Market Orientation

Market Orientation

Miguel Angel Valera Lopez
Academia de Administración de Empresas
UPAEP

Introduction
Nowadays there are multiple theories about how a business can be successful or how companies can compete in an aggressive market and retain their customers, but most of the marketing authors agreed that one of the best ways to develop a successful business strategy is developing and sustaining a competitive advantage which can create and deliver superior value to its customers. Consequently, the customer and his environment are the main objective where companies must focus all their efforts and strategies. That mind market orientation.
The aim of this essay is define market orientation from different point of views, clarify how companies can develop it and sustain it, analyze the key theories and outcomes of this principle and discuss different strategies that companies can use to develop a market orientation

Theoretical Background
As marketing has an evolution from the production concept, product concept, selling concept to marketing concept and social marketing concept (Kotler, 1999), the philosophy of market orientation has his own evolution and it is important to describe it in order to understand the full model and its application.
At first this theory was known such as “Marketing Orientation”. Developed during 1970s and based on that the heart of activities and efforts of any company must be the market, and marketing should lead and coordinate other areas of the business with out take care of any other aspect of the company (Murray, 1996), this point of view have the advantage that companies start to listen and try to satisfy the wants of their consumer, but don’t worry about other fundamental aspects like resources, profits and competence.
Then emerged the theory of “Relationship-based Market” which attracted special attention during the 1980s and the managers where focused in develop strong relationship with their customers especially in business to business industry (Murray, 1996). But this philosophy still had the disadvantage of not ensure value delivering to customer.
Subsequently, in 1990s was developed the “Market-focused Company” conception, based on the vital interdependence of business strategy, organizational capability, company performance, market and competitive realities and the marketing action (Murray, 1996). This concept is much more complex and complete than the former theories, because adjusts the core capabilities and activities of the organization with market conditions. And not only takes care about customers needs.
And finally the philosophy of “Market Orientation” has been developed. The core elements of it are similar than the other theories mentioned above in the sense of companies must develop their strategies focused in customer and try to fit the organization with the market. But market orientation is much more complete and deep,

What is Market Orientation?
One of the most complete definitions on market orientation is the e provided by Slater and Narver (1994) in which says that “A business is market-oriented when its culture is systematically and entirely committed to the continuous creation of superior customer value. Specifically, this entails collecting and coordinating information on customers, competitor and other significant market influencers to use in building this value”.
Within this definition there are some important ideas to analyze:
“Culture”; as business philosophy, market orientation is made, developed and used by people of an organization and such as culture, employees most think, believe and act in base a certain concepts. Therefore the only way to make successful a market orientation strategy at first is creating a culture within the organization which show the way of think and act to employees that would contribute in value delivering for the customer.
“Systematically and entirely”; If a company have already a market orientation culture this will be useless if is applied in only some moments, areas or circumstances, neither if is not adopted by all members of the company, no matter the area or hierarchic level . For the reason that the costumers needs and wants most be satisfied every time they have contact with the company, and not only in some special circumstances. All value chain can be useless if a customer that regularly is satisfied suddenly is disappointed for only one time and he can choose another company, and business will be affected by the cost of attract new customers. “It has been noted that in mature markets it may cost five times as much to attract a new costumer as to maintain the goodwill of and existing customer” (Peter 1987).
“Creation of superior customer value”; The main goal of every business is obtain sustained profits, however nowadays this is a very hard task, “an hyper-competition, inter-industry competition, customer more demanding, necessity of more business relevance, necessity of accelerated relationships, low cost via retention strategies and politic, economic, social instability (Pressey, 2004) make extremely difficult survive for a business, subsequently one of the most helpful strategy to obtain that sustained profit is create, develop and deliver superior customer value. But this is a especially complex concept.
Kotler (1999) says that costumer value is the difference between the values the costumer gains from owing and using a product and the cost of obtain the product. Therefore, if managers of a market oriented company ensure that they know what represents value for their costumer and give to them better than the competence and with a better price, they would obtain loyalty of their customers.
“Information on customers, competitor and other significant market influencers”; This sentence shows the most important difference between market orientation and other market focused philosophies, because perceives market such a big field where all participants (clients, competitors, trends, and so on) make the rules, and not only the consumers.



Table 1: Some examples of Market Orientation Statements
COMPANY
PRODUCTION
ORIENTED ANSWER
MARKET ORIENTED ANSWER
AT&T
We operate a long distance company
We provide multiple forms of reliable, efficient and inexpensive telecommunication system
EXXON
We produce oil and gasoline products
We provide various types of safe and cost effective energy
Penn Central
We run a railroad
We offer transportation and materials handlings system
Levi Strauss
We make blue jeans
We offer comfort, fashion and durability in wearing apparel
Eastman Kodak
We make cameras and films
We help to preserve beautiful memories
Revlon Cosmetics
In the factory we make cosmetics
In the drugstore we sell hope
Source: Staton, Etzel & Walker 1994


Developing a Market Orientation Strategy
Because a market orientation strategy is based in a big cultural change in companies, the way that should be implanted most be motivated, guided and controlled by top management also developed and performed by whole organization.
Leavitt assumed (1987):” Probably the best way to maintain a path finding culture is, paradoxically by not working in it” That mind that a CEO of a company can not create such kind of organizational culture, but he must generate all conditions that stimulate and foment this culture. Consequently there are two well known approaches to culture change (Slater & Narver 1994): The “Programmatic” and the “Adaptive” approach.
Beer, Eisenstat and Spector (1990) say that the “Programmatic” approach is laid on the idea that organizational change is the result of changes in individual beliefs and behaviours. And the “Adaptive” approach is based on that management and employees continuously learn from their effort to create buyer value.
Although both of them have the same purpose, the method is completely different; the fist one is controlled, administrated and developed by top management usually helped by a consultancy team; this can bring the risk that the employees don’t feel motivation for the programme and make it ineffective. In the other hand, the second method is developed and performed by the whole organization; giving to it a real context of team work and organization culture.
Since the programmatic approach is based in a quickly change of attitude and behaviour of the staff, is expected a big change within the organization towards to a market orientation philosophy. Unlikely with the adaptive approach, employees continues learn from all their activities oriented to create customer value; obviously this brings a slower change but much more consistency and long term benefits.
In addition, the first approach is developed firstly creating the organizational structure and secondly adapting the strategy; this methodology makes very inflexible and vulnerable the strategy because is based in assumptions of the market. The second approach develop at first the strategy observes the results and then adapts or designs the organizational structure; although in this process the change can be slower than the first one, is much more focused, flexible and efficient because is based in learning from market and its responses.

Outcomes of Market Orientation Strategy
There is no doubt that market orientation is a strategy that can bring extraordinary results after a correct implementation of it such as (see table 2): The organization can know and understand perfectly the needs and wants of the customers, because one of the main and daily activities of all staff is listen, ask and interact with clients and market. It helps to develop a real competitive advantage, for the reason that the whole organization is prepared and structured for this purpose, and can create products and services better than the competence, delivering a authentic customer value retaining the current clients, attracting new ones and expanding the market share.
However, this business philosophy has some risks and limitations such as (see table 2): This model suggest to adapt the assets or the company to the environment in order to satisfy customers, therefore the cost involved in producing this customer value might be very high (Hollensen, 2003). No matter the method used to implant this strategy (Programmatic or Adaptive) the strategy is based in assumptions of market or in learning and adapting capability of the organization, so this foundation can be wrong or week producing a useless strategy. Moreover, companies can be so focused in market that can overlook or minimise the problems and activities within the organization.

Table 2: Outcomes of Market Orientation Strategy
Benefits Risks
Consumer needs and wants
Expensive business model
Competitive advantage
Learning capability dependence
Costumer value
Assumption of market dependence
Market Share

Competitive business



Market Orientation and Learning Orientation
It is very important to have a specific discussion about the relationship between market orientation and learning orientation because the first theory is very strong to be acquainted with market and to understand how can be delivered customer value, but Baker and Sinkula (1999) declare that without a Learning orientation within the organization, the company will no be able to change and afford the requirements of the market, especially if is the case of mature products or brands. Therefore it is highly recommended that any company which starts to run a market orientation strategy, must develop a learning oriented culture within the organization which help to make changes and responds of the company faster and more efficiently.

Conclusion
The current market conditions such as high competence, customers more demanding and quick changes are challenging the business around the world. If companies want to survive and make long-standing profits, they must create and develop competitive advantages mainly based in value customer delivering. One of the most useful strategies to develop this competitive advantage is the market orientation philosophy in which all structure and core activities and capabilities of the organization are focused in market including customers, competence and other market influencers, and get the necessary information to create superior customer value.
Although there are some risks in this business model such as possible high costs or change barriers, can be extremely productive philosophy if is applied and developed adapting the structure to market conditions, involving whole organization in the process of change, and building up a learning orientation as well.


References
Baker, Michael J. “Marketing Strategy and Management,” Second Edition, Macmillan, 1992, pp. 468-170
Baker, William E.; Sinkula, James M. “The Synergistic Effect of Market Orientation and Learning Orientation on Organizational Performance,” Journal of the Academy of Marketing Science, Fall 1999, pp.411-427
Beer, M.; Eisenstat, R. and Spector, B “Why Change Programs Don’t Produce Change,” Harvard Business Review, Nov-Dec 1990, pp. 158-166.
Hollensen, Svend “Marketing Management A relationship Approach,” Prentice Hall, First Edition, 2003, pp. 29-30, 38-41, 765
Kotler, Philip; Armstrong, Gary; Saunders, John and Wong, Veronica, “Principles of Marketing,” Second European Edition, Prentice Hall, 1999, pp. 9-12, 17, 22, 88, 118, 472-5
Langerak, fred “An appraisal of Research on the Predictive Power of Market Orientation,” Erasmus University, Rotterdam, Netherlands, August 2003
Leavitt, H. J. “Corporate Pathfinders” (Homewood, IL: Penguin Books 1987).
Lui, Sandra S,; Luo, Xueming and Shi, Yi-Zheng “Market-oriented Organizations in a Emerging Economy,” Department of Consumer Sciences and Retailing, Purdue University, Department of Business Administration, State University of New York, Department of Marketing, School of Business, Hong Kong Baptist University, March 2003.
Murray, John A. and O’Driscoll Aidan, “Strategy and Process in Marketing,” Prentice Hall, 1996, pp. 11-14, 19, 66, 443
Peters, Tom; “Thriving on Chaos,” Macmillan, Basingstoke, pp. 91.
Pressey, Andrew. “Handouts School of Management University of East Anglia,” 2004.
Singh, Satyendra and Ranchhod, Ashok, “Market Orientation and Customer Satisfaction: Evidence from British Machine Tool Industry,” Department of Administrative Studies, University of Winnipeg and Southampton Business School, May 2003.
Slater, Stanley F. and Narver, john C. “Market Orientation, Customer Value, and Superior Performance,” Busines horizons, March-April 1994, pp. 22-28
Solomon, Michael R. and Stuart, Elnora W. “Marketing Real People, Real Choices,” Third Edition, Prentice Hall, 1997 pp. 6-8, 17-18
Staton, William J.; Etzel, Michael J.; Walker, Bruce J. “Fundamentals of Marketing,” McGraw Hill Tenth Edition 1998, pp. 12-14