientation
CHAPTER THREE: METHODOLOGY
3.1 Conceptualization and Operationalization
3.1.1 Conceptual Framework
126.96.36.199 Key Components of the Model
3.1.2 Operationalization of Variables
188.8.131.52 Measures of Market Orientation
184.108.40.206 Measures of Business Performance
3.2 Research Approach
3.3 Research Design
3.3.1 Research Site
3.3.2 Sources of Data
3.3.3 Population and Sampling
3.3.4 Method of Data Collection
3.3.5 The Reseach Instrument
3.3.6 Reliability and Validity
3.3.7 Methodological Limitations of the Study
3.3.8 Method of Data Analysis
3.4 Time Frame and Assess to Research Site
CHAPTER FOUR: ANALYSIS AND DISCUSSION
4.1 Data Preparation
4.2 Sample Profile of Respondents
4.3 Reliability and Validity Tests
4.4 Descriptive Statistics
4.5 Statistical Assumptions Testing
4.6 Correlation Analysis
4.7 Regression Analysis
4.7.1 Summary Statistic of Fitted Multiple Regression
CHAPTER FIVE: CONCLUSION
5.1 Conclusion and Reccomendations
5.2 Theoretical Implications
5.3 Managerial Implications.
5.4 Limitations and Future Research Directions
Appendix 01- Validity Test
Appendix 02-Model Summary
Appendix 04-Summary Statistic of Fitted Multiple Regression
Appendix 05-Requesting Letter and Questionnaire
This thesis studies the business performance of firms in the food and beverage industry in Sri Lanka by using the market orientation theoretical framework to explain why some firms are more successful than others. It also investigates how firms become more market-oriented and whether there is a significant relationship between market orientation and business performance.
Data was collected through a survey using a self-administered questionnaire. A total of 160 questionnaires were sent to top and middle level managers employed in 21 food and beverage companies operating in Sri Lanka. 120 questionnaires were returned. And, all questionnaires were useable. Furthermore, questionnaires were coded into SPSS version 21 for Pearson Correlation Analysis and Multiple Regression Analysis.
The results from this study indicate that market orientation has a positive impact on business performance of organizations operating in the food and beverage industry in Sri Lanka. Moreover, the results reveal that customer orientation has a positive significant impact on business performance. Also, results suggest that the impact of competitor orientation on business performance is positive significant. Results suggest that inter-functional coordination has a negative significant impact on business performance of organizations operating in the food and beverage industry in Sri Lanka.
The results of this study suggest that firms operating in the food and beverage industry should be focused on approaches of customer orientation, competitor orientation and inter-functional coordination activities of organizations in order to be more successful in the prevailing business environment achieving high business performance.
I would like to thank all those who have contributed in so many ways to the completion of this thesis:
To my great supervisor: Mrs. Thilini C. Gamage, Lecturer, Department of Marketing Management for her valuable time and advice; as well as for her intellectual support and encouragement throughout the journey.
To all respondents, who freely gave their valuable time to share their experiences with me. Their contributions are much appreciated.
To my family, they have been a great emotional support to me. I would like to thank them for their love and concern, and for taking pride in whatever success I may have had.
Faculty of Management Studies
Sabaragamuwa University of Sri Lanka
Table 2.1 Summary of Major Studies on Market Orientation and Business Performance
Table 3.1 Operationalization of Variables Table 3.2 Time Frame
Table 4.1 Reliability of Dimensions Table 4.2 Validity of Dimensions
Table 4.3 Descriptive Statistics for Market Orientation and Business Performance Dimensions
Table 4.4 Shapiro-Wilk Test and Kolmogorov-Smirnov Test Dimensions
Table 4.5 Tolerance Level and VIF Score for the Dimensions
Table 4.6 Correlation
Table 4.7 Model Summary Table 4.8 ANOVA
Table 4.9 Coefficients
Figure 2.1 Kohli‟s and Jaworski‟s View on Market Orientation
Figure 2.2 Narver and Slater„s View of Market Orientation
Figure 3.1 Conceptual Framework
Figure 4.1 Sample Profile According to Respondents‟ Level of Management Figure
4.2 Sample Profile According to Respondents‟ Level of Experience
Figure 4.3 Standardized Residual Plot for Market Orientation and Business Performance
Figure 4.4 Standardized Residual Plot for Customer Orientation and Business Performance
Figure 4.5 Standardized Residual Plot for Competitor Orientation and Business Performance
Figure 4.6 Standardized Residual Plot for Inter-functional Coordination and Business Performance
The first chapter consists of seven sections. The first section discusses background of the study. From second to final section, research problem, objectives of the study, significance of the study, limitations of the study and chapter organization are described respectively.
“Market orientation is the organization culture that most effectively and efficiently creates the necessary behaviors for the creation of superior value for buyers and, thus, superior performance for the business” (Narver & Slater, 1990, p. 21). Furthermore, market orientation is identified as a competitive strategy that most efficiently generates the right kinds of behavior to create enhanced value for the consumer and assures better long term- results for corporations. Also, market orientation is based on orientation towards the customer, orientation towards competitors and inter-functional coordination (Narver & Slater, 1990).
“Market orientation is the organization-wide generation of market intelligence, dissemination of the intelligence across departments and organization-wide responsiveness to it” (Kohli & Jaworsky, 1990, p. 54).
In order to become successful in the market, organizations should be monitoring changing customer wants and needs, competitors as well as affecting factors in the environment constantly. By recognizing, changing customer needs, approaches of competitors and affecting factors in the environment in advance; firms are able to develop strategies to encounter them and to become successful in the market (Narver & Slater, 1990).
Furthermore, several studies previously carried out have revealed that the relationship between market orientation and business performance is positive (Jaworski & Kohli, 1993; Narver & Slater, 1990). Also, Narver and Slater (1990) have revealed that market-oriented organizations are more successful than the less market-oriented organizations in terms of profitability. As well as, profitability of the firm has been recognized as a consequence of market orientation by researchers. Moreover, by being market-orientated, organizations are able to yield short-term as well as long-term benefits, such as huge short-term profits, a strong customer base, positive word of mouth and finally long term success of the organization.
Many of the business ventures operating in today‟s world are relying on the concept of market orientation since market orientation has become one of the most significant factors, which the success of the organization is highly depend on. In order to become marketoriented, most of small, medium as well as large scale corporations have taken steps to invest a large sum of money in modern information systems for the purpose of acquiring the knowledge of customers and competitors. After the acquisition of knowledge, organizations manage the various functions in a coordinated manner towards the accomplishment of goals and objectives set by the top management of firms.
According to Lambin (2008), in today‟s world, many factors force business ventures to become market-oriented ever before. Several of those factors are as follows;
- Globalization: with globalization, the world has become smaller. Thus, the business organizations are able to operate without geographical boundaries throughout the entire world. Then, foreign business ventures enter into domestic markets. And, in order to become successful and survive in the market, organizations have no choices other than becoming market-oriented.
- Constantly changing customer needs, wants and expectations: customers are constantly seeking for novel products and services for fulfilling their changing needs and wants. Thus, the business organizations need to be more aware of changing needs, wants and expectations as well as take necessary steps to satisfy them on time.
- More empowered customers: in the prevailing environment; customers are more empowered in decision making of consumption. Also, more information is available for customers of products, services and business organizations. Then, in situations where organizations are not able to meet customer expectations at an adequate level, customers can shift other organizations for high satisfaction of needs and wants.
- Very competitive business atmosphere: the business environment has become more competitive ever before from the last decade. With the large number of emerging business ventures, yielding profits and surviving in business environment have become hard. Thus, the companies need to be more market- oriented for staying in the market.
The food and beverage industry primarily comprises farming food production, distribution, retail and catering. The industry is recognized as one of the key industries influence on the growth of all economies in the world. Moreover, it has shown a consistent growth over time. Generally, the food and beverage industry is vital for any economy since the growth of it affects the entire economic system of the country. Furthermore, the industry plays a significant role in fulfilling most basic human needs of the population (American Marketing Association [AMA], 2016).
With the prevailing economic and business atmosphere, business ventures operating in the food and beverage industry have become more market-oriented. Many organizations are fully aware of changing customer needs, competitors‟ strategies and make coordinated efforts to satisfy customer expectations and accomplish objectives set for the organizations. By becoming market-oriented, the food and beverage ventures have been able to become more profitable and win the today‟s hyper competitive market place. By being market-oriented, the organizations are accomplished and successful ever before. Food and beverage companies have become market-oriented since;
- Customer food consumption patterns are subjected to change heavily: in the past several decades, food consumption patterns and preferences of customers have evolved fast. Thus, the business ventures need to be more market-oriented in order to become successful.
- The food and beverage industry has turned into very competitive: with growing large number of the food and beverage companies; the entire industry has turned to be very competitive. Furthermore, the food and beverage industry is very comprehensive and dynamic. Thus, the organizations need to be market-oriented.
- Organizations operating in the industry depend on high technology regarding business processes: since many business ventures in the industry use high technology, all other business organizations need to be more aware of competitors‟ strategies and be more market-oriented.
- Multi-national corporations play a key role in the industry: the largest food and beverage corporations in world-Nestlé, Kraft Foods, Unilever and Cargill produce 5 percent of the global food and beverage supply (AMA, 2016). Thus, the other businesses in the industry ought to be more strategic and market-oriented for surviving in the market.
Previous literature on concepts of market orientation and business performance is available from research carried out by several scholars (Chakravarthy, 1986; Day & Wensley, 1988; Golden, 1992; Kaldor, 1971; Kohli & Jaworski, 1990; Narver & Slater, 1990). According to studies accomplished, the impact of market orientation on business performance is recognized as high value for organizations operating in the prevailing business environment. Furthermore, Narver and Slater (1990) as well as Kohli and Jaworski (1990) pointed that further studies are necessary to be conducted concerning concepts of market orientation and business performance.
However, a few researchers have further studied of the influence of market orientation on business performance concerning the food and beverage industry (Nwokah, 2008; Aziz & Yassin, 2010).
Even though food and beverage companies in Sri Lanka are very crucial in terms of its substantial contribution towards the growth in Gross Domestic Product (GDP) of the country and employment generation, there are not many detailed studies accomplished concerning the industry in Sri Lanka.
Hence, it is important to study of the impact of market orientation on business performance in the food and beverage industry in Sri Lanka so that further insights can be generated on the practical application of the concept of market orientation in food and beverage organizations. Moreover, managerial and critical policy changes can be taken based upon the generated insights and finally, the performance of business organizations can further be developed for better financial and marketing outcomes in the industry and face competitive marketing environment.
Then, this study on the impact of market orientation on business performance in the food and beverage industry in Sri Lanka is a well-timed area to be investigated in the detailed view.
Thus, the research problem in this study is dimensioned as follows;
How does market orientation impact on business performance in the food and beverage industry in Sri Lanka?
For the purpose of examining the impact of market orientation on business performance, following research questions are formed. Research questions are in line with specific objectives of the study.
I. Does customer orientation have an impact on business performance of organizations operating in the food and beverage industry in Sri Lanka?
II. Does competitor orientation have an impact on business performance of organizations operating in the food and beverage industry in Sri Lanka?
III. Does inter-functional coordination have an impact on business performance of organizations operating in the food and beverage industry in Sri Lanka?
In the mentioned research questions, the impact of customer orientation, competitor orientation and inter-functional coordination on business performance of selected industry is determined to investigate. As Narver and Slater (1990) suggested, market orientation consists of three components. They are identified as customer orientation, competitor orientation and inter-functional coordination. Thus, the questions deal with components of market orientation based upon Narver and Slater‟s view. And, the impact of customer orientation, competitor orientation and inter-functional coordination on business performance in the selected industry is determined separately.
In the study, it is determined to test the following hypothesis;
H1: Customer orientation has a positive significant impact on the business performance of organizations operating in the food and beverage industry in Sri Lanka.
H2: Competitor orientation has a positive significant impact on the business performance of organizations operating in the food and beverage industry in Sri Lanka.
H3: Inter-functional coordination has a positive significant impact on the business performance of organizations operating in the food and beverage industry in Sri Lanka.
The research intends to evaluate the impact of market orientation on business performance in the food and beverage industry in Sri Lanka comprehensively by using the behavioral approach of market orientation introduced by Narver and Slater (1990). Thus, the results of the study will be beneficial for the industry level managerial decision making as well as national level decision making procedures since the industry selected in the study is very crucial for the economic growth of the country.
To investigate the impact of market orientation on business performance of organizations operating in the food and beverage industry in Sri Lanka.
I. To investigate the impact of customer orientation on business performance of organizations operating in the food and beverage industry in Sri Lanka.
II. To investigate the impact of competitor orientation on business performance of organizations operating in the food and beverage industry in Sri Lanka.
III. To investigate the impact of inter-functional coordination on business performance of organizations operating in the food and beverage industry in Sri Lanka.
The results of this study expand the knowledge generated by previous research on the field of market orientation and business performance. The findings can be used to enhance corporate management and organization culture so that the business performance is improved from the bottom level. In addition, subjects used in this research come from a particular industry and other researchers can apply the same methodology used by the researcher in collecting data and analyzing. Furthermore, at the empirical level, the ideas suggested by the researcher can contribute to develop new knowledge of the concept of market orientation and business performance.
In a broader view; the findings of this research are beneficial at national level. The food and beverage industry is known to be very important for both GDP and labor force of the country. The results of this study are crucial since business performance of the food and beverage industry will have an impact on economic performance. The government and its agencies can apply findings of the research for designing policies concerning the food and beverage industry and making crucial changes needed in the industry. Then, the better actions taken by the government will have a positive effect on improving the performance at a greater level.
At industry level, the findings can be applied by the business alliances and professional bodies for supporting their policies in order to achieve better business performance and productivity encouraging business ventures operating in the industry.
From a practical view point, the management of firms is able to apply the results to encourage companies‟ performance in terms of profitability and marketing effectiveness and face the competitive market in a better way.
This research focuses only on subjects from a single industry, which is the food and beverage industry in Sri Lanka. Thus, the results of this study can only be generalized to the food and beverage industry. Moreover, the research only emphasizes on the companies‟ view point of the industry. The researcher does not focus on customers‟ view point on the selected study area. To apply the results generated in this study to another industry or sector, one should be aware of the limitations of different factors from different industries and environment.
The organization of this thesis is as follows:
Chapter Two summarizes two key streams of literature, market orientation and business performance, which are central to the research topic.
Chapter Three discusses the methodology of the research, which includes conceptualization
and operationalization, research approach, research design, data collection procedures, time frame and access to the research site.
Chapter Four includes the analysis of data and discussion.
Chapter Five describes conclusions, which comprises conclusion and recommendations, theoretical implications, managerial implications and limitations and future research directions.
The second chapter consists of ten sections. This chapter discusses definitions of market orientation and business performance and the relationship between the two concepts, the history of market orientation, popular scholars‟ views of market orientation and business performance, moderators and barriers of market orientation and finally, implementation of market orientation.
Every business venture operating in the business environment aims to maximize the profits for shareholders while creating sustainable competitive advantages over competitors which are operating in the industry. Thus, the source of competitive advantage for an organization is within the capability of the organization for creating superior value for its customers by acquiring economies of scale, broad product line and market power (Gummesson, 1991).
Market-orientated organizations have acquired the ability of rapidly screening and responding to changes occur in the volatile market (Day, 1991).
Furthermore, Narver and Slater (1990) stated that “market orientation is the organizational culture that most efficiently and effectively creates the necessary behaviors for creating superior customer value and superior performance for the business” (p. 21). By becoming market-orientated, firms create enhanced value for customers while assuring better long-term relationships with customers and yield long-term benefits for the organization (Narver & Slater, 1990). As well as, according to studies of Narver and Slater (1990) the concept of market orientation is divided into three major components, such as customer orientation, competitor orientation and inter-functional coordination.
Kohli and Jaworsky (1990) defined “market orientation is the organization-wide generation of market intelligence, dissemination of the intelligence across departments and organizationwide responsiveness to it” (p. 54).
Moreover, Jaworsky and Kohli (1993) presented a process-driven model of market orientation which focuses on the generating, disseminating and responding market intelligence as the core of market orientation. The process is as follows.
I. Generation and analysis of all relevant information about the market;
II. Dissemination of this information among the various departments of the organization in order to coordinate and arrange strategic planning; and
III. Implementation of strategic initiatives designed to satisfy the market.
Several researches carried out in the field revealed the strong relationship between market orientation and several measures of business performance, such as customer retention, profitability, sales growth, innovation, new product success and customer satisfaction (Chakravarthy, 1986; Day & Wensley, 1988; Golden, 1992; Kaldor, 1971; Kohli & Jaworski, 1990; Narver & Slater, 1990). Employees of the organizations need to become more customer oriented and they need to work towards common goals set in the organization in order to achieve market orientation though delivering superior customer value (Zeithaml & Bitner, 2003).
Narver, Slater and Tietje (1998) discussed the market orientation as an organizational culture and the culture of the organization, management and market orientation are interrelated. In order to become market-orientated, management of an organization ought to direct employees with a clear vision, mission and values of the business. Thus, the roles that should be accomplished by the employees need to be clear.
Kotler, Armstrong, Wong, and Saunders (2001) revealed that organizations need to uphold a steadiness between the customer orientation and competitor orientation when creating a market oriented culture within the business and if the organizations are unable to maintain the steadiness between above two components, eventually the organizations perform poorly in the market.
Although several scholars have presented definitions on market orientation, definitions presented by Narver and Slater (1990) and Kohli and Jaworsky (1990) are the most accepted definitions within the field of market orientation. Moreover, the definition offered by Narver and Slater (1990) is taken as the basis for this study.
Previous studies pointed that business performance of organizations is a consequence of market orientation (Kohli & Jaworski, 1990; Narver & Slater, 1990). Also, performance is in the form of short-term and long-term financial or organizational benefits. Fundamentally, business performance is recognized from two vital types, as financial performance and non- financial performance (marketing performance). High customer satisfaction, superior interactions with customers, high level of employee satisfaction and moral, good reputation and renowned image of the organization, positive word of mouth and customer retention over long-term are included in non-financial performance of organizations. Furthermore, high profitability, sales growth, growth in market share are considered as financial performance of organizations (Alizadeh, 2013).
In the field, business performance is recognized from two vital approaches as subjective approach and objective approach. Subjective approach means business performance of the organization is measured in reference to competitors or relative to the organizations own expectations or assessments (Golden, 1992). Specially, in subjective approach, respondents of a research study are asked to scale their knowledge on performance of the business. In objective approach, absolute measures are utilized for measuring business performance of firms (Chakravarthy, 1986). In other words, in objective approach, actual data on performance measures are used to make decisions on performance of the organization.
In the present study, subjective approach for measuring business performance has been adopted.
Several studies which have been previously carried out with samples from US companies show that the relationship between market orientation of the organization and its economic performance is positive. However, mix results have been reported from studies with non-US samples (Jaworski & Kohli, 1993; Narver & Slater, 1990). Yet, as Kaldor (1971) suggested, the relationship between market orientation and business performance is questionable since customers do not always know what they need. Also, Greenly (1995) revealed that the relationship between market orientation and business performance may be negative or positive depending on the competitive environment, which organizations are operating in. Moreover, market orientation is identified to have a positive impact on both financial and non-financial performance in organizations (Kohli & Jaworski, 1990; Narver & Slater, 1990).
Terms, such as market-oriented, market-driven and customer-focused have become very popular with competitive business strategy used in organizations all over the world. The utilization of customer focus in business planning processes seems a very modern one. And, it is the idea of organizing the firm´s processes with the thorough understanding of customer needs and demands (Desphandé, 1999). Many management theorists cite Peter Ducker‟s statement from 1954 that marketing is not only a specialized functional activity but also the whole business is seen from the point of view of its final customers. A definition of the marketing concept that is cited from the American Marketing Association website (AMA, 2016); the following definition was approved in 2007.
“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”
Bagozzi, Rosa, José, and Sawhney (1998) stress that firms ought to use marketing concepts in a way that an organization meets and exceeds customer needs and expectations and fulfills goals of the firm while creating advantages over competitors. Paul Converse is recognized as one of the first academics who developed a detailed overview of the concepts of marketing in 1945. He completed a list of text books and articles about marketing and revised the marketing courses taught in universities and lectures on the subject of marketing until the 1940s in America. He revealed that in 1878, business men became involved in developing ways to increase sales, improve sales processes, create a high demand for products and services so that more products and services may be bought by customers generating both improved turnover and higher profits. This trend enforced companies to teach their sales force systematic sales strategies. Professional courses in marketing and sales were first taught in 1901 at the University of Illinois.
In 1911, the first books on marketing were printed and it was mostly based on basic economic theory. The first empirical research papers on marketing were issued around 1920 (Converse, 1951).
Journal of Marketing, which was published in 1936 in the USA, is recognized as the first academic journal on marketing acquiring 600 subscribers within the first year of publication. And, the demand for journal grew really fast since academics and business owners were interested in the journal. In 1948, The American Marketing Association (AMA, 2016) presented the following definition of marketing:
“The performance of business activities directed toward, and incident to, the flow of goods and services from producer to consumer.”
As discussed earlier in this chapter, the new definition was approved by AMA in 2007. Considering both the old and the new definition, marketing is considered a specialist function managing certain decision-making areas to create exchanges that satisfy the customers´ and the firm´s goals equally.
In the last decade, the field of marketing has developed vastly and many books and articles about the subject have been written for business people across the globe. Before market orientation became a general term within marketing, many scholars had described the concept in different ways. Drucker (1954) described the concept in his book “The practice of Management” where he states that only customers can define what a company is by measure of their needs and expectations. In 1987, the Marketing Science Institute (MSI) in the USA organized a conference on the topic “Developing a Market Orientation”. According to Desphandé (1999) the main purpose of this forum was both to develop some early learning from market orientation and, more importantly, to articulate a better defined model of dimensions for market orientation measure. This conference marks a major development in market orientation research. In 1990, a second conference was organized, this time it contained both academic speakers and practitioners and they summarized their companies´ experiences in implanting a market orientation. In 1994, market orientation has become to be a capital research topic by MSI. After that, market orientation became a very popular area for research.
The scholars, Ajay K. Kohli and Bernard J. Jaworski published the article “Market orientation: The dimension, research propositions and managerial implications” in July 1990. In the research, researchers developed a process driven model of market orientation which focuses upon the collection of market data, disseminate information throughout the functions of the organization and implementation of appropriate strategies in order to satisfy the market while concerning market orientation as the core of business. This process driven model of market orientation was developed based on the results gained though interviewing 62 managers within both marketing and non-marketing positions in US companies. In the study, “theoretical sampling plan” was used. The sample was selected including companies from diverse sectors and different sizes in the country.
Here, Kohli and Jaworsky (1990) suggested that profitability is a consequence of market orientation not a component of it as well as market orientation is not considered as a component of the organization culture in Kohli‟s and Jaworsky‟s work. According to Kohli and Jaworsky (1990), market orientation is the organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization-wide responsiveness to it.
In detail, market orientation is the process of collecting and assessing market intelligence on customers‟ current needs and wants, competitors‟ data and government regulations which are likely to impact upon these needs and wants. In here, the roles of managers and employees are to collect disseminate and communicate the knowledge processed within organizational functions in formal and informal manner. This concept of information sharing among business functions is recognized as inter-functional coordination by Narver and Slater (1990).
Kohli and Jaworsky (1990) recognized three set of antecedents namely senior management factors interdepartmental dynamics and organizational systems. Then, antecedents and consequences of market orientation presented by Kohli and Jaworsky (1990) are discussed in section 2.3.1 and 2.3.2.
Top management plays a very crucial role in market orientation. Top management need to direct employees with a clear vision, mission and values of the organization. And top management further needs to act in collaboration for disseminating information generated among the functions while empowering employees to create a market oriented culture in the organization. Moreover, top management is bound to make strategies to respond market intelligence in an appropriate way.
And the top management‟s attitudes towards the risk impacts on the degree of market orientation with risk aversive top management, the organization becomes less market oriented and if the top management is willing to take risk, the organization tends to be more market oriented by generating, disseminating information on market intelligence and responding to changes in customer needs and wants.
The second antecedent is interdepartmental dynamics. It means the formal and informal relationships and interactions among the functions of the organizations. The greater the interdepartmental dynamics (interdepartmental connectedness): the greater the degree of market orientation of the organization through improving communication and information dissemination across the functions. When the interdepartmental conflicts exist the degree of market orientation lowers since the communication and informational flow among departments hinders.
The third set of antecedents is organizational systems which consist of structure- formalization, centralization, departmentalization or specialization and reward systems. Formalization is the degree to which rules define roles, authority, relations, norms, sanctions and procedures. Centralization means the tendency to delegate the authority to make decisions throughout organizational members. Departmentalization or specialization is defined as the separation of organizational activities into departments. Levitt (1975) identified departmentalization hinders the information sharing and communication among the departments of the business venture. The greater the formalization, centralization: the lower the intelligence generation, dissemination and response to market intelligence. Furthermore, reward systems must provide positive intensives to employees to encourage the information sharing and communication among the departments so that finally the organization is able to create and deliver superior value to customers
The degree of market orientation effects on the business performance of the firm. Kohli and Jaworsky (1990) revealed that market orientation impacts on developing product focus, improving leadership, making corporate sales activities. Also when the market orientation of the firm becomes greater job satisfaction and commitment of employees towards the organization become higher.
Furthermore, with the more market oriented organizations, customers are satisfied of the products and services delivered and finally positive ward of mouth occurs opening doors for the business to attract new customer easily. And, generally, studies shows that greater the market orientation of the company, the greater the increased sales, better margins on sales, increased market share and high profits.
Figure 2.1 visualizes the relationship among the intelligence generation, dissemination of information and responding changes in the market based upon the information gathered. Intelligence generation is defined as collecting data on customers, competitors and market conditions. And dissemination of information is known as sharing processed information among the departments of the firm. Furthermore, organizational reward systems ought to provide encouragements to employees over information sharing activities in order to become more market orientated. Finally, responsiveness refers to acting on disseminated information to fulfill customer needs and wants in the market place.
illustration not visible in this excerpt
Figure 2.1 Kohli´s and Jaworski´s view on market orientation
Source: (Kohli & Jaworski, 1990, p. 55)
The renowned scholars, John C. Narver and Stanley F. Slater published the famous article about market orientation in October 1990 with the results collected from interviewing managers in 113 business units in one corporation. Narver and Slater (1990) viewed market orientation as an organization‟s culture. Here, researchers suggested market orientated firms focused on both customers and rivals on an equal basis. Moreover, Narver and Slater (1990) considered inter-functional coordination as very crucial. That means the organization depend on strong relationships and interactions amongst functions of the firm.
According to Narver and Slater (1990), market orientation consists of three behavioral components-customer orientation, competitor orientation, and inter-functional coordination- and two decision criteria- long-term focus and profitability. Narver and Slater (1990) introduced three equally crucial behavioral dimensions-customer orientation, competitor orientation and inter-functional coordination. And they recognized two decision criteria-long term-focus and profitability in the study. In section 2.4.1 and 2.4.2, the three behavioral dimensions and two decision criteria revealed by Narver and Slater (1990) are discussed.
Customer orientation is the first dimension. It is defined as the sufficient understanding of one's potential target buyers to be able to create superior value for them continuously.
Bachelorarbeit, 49 Seiten
Bachelorarbeit, 49 Seiten
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