Marketing Orientation And Its Benefits And Barriers Marketing Essay
Understanding customers is a frequently discussed topic among business practitioners and academicians alike. For the last few decades, market orientation has been a rapid development of literatures for recognizing customers and markets. Currently, marketing orientation becomes one of the most popular modern business philosophies in most of the world’s major corporations and leading business schools. Basically, marketing orientation is the generation of appropriate market intelligence pertaining to current and future customer needs, and the relative abilities of competitors to satisfy these needs; the integration and dissemination of such information across the organisation’s departments; the coordinated design and execution of the organisation’s strategic response to market opportunities. Hereinafter, definitions of marketing orientation and the evolution of this concept will be selectively introduced. After that, the antecedence of marketing orientation will be analyzed and criticized. Benefits of companies can get from such an orientation and barriers of operating it will be discussed ultimately.
EVOLUTION OF MARKETING ORIENTATION
A marketing orientation should recognize the concept of consumer sovereignty and that consumption is the sole purpose of production, but it also recognizes that a firm is free to pick who its customers are. It recognizes that companies may take a long-run approach when assessing marketplace demands. A marketing orientation treats the marketer’s needs as the paramount one (Houston, 1986) although it recognizes that these needs need to be supported by organizational process of satisfying consumer demand. A firm under a marketing orientation has choices of marketing and managing its own relevant capabilities in order to achieve the strategic goals.
According to theories of Levitt (1969) and Drucker (1977), which argued against the view of considering profit as a component of marketing orientation and got support from Kohli & Jaworski, (1990), the key concern of the marketing orientation is to satisfy customer wants.
Management and marketing academic literatures consider the marketing orientation as a popular business philosophy which can complement of the inadequacies of alternative approaches, these being the product and production orientation and the sales orientation. The product and production orientation supposedly reached high levels of efficiency and product quality. However, this concept paid little attention to customer demands. The production orientation runs into dead end once supply exceeds demand or changing in consumers' tastes. On the other hand, the sales orientation also assumes that the company has the biggest possibility of knowing what to produce. Based on this concept, customers might face a situation of being around with advertising and other selling practices once a company’s products are not sold. The adoption of the sales orientation had a potential effect on management structures. A company may be running by ex-engineers, sciences, or salesmen, advertiser. These people were always showing impatience on concerning with customer demands but on products research and development.
Based on those drawbacks of production orientation and sales orientation, marketing orientation becomes respectable in modern business world. Companies’ capabilities or production will not be fixed or changed only based on companies’ desires. Instead, customer wants are becoming vital. Companies would like to show progress of production line or selling line in order to fit customers’ demands. Getting customer satisfaction becomes a regular subject of each company.
BACKGROUND OF MARKETING ORIENTATION CONCEPT
It is first introduced in the early 1950s that the marketing concept is the basis of marketing thought (Borch 1957; McKitterick 1957). However, back to those days, even though it is an interesting notion, there is little research which focused on the subject. Only small pieces of academic literatures represent their interests by offering preliminary suggestions for market orientation, such as, Felton (1959), Stampfl (1978), or Webster (1988).
However, after 1970s, there is strong revival of researching marketing orientation (e.g., Deshpande and Webster 1989; Deshpande, Farley, and Webster 1993; Houston 1986; Narver and Slater 1990; Olson 1987; Linden 1987; Shapiro 1988). Kohli and Jaworski (1990) defined an in-use approach of market orientation as being composed of three kinds of activities: organizational generation of market intelligence pertaining to current and future customer needs; interdepartmental dissemination of the intelligence; and organizational abilities of responsiveness to customers’ needs. Furthermore the organizational responsiveness component is defined by Jaworski as being composed of plan of activities of organizations and implementation. This definition focuses on specific organizational behaviors; and hence competence of organization operationalizes the market orientation. The conceptualization of three activities of market orientation also causes a further analysis of any given antecedent of a market orientation. Therefore, most researchers adopted the Jaworski’s concept of market orientation in the contemporary study. Consistent with Lusch and Laczniak (1987), a broader perspective is created into the market orientation concept. Additional forces in a market, such as competition, technology, regulation, etc., are considered to belong to the domain of the market orientation.
In fact, two different approaches seem to be accepted popularly. One approach considers marketing orientation as basically a company philosophy. Another regards it as mainly a company behavior.
Drucker (1954) believed that “marketing is not a specific company activity. On the contrary, it involves the entire organization. It is the organization viewed from the customers' point of view.” Similarly, Felton (1959) has also described marketing orientation as “a way of thinking in doing business that is based on the integration and coordination of all marketing activities which, in turn, will integrate with the rest activities of the company in an effort to maximize long-term profitability.”
In other level of researching of the relationship between marketing concepts and market orientation, Swartz (1990) pointed out the organization of marketing and the concept of marketing orientation differently. In his opinions, the concept of marketing was associated with many concerns of the company’s priorities and goals, while marketing organization was used to describe the functional department of the company that executes marketing related activities, such as pricing, distribution, promotion, etc.. This notion was accepted by Deshpande and Webster (1989) who concentrated on the marketing orientation to quality of philosophical or cultural level of organization. These researchers tried to investigate the innovativeness of Japanese companies and use the degree of marketing orientation to explain the companies’ propensity. They employed the term of customer orientation to describe a specific set of beliefs that puts the customers’ interests first and considers them before anything of other related stakeholders, such as, owners, managers, employees, etc.. Based on their investigation, this set of beliefs employed by customer orientation should be considered much more fundamental as corporate culture. In 1989, Baker also built an approach of marketing orientation which is very similar with what those above researchers had approached. Differently, he turned out a more detailed opinion. Although he avoids a specific definition of marketing or marketing orientation, he made a clear notion of marketing orientation. In his view, producers need to start conscientiously identify and classify customers’ needs. He believed that mobility of these companies’ assets should serve customers’ needs in a mutual beneficial way.
Those researchers have provided successfully of conceptualization of marketing orientation. They set up an ideology of investigating marketing orientation on philosophy-base. However, their research work can not been considering as exhaustive. From 1986 and 1990, other researchers complemented and created those empirical views by all treating marketing orientation as mainly a company philosophy. Hooley, Lynch, and Shepherd (1990) classified companies into four groups, each showing a different level of adoption of marketing orientation, based on investigating a broad sample of marketing directors who hold similar attitudes and knowledge of marketing in Britain. These researchers identified: the “Marketing Philosophers”, as the companies that have fully accepted marketing orientation as a core philosophy of company; the “Departmental Marketers” as the companies that perceive narrowly the concept of marketing orientation in the marketing and/or the sales departments; the “Sales Supporters” as companies that design the marketing orientation concept as a tool for supporting the sales effort; and the "Unsurers" as the companies that still lack of knowledge of the marketing orientation concept. Based on these qualitative researchers, the analysts concluded that marketing orientation acts as a distinctive company philosophy which is tightly linked with organizational attitudes and beliefs. Based on these results, one thing can be acknowledged is that different attitudes and beliefs of marketing orientation from organization, usually from management, can cause different adoption and implementation of marketing orientation. This antecedence will be critically discussed after.
In contrast, another approach which considers marketing orientation as a company behavior has also been argued by some researchers. Trout and Ries (1985) considered marketing orientation as an effort of using combined market intelligence to build a competitive advantage. In fact, they believed that customer orientation is important, but not as vital as competitor orientation which can enable the company to identify the weakness of its competitors and utilize its own advantages to against these competitors’ weak part.
Elliot (1987) tried to use a behavioral approach to explain marketing orientation in different way. He believes that the concept and idea of considering marketing orientation as a priority to satisfy customers’ needs is acceptable, but insufficient. He revised that this conceptualization should consider designing strategies which is for achieving customer satisfaction as part of marketing orientation concept. This strategic behavioral approach of explaining marketing orientation has been already mentioned by other researchers (1985, 1992). There are quotations which explained that marketing orientation requires the development of marketing skills, particularly on designing and implementing marketing strategies (1989) and changes in the organizational structure and marketing systems of the company (1988). Based on these strategic behavioral approaches of explaining marketing orientation, Piercy (1992) concluded three elements comprising marketing orientation: strategies, which is concerning the decision of market definition and market segmentation as well as the identification the differentiation of the company’s products; plans, which is concerning the development of marketing mix; and information, which is concerning the entire market knowledge and data for the use strategy design, planning, and control. Pierrcy’s definition truly completed previous researches which did not focus on strategic dimension. Meanwhile, Kohli and Jaworski (1992) also provide similar idea of defining marketing orientation. They also stated marketing orientation as behavior and explain this concept with three sides: market intelligence collection, which is comprehension of the market; intelligence dissemination throughout the company, which is familiarizing with the market; and responsiveness to the intelligence which is through the strategies and plans that the company designs and implements. These strategic behavior approaches are alternative explanation of marketing orientation in competitor orientation thinking.
Since the marketing orientation is increasing its acceptability of many companies, the necessity of concerning this conceptualization as both companies’ philosophy and behavior is increasing. Therefore, combined above researchers’ works, marketing orientation can be view as company’s philosophy which is using as a tool to fit customer satisfaction, and also company’s behavior which is using as a tool to investigate competitors’ weaknesses.
BENEFITS FOR ORGANIZATIONS
Based on above researches, definitions of marketing orientations are clearly introduced. Subsequently, benefits from operating marketing orientation are willing to be introduced. General advantages of implementing marketing orientations include: improved objective performance (profitability, market share, capacity utilisation, etc.) and improved qualitative or judgemental performance (customer satisfaction, employee satisfaction, service quality, etc.) (Shoham et al, 2005). Based on above definitions and evolution introduction, implementing marketing can provide strategic knowledge of customers and competitors. Companies will investigate customers’ needs then produce suitable products innovation to achieve of customer satisfaction. Companies can also using marketing orientation to estimate competitors’ conditions. By using marketing orientation, managers can grab market intelligence and organizational capabilities to make adequate strategy. During this process, acknowledging internal situation of companies will be achieved. That is to say, knowing employees satisfaction, organizational capabilities and organizational systems can be proposed by marketing orientation.
Besides, the association of marketing orientation and company performance has been the most popular point of several researches. These studies provide fundamental analysis that supports the existence of a relationship between marketing orientation adoption and company performance. Based on these studies, the question of whether marketing orientation leads to better performance or not will be clarified since evidence exhibits.
For example, Hooley, Lynch, and Shepherd (1990) had examined this issue. These researchers adopted a holistic approach and examined not only the groups that they identified but also the overall market activities that companies acted. This approach expressed that the “Marketing Philosophers” are the only ones that implement market segmentation strategies, maintain a superior and clearer organization of their marketing activities and efforts, and adopt a proactive strategic results. Clearly, availability of resources, as the consequence of higher performance, is not a prerequisite for such practices. In fact, such practices increase the overall efficiency of the marketing effort (Greenley, 1995). In addition, these practices were found only among the marketing orientated companies. This led the analysts to conclude that marketing orientation is the cause of superior performance. Other research results (Takeunchi & Quelch, 1983; Saunders & Wong, 1985; Alexander, 1985; Hooley & Shepherd, 1985) have also confirmed that adoption and application of marketing orientation will cause greater superior performance in the market.
Webster (1991) used to viewed, “a marketing oriented industrial company is often more knowledgeable about its customers and their needs than is the typical marketing oriented consumer company.” It is evidential that both new and mature industrial products successes, which assist companies to achieve their financial and market share objectives, are strongly relying on marketing orientation (Cooper, 1993; De Vasconcellos, 1991). Based on these researches there are some conclusions can be produced that marketing orientation adoption will have a positively greater impact on the performance of industrial goods rather than on the performance of consumer goods. Therefore, marketing orientation can bring financial and profitable results for industrial goods of companies.
GENERAL DETERMINANTS MARKETING ORIENTATION
However, although there are lots of benefits companies can get from marketing orientation, the current implementation of this conceptualization in many organizations is not as good as expected. There are some factors which can influence of determining marketing orientation. Hereinafter is some brief introduction. The first set of antecedents is top management in an organization during current studies. Several researchers suggest that top managers play a vital role in expressing an organization’s values and orientation (Felton 1959; Hambrick and Mason 1984; Webster 1988). The essential in these researches is that organization will not be market orientated until an organization gets clear directions and orders from top managers about how important of perceiving customers’ need and competitors’ infromation (Levitt 1969, p. 244; Webster, 1988). Top management reinforcement of the importance of a market orientation is likely to encourage individuals in the organization to track changing markets, share market intelligence with others in the organization, and be responsive to market needs. The market intelligence generation, intelligence dissemination, and responsiveness of the organization are all influenced directly and indirectly by top managment. A second antecedent of market orientation relates to top managers' risk posture.” Responsiveness to changing market needs often calls for the introduction of new products and services to match the evolving customer needs and expectations. But new products, services, and programs often run a high risk of failure and tend to be more salient than established products. Kohli and Jaworski (1990) mentioned that junior managers are more likely to propose and introduce new offerings linked with changes in customer needs if top management declared a willingness to bear risks and failures as being natural. Oppositely, employees are merely possible to focus on generating or disseminating market intelligence to changes in customer needs if top management can not manage risk softly and can not afford to failures. In a word, market intelligence generation, intelligence dissemination, and responsiveness of the organization are all linked with tolerance of risks and failure by top management.
The second determinant factor of implementing market orientation is related to interdepartmental dynamics. Several researchers had investigated that interdepartmental conflict has negative impact of a market orientation (Levitt 1969; Lusch, Udell and Laczniak 1976; Felton 1959). Ruekert & Walker (1987) argued that interdepartmental conflict is inhibiting communication across departments, thus, it caused lower market intelligence dissemination. In addition, tension among departments is likely to inhibit a concerted response by the departments to market needs, thereby hampering a market orientation. No effects are expected for intelligence generation, because interdepartmental conflict should not affect the information acquisition process in a given department. Hence: “The greater the interdepartmental conflict, the lower the market intelligence dissemination and responsiveness of the organization. A market orientation is also posited to be affected by interdepartmental connectedness, which refers to the degree of formal and informal direct contact among employees across departments.” Several related streams of research suggest that connectedness facilitates in-teraction and exchange of information, as well as the actual utilization of the information (see Cronbach and Associates 1981; Deshpande and Zaltman 1982; Pat-ton 1978). Therefore, it can be expected that the greater the extent to which individuals across departments are directly connected (or networked), the more they are likely to exchange market intelligence and respond to it in a concerted fashion (see also Kohli and Jaworski 1990). As before, no effects are expected for the intelligence generation component. Thus: H4: The greater the interdepartmental connectedness, the greater the market intelligence dissemination and responsiveness of the organization.
The third set of antecedents that is proposed to affect a market orientation pertains to organizational structure and systems. It should be first considered as three structural variables-formalization, centralization, and departmentalization in market orientation conception. Formalization means the degree to which rules define roles, authority relations, communications, norms and sanctions, and procedures (Hall et al, 1967). Centralization refers to the opposite of delegation of decision-making authority throughout an organization and the extent of participation by organizational members in decision-making (Aiken & Hage 1968). Departmentalization can be identified as the number of departments into which organizational activities are segregated and compartmentalized.
Some related researches discovered that both formalization and centralization are related to information utilization by totally different ways (Deshpande & Zaltman 1982; Hage & Aiken 1970; Zaltman et al 1973). As Stamp (1978) argues, “it appears that formalization and centralization are inversely related to an organization’s responsiveness”. Similarly, Lundstrom (1976) and Levitt (1969) discussed that departmentalization is also a barrier to communication and, hence, to cause lower market intelligence dissemination.
Furthermore, It is reasonable to believe that the organizational structure may not affect the three components of a market orientation in the same pattern. As introduced above, it can be seen as a pattern of innovative behavior because of a market orientation involving of doing something new or different in changing market conditions,. Zaltman, Duncan, and Holbek (1973) all believed innovative behavior as being composed of two stages: the initiation stage, such as, awareness and decision-making, and the implementation stage, such as, implementation of the decision. Zaltman, Duncan, and Holbek (1973) had spent numberless researches on finding a way to argue that organizational dimensions such as formalization, centralization, and departmentalization may have opposite effects on the two stages of the innovative behavior. Eventually, they discovered that, whereas these variables may hinder the initiation stage of innovative behavior, the same variables may actually facilitate the implementation stage of innovative behavior. This argument suggests that formalization, centralization, and departmentalization may be inversely related to market intelligence generation, dissemination, and response design but positively related to response implementation. That is to say, the intelligence generation, dissemination, and response design and the response implementation are all related to formalization, centralization, and departmentalization. These three factors can cause lower market intelligence generation.
The last antecedent investigated in this study relates to the measurement and reward system that is in place within an organization. Some researches of analysts suggest that measurement or reward systems are instrumental components of the behaviors of employees (Anderson and Chambers 1985; Jaworski 1988; Lawler and Rhode 1976; Hopwood 1974). In a recent research, Webster (1988) believed that “. .. the key to developing a market-driven, customer-oriented business lies in how managers are evaluated and re-warded.” He viewed that managers are likely to focus on these criteria and forget market factors such as customer satisfaction that create the long-term benefits of an organization if managers only focus on evaluating short-term profitability and sales. Besides, Webster (1988) also noted that that individuals in organizations that emphasize customer satisfaction and market-oriented behavior as bases for administering rewards will more readily generate market intelligence, disseminate it internally, and be responsive to market needs. That is to say, the market intelligence generation, intelligence dissemination, and responsiveness of the organization are all relying on the reliance on market-based factors for evaluating and rewarding managers.
BARRIERS OF IMPLEMENTING MARKETING ORIENTATION
Above researches show brief comprehensive explanation of factors which influence marketing orientation. Hereinafter, deeply introducing barriers of implementing marketing orientation will be provided. Barriers of market orientation can be divided into three areas: barriers of internal environment, barriers of sector environment and barriers of external environment. Elements of external environment can be further divided to the state, economy and technologies. These elements could be very difficult influenced by firms. (Koprlová, 2008).
Kohli and Jaworski (1990) had provided the complete list of organizational barriers to marketing orientation. Based on some in-depth inveterviews, they identified three sets of organizational factors (individual, inter-group and organisation-wide) as the antecedents to market orientation. Most subsequent studies of the antecedents of market orientation have chosen an internal perspective. Van Egeren and O’Connor (1998) also found that market orientation is significantly influenced by group cohesiveness among the top management team. Similarly, Ruekert (1992) also discovered that market orientation is significantly affected by the use of market oriented processes in recruiting personnel, the provision of customer services training and the use of a market-based reward system.
Following introduction will provide critically consideration of barriers of implementing marketing orientation, by evaluating top management factor, inter-functional factor and employee factor.
As introduced, top management is major barrier of marketing orientation. It is influenced by the three elements in general: personality and perception of market orientation by top management and knowledge, skills and commitment. They influence management mission, goals, strategy, and style. In other words, it can be identified that there are seven prerequisites for market orientation—creativity, sense of risk, competence, responsibility, long-term horizon, planning and monitoring filling of goals.
Perception is the first one to be noticed by top management. This barrier is possible to be noticed as the largest barrier of all. This first barrier is viewed by Kohli & Jaworski (1990) and Narver & Slater (1990). The second barrier in top management is the combination of knowledge, skills and commitment. Harris and Ogbonna (2001) emphasized that managers should have a lot of skills, but it is impossible to have whole skills. Every branch, every situation need more share of specific skills and commitment, so it is difficult to state ideal share and universal of whole skills and commitment. The same is with knowledge. It is better to have a lot of knowledge, but quantity of knowledge change along to business. Every manager has to have a positive attitude toward education and gaining new information. Farrell (2000) has noticed that managers should have a high learning orientation. The other question can be connected with experience. These unknowingness and inexperience could be reason for ending of the business. Harris (1998) sees a great in weak management support. It is obvious that without management support is very difficult to be market oriented and to be successful in market. Besides those, management style is very narrow idea compared to other barriers in top management. However, management style of management has impact on all functions of firm. Leadership style is the one which is fully influenced by this barrier. Leadership style may importantly influence on employee motivation an ultimately company performance. (Pumphrey, 2004) Mission, goals and strategy could be the next following discussed barrier. Companies should have determined clear conception of its mission. Without mission, companies are not able to be market oriented; and they will not realize systematically activities of companies’ operation. Lack of creativity which is significant competitive advantage in an organization could also cause barriers of implementation market orientation. Creativity should be a one of essential skills by managers. Risk aversion is the next barrier of market orientation. Jaworski & Kohli (1993) had already published some researches about positive relation between risk aversion and market orientation. Lafferty & Hult (2001) then discussed in further details that organizations should have appropriate action in order to achieve of avoiding risk aversion which is already discussed a lot in before part. Trueman (2004) believed that avoid risk aversion and attitude towards change are types of institutional setting. The next barrier connected with top managers’ talk about quality and competence (Homburg & Pflesser, 2000). Some managers have problems with delegation of power and responsibility to their employees. This rigid attitude could be the brake of disincentive of other development of organization. Most employees are not enjoying working in an stressful environment created by managers. The last one of top management barriers is connected with strategy. A lot of organizations always focus on short-term benefits, without perceiving future profitability based on long-term strategy. This barrier was first mentioned by Harris (1998). Market orientation highlight long-term horizon. Planning is a vital part of strategy and affects other related factors. A high quality planning system has the potential of leading to enhance market orientation (Pulendran, Speed & Widing, 2000).
Besides top management, inter-functional coordination is another barrier of implementation of market orientation (Slater & Narver 1995; Harris 1996; Lafferty & Hult, 2001). This barrier could be divided into several barriers: companies’ culture, organizational system, and information coodination.
Organizational culture and organizational system in firm is first one of interdepartmental barriers. It is necessary to concentrate on cultural framework which is appropriate for appropriate implementation of market orientation (Šimberová, 2007). Organizational culture is related with system, structural and procedural barriers. This barrier is eliminated flexible and prompt replay at the new situation in the market. The other barrier of organizational culture is communication (Slater & Narver, 1995). All employees should be acknowledgeable of profiles of all products and services in order to spread necessary information for customers. Communication is an important method of teaching experiences to inexperience of employee. It helps not only to produce high quality of goods, but it is also very important for developing good relationships between employees. In this system of communication inside organization, structure, procedure or communication, barriers as too high centralization, formalization or departmentalization could easily become the weak points which can be broken down. Centralization could have a negative impact on innovation, speed and flexible realization new decision in managing of firms (Trueman, 2004). Maydeu-Olivares & Lado (2003) investigated that application of innovation has positive effect on market orientation. Centralization is connected with formalization, conflict and politically motivated management behavior very often. Some researchers show that high level of centralization is often connected with high level of formalization. Formalization has the same negative effects on market orientation as centralization (Pulendran, Speed & Widing, 2000). Departmentalization can lead to formation of competition into one organization. This situation could cause decreasing quantity or quality of production and leaving experts and whole destruction of the organization. Harris (2000) quoted that the lack of communication and integration are market as some of systematic barriers. Fonfara (2001) also emphasized cooperation between various business units and levels of management is momentous. Second barrier of inter-functional coordination is information coordination. It is necessary to gain information, analysis this information and application results in decision process so that organization may have strategic knowledge of its own strengths and competitors’ weakness. This is also influential for gaining and analyzing information from customers’ needs. This kind of barrier may be caused by inadequate communication, horizontally and vertically in organization.
The named barriers above could cause interdepartmental conflict and cross-functional conflict. Interdepartmental conflict is resulting from some groups of employees who have different interests; as well cross-functional conflict is similar with that. These groups can have their own intention with the firm. These intentions and interests would cause disconnection between each department and functional team.
Employee could be seen as the last element of barriers market orientation. Employee behavior is one of factor which effect cost efficiencies. Managers should be familiar with each personality of workers in order to motivate and direct them. Managers should also need to recognize that any employee could not be acceptable for the specific work or rewards and any worker could be not good team worker. Every worker should be openness and responsiveness to others, only this way leads to good relations each other. Lack experiences or personal skills are also big issues of implementing marketing orientation. All employees should have high qualification profile; otherwise they could not understand and operate standardized marketing strategy and applications. Pulendran, Speed & Widing, (2000) and Trueman, (2004) also stated that the last barrier could also cause reward system which is connected with dissatisfaction of employee. Ruekert (1992) proposed that reward system orientation and recruiting and training of employees were necessary for market orientation.
Through this paper, the concept of marketing orientation is critically introduced. A marketing orientation generally acknowledges consumer sovereignty and customer demand. It recognizes companies’ capabilities of satisfying customer demand and marketing purpose. Generally, there are three antecedences to marketing orientation: top management, interdepartmental dynamics, and organizational structure and systems. Operating marketing orientation can get advantages including: improved objective performance (profitability, market share, capacity utilisation, etc.) and improved qualitative or judgemental performance (customer satisfaction, employee satisfaction, service quality, etc.). However, there are also some barriers of implementing such a market orientation: barriers of internal environment, barriers of sector environment and barriers of external environment. To avoid these barriers, managers should be more careful about their strategies and structure of their organizations.
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