Define The Scope Of The Business Commerce Essay

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Apparently, lack of proper accountability and influence has resulted in undermining the reliability of marketing within the firm and also threatened its existence as a separate potential unit within an organisation (O'Sullivan & Abela, 2007; Rust et al., 2004). The importance of marketing activities is at risk and even marketing scholars have raised their voices showing concerns about the chance of power of marketing subunits declining (e.g., Day, 1992; Kotler, 2004; Kumar, 2004; Sheth & Sisodia, 2005). This has led to several studies on the marketing's role within the firm (e.g., Homburg, Workman, & Krohmer, 1999; Verhoef & Leeflang, 2009).

Power of Marketing :

There are many different perspectives and proper theories on power (Bacharach & Lawler, 1980; Lukes, 1975). In fact the concept of power has been studied in a large variety of areas, starting from organisational change to social group dynamics and planning. However, it has been argued that the application of the concept of power in marketing has been slow and restricted due to "theoretical fragmentation and lack of convergence" (Merlo, Whitwell, & Lukas, 2004). In fact, the use of power theory in marketing has been limited mainly to four areas: (1) distribution channels, (2) organizational buying, (3) consumer behaviour and (4) the influence of marketing departments and marketing people. Fundamentally, power may be defined as the ability of a performer to get a different performer to do something that the latter would not have otherwise done.

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In a review of main schools of thought in power and their possible worthiness in Marketing Research by Merlo et al. (2004), he identifies four main areas of thought on power: "the bureaucratic perspective, the critical contingencies perspective, the network perspective and the psychological perspective". Although each of these perspectives is useful to study various marketing phenomena, Merlo et al. (2004) points out that the 'critical contingencies approach' is best to study the distribution of power within the firm, and particularly, the power of the marketing function. This approach says that there are "three key elements of power: (1) a function's ability to cope with uncertainty, (2) its substitutability, and (3) its centrality within the work flow of activities". Therefore, the power of marketing can be defined as "the extent to which the marketing subunit is relied upon to cope with uncertainty, is non substitutable, and holds a central location within the work flow of activities." (Industrial Marketing Management, 2012)

Role of Marketing within the Firm :

This section is about the contribution of marketing departments in firm's performance. Studies of the role of marketing within the firm, may be divided into four key categories :

Research that examine the role of marketing as an orientation (Kirca, Jayachandran, & Bearden, 2005; Langerak, 2003; Slater & Narver, 2000). These studies tend to prove the positive link between market orientation and performance.

Research that studies the influence of marketing at the corporate level (e.g., Day, 1992; Varadarajan & Clark, 1994). These studies are likely to conceive that the Chief Marketing Officer and the status of marketing's within the firm are closely related (Kerin, 2005; Nath & Mahajan, 2008)

Research that studies marketing as an organisational subunit. Homburg et al.'s (1999) work, demonstrated marketing's relative impact and interaction with other functional units and identified the situations where marketing's influence is higher.

Research that considers marketing's role simultaneously as a function and an orientation. Verhoef and Leeflang (2009) found that a marketing department's influence has positive performance outcomes only because of its link to a market orientation, and note: "the failure of the marketing department's influence to explain significant incremental variance in performance beyond market orientation calls for further research" (p. 30).

Marketing power and business performance :

In a research conducted by Seigyoung Auh and Omar Merlo (Industrial Marketing Management, 2012), the relationship between the marketing power and business performance stands out clear. Their sample formed of an Australian Mailing list, comprising of 600 contacts in both large and medium sized organisations (<=50 employees) in a range of manufacturing industries. The participants included people from all levels of organisation, from Managing directors to CEOs, general managers and others. However, Marketing managers were purposely not included, to enhance the credibility of the findings. Their unit of analysis was the Strategic Business Unit (SBU) and they collected data through a 'self-administered field survey questionnaire', distributed via mail.

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After the completion of research and its analysis, the data they got showed that the most powerful subunits within the sample organisations were Production & Manufacturing and Marketing. However, the finding about production is not unexpected, as the sample is from the manufacturing industries. But it is fascinating that marketing holds a more powerful position than Finance department, and even Research and Development. With respect to substitutability, their findings showed that R&D and Marketing are seen as the most non substitutable functions within an organization.

The research also proved that "a powerful marketing function contributes to business performance" and therefore, the recent trend of decline of marketing sub-units needs careful monitoring.

Many senior managers tend to first cut down marketing budgets randomly in times of crisis, which is expected to then lead to improve the firm's cash flow without affecting any other function of the business, particularly sales (Quelch & Jocz, 2009). However the research findings are in contrast with the perceived notion and most commonly practiced phenomenon. It suggests that "when marketing's power is low, there may be negative performance consequences." Recently in an interview with Businessweek, Phillip Kotler argued that if marketing is not being able to improve financial performance, the most obvious reason for that is the cut on marketing budget.

As pointed out by Boyd, Chandy, and Cunha (2010), often Chief Marketing Officers (CMO) lose credibility and are blamed more than they deserve, due to the fact that marketing outcomes are not easily measurable. This sometimes leads the Chief Executive Officers of any organisation to believe that CMOs does not deserve to be 'on the executive board of the firm' (Webster et al., 2003) and they tend to reduce the marketing function's ability to acquire and retain the resources, even further (Boyd et al., 2010). The findings of the research by Seigyoung Auh and Omar Merlo that "a powerful marketing function has a direct link to business performance should contribute to persuade company executives of the important role that marketing plays within the firm, and by extension, of the crucial role of the CMO as the primary functional executive with responsibility over marketing." However, it says that, as a firm is an assemblage of various functional groups, it is very important to have some kind of, symmetry of power among the groups. The research result highlights "negative effect of power asymmetry on business performance". But somehow, as the marketing function is believed to provide important strategic suggestions and to develop "customer-getting distinction" through "marketing imagination" (Levitt,1986), sometimes an asymmetrical distribution in favour of the marketing function might have beneficial effects on performance of the firm.