Critical Essay M621

What is market orientation and what does it entail?

In various marketing and strategy literature, one can frequently find references to two dominant definitions of market orientation. Firstly, the authors Kohli and Jaworski (1990) described market orientation as being based on "the organisation-wide generation of market intelligence pertaining to current and future customer needs, dissemination of intelligence across departments and organisation-wide responsiveness to it". Another definition frequently quoted in various marketing literature is by Narver and Slater (1990), where they claim that market orientation includes two behavioural components. These are customer and competitor orientations, and interfunctional co-ordination; "the organisation culture that most effectively and efficiently creates the necessary behaviours for the creation of superior value for buyers". The above two concepts can be integrated into a combined definition of market orientation, characterised by the gathering and use of information from customers as well as the development and implementation of a strategy to meet customer needs and wants - (Ruekert, 1992).

In the light of the above, and placing these theories into the exporting environment, we can identify five major elements that comprise market orientation, as it was noted by Hooley and Newcomb (1983):

Export marketing orientation - which should be demonstrated in a more positive and aggressive attitude of actually planning for export and adapting the marketing mix elements to a particular market. This can be seen as opposed to merely product oriented attitude where exporting is only used as a convenient way of dealing with seasonal fluctuations or getting rid of the products that cannot be solved in the domestic market.
Taking into account cultural characteristics of the exporting market: by considering linguistic capabilities amongst the managers and staff and overcoming language barriers through adequate recruitment and selection of appropriate skills and development of same. In addition, careful avoidance of the straightforward application of consumer behavioural theories directly from one market into another should be supported by a sufficient amount of quality market research and adequate use of it.
Commitment to export marketing: Should be demonstrated throughout the organisation by presence of export marketing departments and functions, managerial resources focused on export (e.g. export director) and their integration into all other parts of the organisational operations. To support this, the appropriate evaluation and compensation systems based on export related performance objectives should be clearly defined and implemented.
Concentration of effort: Should be achieved through evaluation, analysis and decision on which and how many markets to serve where the primary objective should be to focus on a selected few where more resources could be applied rather than spreading these thinly on too many markets. The main benefit derived from this would be acquiring more knowledge relevant to more important markets rather than risking acquiring too little knowledge by employing "a shotgun approach". A consequential benefit would be, for example, an ability to recognise the opportunities to compete on non-price factors rather than relying on price competition, thus achieving better margins.
Mastering adaptation strategies: Would mean fast approach to offering new products and technical solutions relevant to customers needs and wants in the particular exporting market. In addition to this, decisions on adapting after sales service, technical information literature, promotion and language, brochures and correspondence should be based on the evaluations on whether this would increase sales sufficiently in order to prove profitable in the longer term.

What factors are likely to influence an exporter's level of market orientation in its foreign markets?

An important prerequisite to determine the factors influencing an organisation's level of market orientation in exporting, is based on internal organisational factors, and it was noted in the study by J W Cadogan and N J Paul (1999) as "a strong co-ordinating mechanism which appears to improve the firm's ability to successfully generate, disseminate and respond to export market intelligence". Their findings also show that top management plays a crucial role in facilitating export market oriented activities within the firm.

The above mentioned internal factors are closely related to the management's focus on and recognition of the export environment as an external factor influencing an exporter's level of market orientation. Providing that the management is ready to absorb, analyse and act upon relevant conditions and changes in the export environment they will be able to recognise the opportunities and modify their marketing mix accordingly. For example, competing against other market-oriented competitors in a crowded foreign market would require investing more resources in order to find the best strategies in order to compete successfully. This, if combined with the relatively high importance of the particular market would inevitably lead to increasing the level of market orientation of the organisation.

Cultural factors and consumer behaviour characteristics relevant to the particular market could also be considered as important factors likely to influence an exporters level of market orientation providing that the previously mentioned factors are present. This would mean that given the managerial focus on exporting and relatively higher importance of the market, the resources invested into the effort to adapt the marketing mix successfully are more likely to increase the level of marketing orientation.

Market growth was one of the factors frequently quoted in the marketing literature as another factor influencing the level of market orientation of exporting organisation. In the economies characterised by strong demand and market growth, a firm can do well even with a lower level of market oriented efforts. On the other hand, if the demand was weak in the market, it can be expected that the customers would emphasise value as the most important competitive factor and as a consequence the firms competing in the same market would need to apply more resources in order to be competitive. However, as noted by Kohli and Jaworski (1990), marketing sometimes appears to require more resources precisely when the business has limited resources, again often caused due to weak market conditions.

How and why does this market orientation affect the firm's export performance?

It was noted by Turnbull and Cunningham (1981) that the tendency of many British exporters was to obtain a small amount of business in many countries, rather than to concentrate on a few. As a consequence they were left with too few resources applied too thinly and therefore were not able to acquire enough knowledge about the markets and to adapt efficiently where appropriate. By applying marketing orientation principles of concentration of effort, the firms export performance can be improved simply through focusing more resources on fewer more important markets and thus more profitable areas would be tackled more successfully (Hooley and Newcomb, 1983).

With a higher degree of market orientation, if demonstrated by overcoming cultural and language barriers, an important competitive advantage can be gained. This in turn would lead to a range of possible improvements such as a better after sales service, more effective promotion and as a consequence, increased sales, leading again to a better export performance.

Further important evidence of market oriented behaviour is a sufficient and adequate use of market research applied in pricing. The result of this research, if used effectively, would increase the company’s ability to compete on non-price factors and achieve better margins per unit sold, thus increasing the overall profitability. To support this, monitoring price movements in the market place and quick reaction to any fluctuations would confirm the organisations market orientation commitment over a long period, by recognising that in some markets, pricing strategies should change more frequently. Recognising the fact that the findings of any market research can change with the time would help the organisation to maximise its export performance.

In the marketing and strategic business literature many authors advocated the importance of market orientation and its influence over the firms export performance. For example, Kohli and Jaworski (1990) suggested that a marketing orientation appears to provide a unifying focus for the efforts of employees and departments within the firm, thus leading to superior performance. Another observation attributed to Narver and Slater (1990), states that market orientation is the organisational culture that most effectively and efficiently creates the necessary behaviours for developing superior value for customers and, thus, continues superior performance for the firm.

In conclusion, it can be argued that an organisation practising marketing orientation strategies and demonstrating managerial long term commitment to those principles can benefit from the fact that this mix of business activities, attitudes and knowledge would inevitably positively affect the overall business culture, improving the competitiveness, export performance and profitability of this organisation.

References:

Cadogan, J.W. and N.J. Paul (1999) Key antecedents to export market-oriented behaviours. (Ref: EMAC Conference, Berlin, 1999).

Hooley, G.J. and J.R. Newcomb (1983) Ailing British exports: symptoms, causes and cures. The Quarterly Review of Marketing 8. (4).

Kohli, A. and Jaworski, B. (1990) Market Orientation: the construct, research propositions, and managerial implications. Journal of Marketing 54.

Kwaku Appiah-Adu (1998) Market orientation and performance: empirical tests in a transition economy. Journal of Strategic Marketing 6. (25-45).

Narver, J. and Slater, S. (1990) The effect of a market orientation on business profitability. Journal of Marketing 54.

Ruekert, R. (1992) Developing a market orientation: an organisational strategy perspective. International Journal of Marketing 9.

Turnbull, P.W. and Cunningham M.T. (1981) International Marketing and Purchasing. MacMillan Press 1981.

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