Introduction at exploring perspectives. Deshpande et al (1993) also

Introduction
to Market Orientation

Market
orientation has gained traction since the early nineties when it was the focus
of two seminal papers – Kohi and Jaworski (1990) & Narver and Slater
(1990). Most of modern research and thought pieces stem from the definitions
offered in these papers, and look at exploring perspectives. Deshpande et al
(1993) also formulated a measurement of market orientation. At present in the
VUCA world, with globalization and competitiveness at its peak, the business of
being market oriented is very critical for success. Customer focus is now a
highly value proactive business strategy. It can be argued that razor sharp
customer focus and market intelligence can help pre-empt any sudden shifts or
changes in volatile and disintegrating markets (Day, 1994).

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There
is hence a need to analyze all existing literature and differing opinions on
the broad subject of market orientation in order to assess its future
consequences and potential. In this literature review, first, an understanding
of the concept of market orientation and different definitions is provided.
Then, antecedents are explored along with observed drawbacks and consequences
to provide a holistic view of the subject.

Definitions
& Interpretations of Market Orientation

Market
Orientation has been having a generic appeal to it. There are many themes that
are related to market orientation. For instance market orientation is
considered to be a set of activities that are based on information (Kohli and
Jawarski, 1990). There are certain research papers that relate Market
Orientation to a business philosophy within the firm that is omnipresent across
all departments. It is about the study of consumer needs and disseminating
these studies across all function departments thereby deriving a business
philosophy based on it (Sigauw and Diamantopoulos, 1995). Some researchers have
tried to draw a thin difference between Market Orientation and Marketing
Orientation that are mistakenly used interchangeably. Marketing Orientation is
more dependent on the marketing function within the firm which tries to
differentiate between marketing, sales and production. Market orientation is
inclined towards understanding the current and potential need of the end
consumer, obtaining this marketing intelligence, sharing it across the firm and
then providing a business response which would affect the client, firm and the
surrounding environment. A complete interpretation of Market Orientation covers
competitor orientation thus having a dual focus (Hunt and Morgan, 1995). Thus
marketing orientation is not limited to only implementation of the marketing
concept.

Recent
researches (Mastuno and Mentzer, 2000) have widen the horizon of Market
Orientation. There has been an inclusion of multiple stake holders such as
suppliers, distributors, retailers. This inclusive macro environment could
result in hiding the critical underlying drivers of market orientation. The key
message the Market Orientation tends to define is that developing and enhancing
customer value and relation is the responsibility of everyone in the firm.

Antecedents to
Market Orientation

Antecedents
are defined as the organizational elements that either bolster or impede the
extent of market orientation of a firm. The antecedents play a pivotal role in
the dissemination of business intelligence across the organization. For
instance, an active top management that constantly communicates its commitment
by appropriate resource allocation is a considered as an example of a senior
management antecedent that positively impacts the market orientation (Sorenson,
2008). Information asymmetry plays another important role in the market
orientation of a firm. If a person’s role in the firm is a result of the
information he/she obtains, then there is very little incentive for that person
to share the business intelligence (Sorenson, 2008). This has a negative
outlook towards the market orientation.

Alternative
characteristics like Sales Force Management, New Product Development and
Innovation practices and Human Resource Management with internal customer
orientation also play a great role in determining the successful market
orientation of the firm (Pulendran, Speed and Widing, 2002). They go on to
argue that successful market planning can play a huge role in separating the
average firms from the good ones in terms of market orientation. Risk aversion
by the top management also features as a key contributor to the market
orientation. The lower the risk appetite leads to lesser business intelligence
accumulation, thereby lesser dissemination and even lesser responsiveness of
the organization as a whole (Alshahry and Wang, 2002).

Higher
departmental connectedness leads to a greater market orientation.
Departmentalization, formalization and centralization lead to lower
intelligence dissemination and thereby a poor market orientation (Green, Inman,
Brown and Willis, 2005). Further, they add that having higher performance
related incentives for the employees would automatically lead to a higher
market orientation.

Consequences
of Market Orientation

Many
studies have proven a positive relationship between market orientation and
business performance. Market
orientation is frequently perceived to improve the firm’s performance. If the organizations
are market-oriented, i.e., being on top of the customer needs and responding to
their preferences can better satisfy customers and, hence improve
organization’s performance at higher levels. Many literatures say that there is
a lack of empirical evidence to prove that profitability is a component of
market orientation.

According to Gloria and Daniel
(2005), the main consequence, i.e. the organizational performance can be
divided into two dimensions. They are Market performance and financial performance.
Also, they reinstate in their study that
market performance will be measured by perceptions of market share, sales
growth and new product success by the managers. To measure the financial
performance, they use two criteria, which are return on investments and return
on asset.

Robert
E. Morgan and Carolyn A. Strong (1997) discuss about the strategic orientation
of the company along with market orientation. They discuss that the main
difference between a market oriented firm and its less market oriented
competitors is the ability of the former to create a long-term value for its
customers. Sorensen (2009), explains how
narrow focus on either consumers or competitors alone can have negative
consequences to the firm’s performance. They further state that competitor
related information should be used as an input to formulate a business strategy
rather than focusing only on financial performance.

Thus
there is an evident positive relationship between market orientation and
business performance as the former aids the firm in improving its resources and
is a market differential which results in superior performance.

 

 

Limitations
& Criticism of Market Orientation

While
the market orientation concept is slowly becoming a buzzword in various organizations
across industries, there are certain limitations of the concept that are
becoming apparent. There are three aspects to the criticism-

a)     There
are certain conditions under which being market oriented is not useful and
might even be detrimental

b)     The
concept ironically does not protect the consumer, while it originates from and
ends at the consumer’s needs

c)     The
concept ignores the creative abilities of the firm itself, which is crucial to
the success of the orientation

The
first aspect deals with evidence supporting the incongruence of the
implementation of market orientation with the conditions of the organization at
the time. In particular, organizational stress, excessive costs and high
product failure rates are the major concerns of those that find the concept counterproductive
(Bell and Emory, 1971). It stresses on the fact that the benefits have to
exceed the cost of the resources and the macroeconomic conditions prevalent at
the time of the implementation. According to Kohli and Jaworski (1990), under
conditions of limited competition, stable market preferences, technologically
turbulent industries and booming economies, a cost-benefit analysis becomes
even more significant, as market orientation might not be strongly correlated
with business performance.

The
second aspect deals with loopholes in the concept itself which might allow for
exploitation of the consumer and propagating consumerism in a way that is
detrimental to the consumer. Bell and Emory (1971) state that two aspects of
the theory, namely, the anticipation of consumer needs and the profit direction
make the concept hazy. They point to the fact that the concept does not exclude
any possibility of the needs being artificially created or the need for
aggressive selling in order to manipulate or persuade the consumer into
believing that the products and services being sold are fulfilling a basic
need. It also questions the profit direction aspect of the concept, which leads
to consumer centricity becoming a business imperative and a means to an end, rather
than a philosophy. This is what leads to unethical practices, unscientific
claims and a culture that promotes consumerism. There is therefore a need to
tweak the three elements of the concept itself to make sure the consumer is not
harmed in the process.

The
third aspect deals with the creative abilities of the firm and Kaldor (1971)
argues that consumer and profit orientation is not enough to make a firm
successful. While Kohli and Jaworski (1990) have looked at three antecedents of
market orientation, namely senior management factors, interdepartmental
dynamics and organizational systems, there is no specific focus on the
abilities of the firm itself, right from the market intelligence generation to
the creation of the product/service. The paper focuses on this gap and talks of
remedies to make market orientation a more successful concept practically.

Conclusion

Market
orientation seems like a contemporary concept as it has only gained prominence
in recent times, with empirical evidence also suggesting that it helps improve
a business’ performance. However, its seeds were sown in the heart of marketing
philosophy. Peter Drucker in the 1950s made a case for businesses to sit on the
same side of the desk as the customer, and to gain a keen understanding of
their needs before providing solutions. “To satisfy the customer is the mission
and purpose of every business”, he proclaimed. Marketing was to be an integral
part of business and not a silo-ed specialized function, and the concept of
market orientation is a testament to this truth. Kohi and Jaworski (1990)
continue to be cited by varied research papers exploring one or more of market
orientation’s subthemes. Since then, until now, there has been sufficient
research on the extent to which companies have adopted market orientation but
there is still room for more on arguing on the interpretations of its
philosophies as well as its antecedents & drawbacks. Kohi and Jaworski
(1990) continue to be cited by varied research papers exploring one or more of market
orientation’s subthemes.