Marketing efforts and know-how are instrumental in commercializing ideas and inventions successfully. Therefore, it could be fatal for companies to ignore the importance of marketing Kotler (1999) emphasizes the position of marketing to even argue that, in the future, marketing has the main responsibility for achieving profitable revenue growth for the company. Today cost-efficiency does not provide long-term competitive advantage for companies whereas marketing, when well conducted, does. Especially in the field of strategic marketing, benefits are still largely waiting for realization.
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Marketing has traditionally been viewed and treated more as an operational rather than strategic function in companies. It has focused on decisions related to analysing and selecting target markets, product and brand development, promotion, and channels of distribution (Hunt and Morgan, 2001). This perhaps somewhat biased standpoint presents marketing as a task of creating, promoting and delivering goods and services to consumers and businesses (Kotler, 2003). It is generally accepted that acquiring a new customer may turn out to be considerably more expensive than building customer loyalty among firm’s current customers (e.g. Kotler, 2003). This strongly speaks for the need for higher levels of customer orientation among companies. Similarly to reward systems that base on short-term performance, short-term marketing focus may start working against longer-term market orientation, business performance and strategic intentions of a company.
From strategic point of view, as Morgan, Clark and Gooner (2002) argue, marketing budgets should be seen as capital expenditure in building revenue generating marketing assets rather than overhead expenditure; marketing resources ultimately drive long-term marketing performance. It is not easy, however, for marketing managers to convince executives in the absence of valid, reliable, and credible marketing performance assessment (MPA) systems. In addition to corporate executives, also marketing managers are often unable to uncover and confidently support cause-and-effect relationships between marketing inputs, marketing processes and marketing performance outcomes. (Morgan, Clark and Gooner, 2002) Difficulty to assess the marketing performance is evident since it depends on external, largely uncontrollable factors, such as customers and competitors (Neely, 2002). Additionally, links to business performance are very often complex and may include some irrationality; for example, success sometimes bases considerably on luck. Thus, as the aggravated example shows, high performance of a product or a company may not have much to do with goodness of management.
Even though Bonoma and Clark (1988) argue that marketing’s outputs are subject to so many internal and external influences that establishing causes-and-effect linkages is very hard, if not impossible, it is somewhat alarming in the light of previous discussion how the connection between marketing efforts and business performance is still relatively vague for both academics and decision makers in business context. Increasingly, in order to survive and excel in today’s heavily competitive environment, companies need to be able to define their real competitive advantages and focus on them.
According to previous studies (e.g. Hooley et al., 2001; Fahy and Smithee, 1999), marketing capabilities and assets possess potential to be important sources of competitive advantage for companies. As a component of marketing orientation of a company, also innovation orientation that situates between internal and external views has been showed to influence performance (e.g. Matsuno, Mentzer and Ã-zsomer, 2002). In addition, marketing with strong market orientation seems to be increasingly important for firms (e.g. Kohli and Jaworski, 1990). This is due to strong inward focus of resource-based view of the firm which is at risk to ignore dynamic market conditions and nature of demand. Clearly, firms should thus start adapting principles of strategic marketing.
Despite general acceptance of value creation of marketing activities, marketing practitioners have found it difficult to measure and communicate to other functional executives and top management the value created by investments in marketing (Srivastava, Shervani and Fahey, 1998). To bring light to the prevalent situation, confirmatory statistical analysis basing on hypotheses from previous literature is a justified method to explore strategic marketing and its effectiveness.
It seems that studies attempting to link strategic marketing and its consequences on firm performance have not been conducted too much and e.g. Cadogan et al. (2002) emphasize the need for further research in different countries to advantage universality of the previous results. Additionally, international or inter-industrial comparison studies are lacking almost entirely. This study takes these research gaps into consideration and attempts to fulfil them by analysing data collecting data from Kenyan companies in order to find common regularities in the background of company performance in general and in different business environments.
One of the major aims of this study is to give guidance to Kenyan business managers on which marketing-related issues they should concentrate on in order to maximize their companies’ long-term financial performance. The primary research problem for this study can thus be presented as follows:
What kind of strategic marketing most positively and effectively relates to companies’ financial performance in different business environments?
This problem can be further divided into three sub-problems, or research questions, as presented below:
What is the relationship between marketing resources and business orientations, and financial performance of a firm?
How is marketing effectiveness assessed today and potentially in the future?
Objectives of the Study
First, and foremost, the objective of this study is to find answers to the main research problem and the sub-problems related to it. Consequently, arriving at usable managerial implications and action recommendations, which also are goals of the study, is of relatively high probability. Individual sub-problems contain their own objectives, too. These are next described.
Hooley et al. (2001) brings up the need to further theoretically and empirically develop the strategically significant marketing concepts and their relationships with performance measures. According to them, there has been especially little attempt to measure marketing assets and capabilities and assess their effects on business performance. Therefore, one clear objective can be assigned to the first sub-problem: test hypothesized relationships between strategic marketing subjects and business performance of a firm.
The objective here is not to form models that take into account each and every aspect of marketing. Instead, it is to seek for such models that illuminate some of the most interesting relationships between certain marketing resources, business orientations and performance of firms. Data as a whole is used to come up with a model in which regression coefficients, illustrating direction and magnitude of relationships, could be generally applicable.
The goal of the second research sub-problem is to explore generalizability of the results to firms in different sectors and market conditions. Somewhat more detailed, comparative analysis is to be conducted at this stage. Naturally, samples of individual firms and other groups are used here.
The research can be divided into two parts. Consequently, also two main research methods, literature review and analysis, and statistical analysis, are used to solve the research problem and answer the research questions. The methods are next shortly described.
Literature review and analysis
Due to relatively young field of research in strategic marketing, literature section will contain quite a significant amount of material of more traditional frameworks, such as Porter’s generic competitive strategies and resource-based view (RBV) of the firm. The review section aims arriving at a framework between concept of strategic marketing and other related and more established concepts.
The second part of the study will be carried out by applying statistical analysis methods to the research data. This empirical part builds upon the first, theoretical part of the study making them closely interrelated.
The data analysis is organized in the following way. Simple, descriptive analysis will be first performed in order to get a general picture of the sector firm’s samples by providing some clarifying frequencies of marketing- and performance-related factors compared to market and firm-specific characteristics.
Scope of the Study
The scope of the study is somewhat evident from the research problem, research questions and objectives of the study. In addition, developing conceptual framework of strategic marketing is at the core of the research. Both academics and firm company audiences are being considered in this study since, in addition to taking part to discourse of strategic marketing, it also offers implications and even a concrete marketing performance assessment tool for firms.
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The questionnaire will include both strategic and more operational issues, offering plenty of analysis possibilities. Though there would have been lots of possible constructs to include in the statistical analysis, this study will focus on factors that have potential to provide positive long-term performance impact for companies. At the core of the analysis are different marketing-related capabilities and company orientations. Consequently, both inner and outer perspectives are dealt within the study.
Marketing has been diligently given definitions and practically every author has his own interpretation of the concept. However, the definition most commonly used as a reference is that of The American Marketing Association (AMA). The current definition of AMA is the following:
Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.
Hooley et al. (2001), in turn, provide a following definition:
Marketing is the process of profitably matching organizational capabilities to the requirements of chosen customers.
Both of the definitions are rather strategic and customer-oriented, not focusing on operational issues, such as 4P’s of marketing (or marketing mix; product, price, place, promotion) or marketing channels. The marketing concept clearly argues that (1) all areas of the firm should be customer oriented, (2) all marketing activities should be integrated, and (3) profits, not just sales, should be the objective (Hunt and Morgan, 2001). The first argument of these closely relates with the concept of market orientation.
It is commonly argued that the first strategist of all-time was Sun Tzu, Chinese general who lived in the fourth century B.C. He emphasized the need for far-sightedness and good planning. Sun Tzu also put importance on knowing both your enemy and yourself, and sensitively reacting to changing conditions. (Chen, 1994) Since the days of Sun Tzu, many business-related phenomena have gone through significant changes but the concept of strategy has remained essentially the same. Put simply, strategy is a long-term plan for achieving a company goal.
To highlight the difference between strategic and operational management, Drucker (1966) well claimed good strategic performance (effectiveness) as “doing the right things” and good operational performance (efficiency) as “doing things right”. As for the concept of marketing, there are numerous definitions available for strategy in different publications. One can therefore choose which of several strategic points of view best suits the situation at hand. I next shortly consider two of them.
Porter (1980) defines competitive strategy as “a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there”. He introduces three generic competitive strategies of overall cost leadership, differentiation, and focus. Miles and Snow (1978) offer another set of business strategies: prospector, defender, analyser and reactor, with somewhat close interpretations with those of Porter. Evidence from everyday company communication and firm websites suggest that companies’ strategic orientations are becoming increasingly customer-focused, implicating the current understanding of satisfied customer being a profitable customer.
The concept of strategic marketing is used in various ways and any established definition is not yet available. This study aims to further develop the definition in relation with other, more established concepts, such as strategy and marketing.
Performance outcomes result from success or market position achieved (Hooley et al., 2001). Performance can be determined in various ways. It might stand for financial performance, market performance, customer performance or overall performance, at least. In this thesis, the term business performance is mainly used as a general performance measure. Financial performance literally refers to financial measures, such as profit margin and return on investment (ROI). Market performance includes e.g. measures of market share and sales volume. Additionally, superior performance in this study refers to performance that exceeds that of its closest competitors (cf., Hunt and Morgan, 2001). Specially, superior market performance probably, but not necessarily, results in superior financial performance (Hooley et al., 2001).
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