Market orientation

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Market orientation is the extent to which an organisation behaves in response to a given market. Kohli and Jaworski define market orientation as "the organization-wide generation of market intelligence, dissemination of the intelligence across departments and organization-wide responsiveness to it". [1] Narver and Slater define market orientation as "the organization culture that most effectively and efficiently creates the necessary behaviours for the creation of superior value for buyers and, thus, continuous superior performance for the business". [2]

Contents

Kohli and Jaworski consider market orientation as the implementation of the marketing concept, whereas Carver and Slater consider it to be an organizational culture. According to the former authors, the marketing concept is a business philosophy, whereas the term market orientation refers to the actual implementation of the marketing concept. They added that market orientation "provide[s] a unifying focus for the efforts and projects of individuals and departments within the organization." As such, they consider market orientation to be an organisational culture consisting of three behavioral components, namely, i) customer orientation, ii) competitor orientation and iii) interfunctional coordination. [3] Empirical study found that among all three behavioral components, interfunctional coordination has the most significant influence on new product success. [4]

Perspectives of market orientation include the decision-making perspective, market intelligence perspective, [5] culturally based behavioural perspective, strategic perspective [6] and customer orientation perspective. [7]

The shifting source of competitive advantage

Niraj Dawar [8] argues that competitive advantage is shifting from a firm’s “upstream activities” such as sourcing, production, logistics and product innovation to “downstream activities”. In doing so, Dawar expands on the notion of market orientation: Instead of bringing better products to market or increasing operational and asset efficiencies, downstream activities focus instead on what else the firm can do for the customer: The core focus of the business has tilted from product and production, to customers and the market. Thus, competitive advantage exists externally to the firm, enabling the company to build lasting differentiation by creating new forms of customer value. Consequently, it is the firm’s perceived position in the eyes of the customer that matters, in the context of shifting purchase criteria, and not product innovation.

Customer perceptions can be shaped through an increased focus on building trust, changing the customer’s purchasing criteria and defining the competitive set. By also tailoring the offering to specific consumption circumstances and reducing customer costs and risk, value is created for customers through downstream innovation. Finally, the firm can build accumulative competitive advantage from network effects and also by accumulating and leveraging customer datasets.

Measurement scales

In order to measure market orientation, the two most widely used scales are MARKOR [9] and MKTOR [2]

The MKTOR scale is a 15-item, 7-point Likert-type scale, with all points specified. In this measure, market orientation is conceptualised as a one-dimensional construct, with three components, namely: customer orientation, competitor orientation, and interfunctional coordination. The simple average of the scores of the three components is the market orientation score.

On the other hand, the MARKOR scale is a 20-item, 5-point Likert scale, with only the ends of the scale specified. Here market orientation is again composed of three components, namely: intelligence generation, intelligence dissemination, and responsiveness.

Evaluation Scales (Deshpande 1998)

See also

Related Research Articles

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A business model describes how a business organization creates, delivers, and captures value, in economic, social, cultural or other contexts. The model describes the specific way in which the business conducts itself, spends, and earns money in a way that generates profit. The process of business model construction and modification is also called business model innovation and forms a part of business strategy.

<span class="mw-page-title-main">Strategic management</span> Planning for a companys responses to external issues

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Marketing management is the strategic organizational discipline that focuses on the practical application of marketing orientation, techniques and methods inside enterprises and organizations and on the management of marketing resources and activities. Compare marketology, which Aghazadeh defines in terms of "recognizing, generating and disseminating market insight to ensure better market-related decisions".

Competitive analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats. Profiling combines all of the relevant sources of competitor analysis into one framework in the support of efficient and effective strategy formulation, implementation, monitoring and adjustment.

<span class="mw-page-title-main">Porter's five forces analysis</span> Framework to analyse level of competition within an industry

Porter's Five Forces Framework is a method of analysing the competitive environment of a business. It draws from industrial organization (IO) economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness of an industry in terms of its profitability. An "unattractive" industry is one in which the effect of these five forces reduces overall profitability. The most unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit levels. The five-forces perspective is associated with its originator, Michael E. Porter of Harvard University. This framework was first published in Harvard Business Review in 1979.

Marketing strategy refers to efforts undertaken by an organization to increase its sales and achieve competitive advantage. In other words, it is the method of advertising a company's products to the public through an established plan through the meticulous planning and organization of ideas, data, and information.

Marketing intelligence (MI) is the everyday information relevant to a company's markets, gathered and analyzed specifically for the purpose of accurate and confident decision-making in determining market opportunity, market penetration strategy, and market development metrics. Marketing intelligence is necessary when entering a foreign market.

Customer satisfaction is a term frequently used in marketing to evaluate customer experience. It is a measure of how products and services supplied by a company meet or surpass customer expectation. Customer satisfaction is defined as "the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services (ratings) exceeds specified satisfaction goals." Enhancing customer satisfaction and fostering customer loyalty are pivotal for businesses, given the significant importance of improving the balance between customer attitudes before and after the consumption process.

The concept of business process orientation (BPO) is based upon the work of Deming, Porter (1985), Davenport and Short (1990), Hammer, Grover et al. (1995), and Coombs and Hull (1996). This body of work suggests that firms could enhance their overall performance by adopting a “process view” of the organization. Although many firms have adopted the BPO concept, little to no empirical data existed substantiating its effectiveness in facilitating improved business performance. McCormack (2000) conducted an empirical study to explore the relationship between BPO and enhanced business performance. The research results showed that BPO is critical in reducing conflict and encouraging greater connectedness within an organization, while improving business performance. Moreover, companies with strong measures of BPO showed better overall business performance. The research also showed that high BPO levels within organizations led to a more positive corporate climate, illustrated through better organizational connectedness and less internal conflict. Another empirical study by Kohlbacher (2009) reveals that BPO is positively associated with customer satisfaction, product quality, delivery speed and time-to-market speed.

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Customer retention refers to the ability of a company or product to retain its customers over some specified period. High customer retention means customers of the product or business tend to return to, continue to buy or in some other way not defect to another product or business, or to non-use entirely. Selling organizations generally attempt to reduce customer defections. Customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship and successful retention efforts take this entire lifecycle into account. A company's ability to attract and retain new customers is related not only to its product or services, but also to the way it services its existing customers, the value the customers actually perceive as a result of utilizing the solutions, and the reputation it creates within and across the marketplace.

Customer experience, sometimes abbreviated to CX, is the totality of cognitive, affective, sensory, and behavioral customer responses during all stages of the consumption process including pre-purchase, consumption, and post-purchase stages.

Market intelligence (MI) is gathering and analyzing information relevant to a company's market - trends, competitor and customer monitoring. It is a subtype of competitive intelligence (CI), which is data and information gathered by companies that provide continuous insight into market trends such as competitors' and customers' values and preferences.

Organizational ambidexterity refers to an organization's ability to be efficient in its management of today's business and also adaptable for coping with tomorrow's changing demand. Just as being ambidextrous means being able to use both the left and right hand equally, organizational ambidexterity requires the organizations to use both exploration and exploitation techniques to be successful.

Value chain management capability refers to an organisation's capacity to manage the internationally dispersed activities and partners that are part of its value chain. It is found to consist of an international orientation, network capability, market orientation, technological capability and teamwork management capability. Value chain management capability is a higher level capability that draws together a variety of lower level capabilities.

Traditionally, market orientation (MO) focuses on microenvironment and the functional management of an organisation. However, contemporary organisations have widened their focus to incorporate more roles, functions and emphasis on the macro environment. Firms have been concerned with short run success and often not taken into account the long-run ecological, social and economic effects from their activities. Despite growth in the MO concept, there is still a need to reconceptualise the concept with a greater emphasis on external factors that influence a firm.

A chief revenue officer (CRO) is a corporate officer (executive) responsible for all revenue generation processes in an organization. In this role, a CRO is accountable for driving better integration and alignment between all revenue-related functions, including marketing, sales, customer support, pricing, and revenue management.

The composition-based view (CBV) was recently developed by Luo and Child (2015). It is a new theory that explicates the growth of firms without the benefit of resource advantages, proprietary technology, or market power. The CBV complements some existing theories such as resource-based view (RBV), resource management view, and dynamic capability – to create novel insights into the survival of firms that do not possess such strategic assets as original technologies and brands. It emphasizes how ordinary firms with ordinary resources may generate extraordinary results through their creative use of open resources and unique integrating capabilities, resulting in an enhanced speed and a high price-value ratio that are well suited to large numbers of low- to mid-end mass market consumers. The CBV has been commented as “a new view with significant application” for emerging market firms and for small and medium sized enterprises in many countries. The view cautions though that composition-generated advantages are temporary in nature and that composition itself mandates special skills in distinctively identifying, leveraging, and combining open or existing resources inside and outside the firm.

References

  1. ↑ Kohli, Ajay K.; Jaworski, Bernard J. (1990). "Market Orientation: The Construct, Research Propositions, and Managerial Implications". Journal of Marketing. 54 (2): 1–18. doi:10.1177/002224299005400201. ISSN   1547-7185. S2CID   198869250.
  2. 1 2 Narver, J.C. & Slater, S.F. (1990). The effect of a market orientation on business profitability. Journal of Marketing, 54(4), 20-34.
  3. ↑ Kumar, Kamalesh; Subramanian, Ram; Yauger, Charles (1998). "Examining the Market Orientation-Performance Relationship: A Context-Specific Study" (PDF). Journal of Management. 24 (2): 201–233. doi:10.1177/014920639802400204. hdl: 2027.42/68689 . ISSN   0149-2063. S2CID   13287775.
  4. ↑ Wong, S.K.S. and Tong, C. (2012), "The influence of market orientation on new product success", European Journal of Innovation Management, Vol. 15 No. 1, pp.99 - 121
  5. ↑ Kohli, A. K., & Jaworski, B. J. (1990). Market Orientation: The Construct, Research Propositions, and Managerial Implications. Journal of Marketing, 54(2), 1–18. https://doi.org/10.1177/002224299005400201
  6. ↑ Ruekert, Robert W. (1992). Developing a Market Orientation: An Organizational Strategy Perspective. International Journal of Research in Marketing, 9(3),225-45.
  7. ↑ Deshpandé, R., Farley, J. U., & Webster, F. E. (1993). Corporate Culture, Customer Orientation, and Innovativeness in Japanese Firms: A Quadrad Analysis. Journal of Marketing, 57(1), 23–37. https://doi.org/10.1177/002224299305700102
  8. ↑ Dawar, Niraj (2013-12-01). "When Marketing Is Strategy". Harvard Business Review. No. December 2013. ISSN   0017-8012 . Retrieved 2020-09-02.
  9. ↑ Kohli, A.K.; Jaworski B.J. & Kumar A.(1993). MARKOR: A Measure of Market Orientation. Journal of Marketing Research, 30(4), 467-477.
  10. ↑ Desphande 1998 in: Benjamin Teeuwsen (2013). "www.chiligum.com". Chiligum Strategies. Retrieved 2013-06-26.{{cite web}}: CS1 maint: numeric names: authors list (link)
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