Economies of Central Europe:
Tests of the Narver and Slater Market
Orientation Scales
Graham Hooley
ASTON BUSINESSSCHOOLTony Cox
ASTON BUSINESSSCHOOL
John Fahy
UNIVERSITY OFLIMERICK
David Shipley
TRINITYCOLLEGEJo´zsef Beracs
BUDAPESTUNIVERSITY OFECONOMICSCIENCES
Krzysztof Fonfara
POZNANUNIVERSITY OFECONOMICS
Boris Snoj
UNIVERSITY OFMARIBOR
The Narver and Slater (Narver, J.C., and Slater, S.F.: The Effect of (1990). Researchers such as Hart and Diamantopoulos (1993), Cadogan and Diamantopoulos (1995), Greenley (1995a,
Marketing Orientation on Business Profitability.Journal of Marketing
54 (1990): 20–35.) market orientation scale is tested in the context of 1995b), Siguaw and Diamantopoulos (1995), and Gray, Ma-tear, and Matheson (1998) have tested, developed, and refined
the transition economies of central Europe and found to be both valid
and reliable. Relationships between market orientation and both marketing the early market orientation scales to create useful tools for measuring the degree of market orientation Western firms
strategy and performance broadly follow predictions from the Western
literature indicating that the adoption of a market orientation is equally exhibit. To date, however, there has been relatively little re-search into the extent of market orientation in developing
applicable in transition as in Western economies. A number of different
approaches, however, are evident in the transition economies suggesting economies in general and the transition economies of central Europe in particular. The question remains whether the
con-that other business orientations may coexist with a market orientation
creating a richer and more complex set or organizational drivers.J BUSN struct is equally applicable in such different and turbulent
environments.
RES2000. 50.273–285. 2000 Elsevier Science Inc. All rights
re-served. Gray, Matear, and Matheson (1998) summarize the
find-ings of recent market orientation studies, concluding that only a small number have investigated the moderating effects of environmental variables on the relationship between market
T
here has been a great deal of recent research in the orientation and performance. Those that have searched for area of market orientation following the seminal works such moderators, however, generally have found them. Re-of Narver and Slater (1990) and Kohli and Jaworski searchers in the United States and other developed economies have found that the relationship between market orientation and performance is stronger in cases of high market andAddress correspondence to Professor Graham Hooley, Aston Business School,
Aston University, Birmingham B4 7ET, United Kingdom. technological turbulence (Slater and Narver, 1994; Greenley,
Journal of Business Research 50, 273–285 (2000)
2000 Elsevier Science Inc. All rights reserved. ISSN 0148-2963/00/$–see front matter
1995b; Doyle and Wong, 1996; Cadogan, Diamantopoulos, If market orientation is a reliable and valid construct, it should be applicable in environments and economies other and Siguaw, 1998). The explanation appears to be that in
more turbulent markets managers need to be more sensitive those in which it originally was developed and tested. Testing to market changes (Gray, Matear, and Matheson, 1998). and extension of the construct to date has largely occurred The transition economies of central Europe exhibit a high in similar, Western developed economies. This study set out to degree of environmental turbulence. Three macroeconomic investigate the reliability and validity of the market orientation indicators in particular point to the turbulence of the econo- construct in the very different economic and business environ-mies of the region: fluctuating growth rates, rising unemploy- ments of central Europe. Specifically content validity was as-ment, and high levels of inflation. sessed through the use of in-depth interviews with managers, The first factor has been the large, and relatively difficult nomological validity was assessed through the ability of the to predict, swings in economic performance and growth rates. market orientation construct to perform as predicted by mar-In Hungary, for example, the decline in GDP of 11.9% in keting theory with relation to other strategy constructs, includ-1991 was halted by 1993 and reached an annual growth rate ing performance, and internal reliability and consistency of of 1.3% by 1996. In Poland, decline of 11.6% in GDP in the scale was assessed through the use of split-half testing by 1990 was converted to strong growth of approximately 7% using Cronbach’s coefficient alpha (see Malhotra, 1996). per annum (pa) by 1995. Slovenian GDP decline peaked at
8.9% in 1991 and by 1996 was showing an annual growth
Theoretical Background and
of 3.1%. Future predictions remain, however, subject to wide
margins of error. A second factor has been the significant rise
Research Propositions
in unemployment rates, a phenomena not known (or at leastBuilding on earlier theoretical and empirical work (e.g., Hous-not officially acknowledged) during the period of central
plan-ton, 1986; Shapiro, 1988; Day and Wensley, 1988; Deshpande ning. In Hungary unemployment rose from 2% of the
work-and Webster, 1989), two significant approaches to measuring force in 1990 to 10% in 1996, whereas in Poland the rise
market orientation emerged in the early 1990s. Kohli and over the same period was from 6% to 11% (with a peak of
Jaworski (1990) conceptualized market orientation as the ac-16% in 1993–94). In Slovenia, unemployment rose from 5%
quisition of, dissemination of, and organization-wide respon-in 1990 to 14% respon-in 1996. The rapid rise of unemployment
siveness to, market intelligence. Their approach was further has created a great deal of insecurity that has translated itself
refined in Kohli, Jaworski, and Kumar (1993) and Jaworski to the marketplace. The third factor is inflation. The economic
and Kohli (1993, 1996). In parallel, Narver and Slater (1990) shock measures taken in 1989–90 in Poland and Slovenia
and Slater and Narver (1994, 1995, 1996) developed market resulted in exceptionally high rates of inflation in those years
orientation as a unidimensional construct (a single scale) with (590% in Poland and 550% in Slovenia). Although never
three underlying behavioral components (customer orienta-reaching such levels since, inflation continues to be a
signifi-tion, competitor orientasignifi-tion, and interfunctional coordina-cant factor in all economies of the region. In Hungary, annual
tion). inflation peaked at 35%pa in 1991 but has stabilized at
Both the Kohli and Jaworski’s and Narver and Slater’s ap-proximately 20%pa since. In Poland, the annual rate was
proaches have been tested and refined in the literature (see, brought down to 19% in 1996 and in Slovenia to 9% in 1996.
e.g., Hart and Diamantopoulos, 1993; Deng and Dart, 1994; Despite the success in reducing inflation levels, they remain
Siguaw and Diamantopoulos, 1995; Greenley, 1995b). The significantly higher that in many Western, developed
econo-Narver and Slater (1990) scale, in particular, is both conceptu-mies (see Business Central Europe, 1998).
ally and operationally appealing because it encapsulates the Hooley et al. (1998) have discussed the microeconomic,
main aspects of the Kohli and Jaworski intelligence gathering, or industry specific environment facing firms in the region.
dissemination, and responsiveness constructs while at the This is characterized by increasingly price sensitive customers
same time assessing cultural factors (see Deshpande, Farley, (directly related to the economic and employment pressures
and Webster, 1993; Hunt and Morgan, 1995). In addition, noted above) demanding better quality products and services.
Wrenn (1997) has pointed out that the Kohli and Jaworski Because of the deregulation of markets and the encouragement
(1990) construct more accurately reflects marketing orienta-of inward investment (especially in Hungary and Poland),
customer choice is increasing, and new market segments are tion (the implementation of the marketing concept) than mar-ketorientation (a concern with both customers and competi-beginning to emerge; new products are coming to market
more rapidly, and new technologies are being introduced. All tors). Below, we term the Narver and Slater scale “MO” for brevity.
these factors lead to markets experiencing rapid, and often
unpredictable, change. In short, highly turbulent markets re- The substantive issue for this research was to assess both the reliability and the validity of the MO construct in the sulted. Under such circumstances, the relationship between
in which it was developed, it must be demonstrated to be implementation), the issues of strategy definition were ad-both valid and reliable. dressed through examination of competitive positioning Validity concerns the ability of a construct to measure what choices. With regard to targeting, firms are faced with a num-it purports to measure (Malhotra, 1996) and can be tested in ber of options along a targeting continuum. At one end of a number of ways. Most basic is content validity, assessing the continuum, firms might attempt to market their offerings the extent to which it appears to contain all relevant aspects across the whole, mass market. In undifferentiated and unseg-of the phenomenon under study. Assessing content validity mented markets, such as commodity markets, this approach perhaps is best approached through qualitative research and may make good strategic sense because it maximizes the po-probing and exploring meaning and comprehension. Nomo- tential market for the offerings (Porter, 1985). The other end logical validity concerns the relationship between the con- of the spectrum, typically adopted by firms operating in highly struct and other theoretically related constructs. Essentially fragmented markets, is to target individual customers. Firms the issue is “does the construct behave as predicted by theory operating in high value markets where individual customers with regard to other phenomena?” Reliability is the extent to represent high potential returns (such as accountants working which a measurement is replicable (Malhotra, 1996). Internal with valuable corporate clients) know they need to tailor their reliability can be tested through split half analysis by using products and services closely to the needs of these individual Cronbach’s alpha coefficient of reliability. customers. Recent developments in one-to-one and direct To test the nomological validity of the construct in central marketing (see Peppers and Rogers, 1994) recognize that many Europe, we developed a number of propositions from the markets are moving in this direction (see Payne, Clark, and Western marketing literature concerning the theoretically ex- Peck, 1995). Between these two extremes, however, lie most pected behavior of the construct with relation to other market- current markets and marketing where customers can be use-ing and strategy constructs. First, the links between market fully grouped to form relatively homogeneous market seg-orientation and marketing strategies pursued were addressed. ments and marketing efforts focused or targeted accordingly Hunt and Morgan (1995), for example, suggest that market (Brown, 1993; McDonald and Dunbar, 1995; Hooley, Saun-orientation is likely to guide the choice of marketing strategy. ders, and Piercy, 1998). A high degree of MO implies a greater The recent strategy literature (see, for example, Kotler, Fahey, level of understanding of, and responsiveness to, the specific and Jatusripitak, 1985; Doyle, Saunders, and Wong, 1986; needs of customers and therefore is likely to be associated Doyle and Hooley, 1992; Doyle, Saunders, and Wong, 1992; with a more focused, or targeted, marketing approach. The Porter, 1996; Doyle, 1998) has drawn attention to the short- second proposition can be stated:
term, financial orientation of many firms in the West compared
P2: Firms exhibiting a higher degree of market orientation with the longer term, market domination goals of many
South-are likely to pursue more focused and targeted ap-east Asian firms (though recent economic problems in
South-proaches in their marketing than less market-oriented east Asia may lead to a reevaluation of these perspectives).
firms. Doyle and Hooley (1992) report greater emphasis on
long-term market position building rather than short-long-term financial A further pillar of current strategic thinking is the need to returns by market oriented firms. Wong and Saunders (1993) create and exploit competitive advantage. Early theories of report an emphasis on competitive aggression amongst more competitive advantage (see Porter, 1980, 1985) stressed prod-market-oriented firms. Davidson (1997) also suggests that uct differentiation or cost leadership as means of creating more market-oriented firms will exhibit a greater degree of competitive advantage. More recent theories stress the impor-aggression in their markets. Similarly, a growing number of tance of service provision, even in predominantly product-researchers (e.g., Abrahams, 1996; Doyle, 1995; Porter, 1996) based markets (see, e.g., Levitt, 1986; Peters, 1986; Berry have expressed concerns that excessive internal focus on effi- and Parasuraman, 1991; Gro¨nroos, 1994; Morgan and Hunt, ciency (doing things right and at minimum cost) may be at 1994; Zielke and Pohl, 1996). Thus, whereas physical product the expense of an external perspective on effectiveness (doing quality might be at parity with competitor offerings, differenti-the right things in differenti-the first place). These lead to differenti-the first ation and advantage might be achieved through superior ser-proposition designed to test nomological validity:
vice or lower prices. The competitor orientation component of the MO construct would suggest that more market-oriented P1: Firms exhibiting a higher degree of market orientation
firms will seek to differentiate their offerings from competitors. will exhibit more aggressive, externally focused,
long-This leads to the third proposition: term strategic priorities than less market-oriented
firms.
P3: Firms exhibiting a higher degree of market orientation are more likely to seek to differentiate their offerings The next set of issues of interest center around the
imple-from those of competitors (through product quality mentation of the marketing strategy. Following Webster’s
differences, service provision, or pricing) than their (Webster, 1992) conceptualization of three levels of marketing
Finally, our interest turns to the links between market A two-stage research design was considered most appro-priate for testing the reliability and validity of the Narver and orientation and performance. A high degree of consensus has
now emerged in the literature concerning the links between Slater market orientation scale in the transition economies. First, in-depth, qualitative research of a case study nature was market orientation and firm performance. The marketing
liter-ature (see, e.g., Kohli and Jaworski, 1990; Narver and Slater, undertaken to assess the content validity of the scale and to both develop and test the other constructs of interest. Through 1990; Ruekert, 1992; Hart and Diamantopoulos, 1993;
Jawor-ski and Kohli, 1993; Hooley and Lynch, 1994; Slater and a series of personal interviews between local research col-leagues and senior managers, conducted in the local language, Narver, 1994, 1996; Doyle and Wong, 1996; Pelham and
Wilson, 1996; Avlonitis and Gounaris, 1997; Cadogan, Dia- the constructs were presented, discussed, and, where neces-sary, refined. This was deemed essential to ensure that the mantopoulos, and Siguaw, 1998; Gray, Matear, Matheson,
1998) suggests that more market-oriented firms outperform research did not simply superimpose Western, developed economy preconceptions in these different market environ-their less market-oriented competitors.
Scholars from other research traditions, however, such as ments.
The second stage consisted of a quantitative survey of a the resource based view of the firm, dispute this (see Grant,
1991, 1995) suggesting that sustainable superior performance broader, more representative sample of companies to test the nomological validity and reliability of the market orientation comes primarily through an internal focus on capabilities and
resources rather than an external focus on customers. Day construct. Data gathered during this second stage were used for the quantitative analyses reported below that set out to (1994) has attempted to reconcile these two opposing views
by pointing out that resources only assume value in creating test both by using established procedures.
Data collection and construct development are discussed sustainable competitive advantage if they are deployed to
cre-ate something of value to customers. in more detail below. It also has been suggested (Day and Wensley, 1988) that a
competitive environment could moderate the effects of market
Data Collection
orientation on performance and that market orientation may Data were collected in two phases in each country. First, a only be necessary for superior performance in some environ- series of in-depth case studies were researched by local aca-ments (see discussion above). Given the highly turbulent na- demics covering issues of market orientation, marketing strat-ture of the market environment in central Europe, the final egy, marketing implementation, performance, issues relating proposition is: to the privatization process and foreign direct investment (where applicable). In Hungary, 11 cases were completed, in P4: Firms exhibiting a higher degree of market orientation
Poland 12, and in Slovenia 11. The cases were conducted in will outperform their less market-oriented
counter-a vcounter-ariety of industries including retcounter-ailing, electronics, counter-and parts.
brewing. Because the cases were exploratory, no attempt was The above propositions, developed from the Western mar- made to create a representative sample of businesses in the keting literature are designed to test the nomological validity region. Rather, a broad cross-section was attempted. of the market orientation construct as measured using the The second phase of the research was quantitative in nature Narver and Slater (1990) scale. by using structured questionnaires administered through
mailed surveys. Questionnaires were developed first in English for use in the three countries under investigation. They then
Methodology and
were translated into local languages by the local academics
Construct Development
and tested on independent executive directors of local firms.After testing, a number of minor modifications were made to To test the above propositions, we undertook fieldwork in
the questionnaires to correct misinterpretation. the transition economies of central Europe during 1995 and
The study focused on enterprises employing 20 people 1996. As stated above, the transition economies exhibit a high
or more. In Hungary, a mailing sample of 3,000 firms was degree of environmental turbulence and change, and hence
constructed. In Poland, the sample was of 2,000 firms. In a context in which to test the propositions. Indeed, Grant
Slovenia, the population of firms employing over 20 people (1995), a leading proponent of the resource based view of
was 1,581, and all were surveyed. In the cases of Hungary the firm, has stated:
and Poland, the samples were constructed from official mailing In general, the greater the rate of change in a company’s
lists and designed to be broadly representative of industry external environment, the more it must seek to base
long-categories, firm sizes, and ownership types (state-owned as well term strategy upon its internal resources and capabilities,
as recently privatized, former state-owned firms, those with part rather than upon an external market focus.
or full foreign ownership and “organic” start-up firms). The questionnaires were dispatched in three waves ad-The above would imply a severe test for the market
question-naire was accompanied by a covering letter, requesting cooper- ited in their power to explain the diverse approaches and priorities apparent in the transition economies. In particular ation, guaranteeing anonymity and indicating the importance
of participation. Reply paid envelopes also were included for a number of respondents expressed the view that their main objectives, and the strategies they subsequently adopted, were return of completed questionnaires,and respondents were
of-fered a free copy of the summary results as a further induce- to provide security and continuity of employment for their managers and employees, an approach not specifically ad-ment to participate. By the cutoff date of end December 1996,
a total of 1,619 responses had been received. The response dressed in the market orientation scales developed in the West. A further approach to strategic orientation assessment, orig-rate varied by country with 629 from Slovenia (40% response
rate), 589 from Hungary (20%), and 401 from Poland (20%). inally developed by Kotler (1977) as an approach to assessing marketing effectiveness (see Hooley, Lynch, and Shepherd, The higher response rate in Slovenia may indicate the relatively
low level of academic research amongst businesses conducted 1990; Norburn et al., 1990) has been used successfully in Southeast Asia (Huang et al., 1992), western Europe (Willenb-in the country compared with the more extensively research
Polish and Hungarian businesses. Samples were found to be org, Alsem, and Hoekstra, 1998) and eastern Europe (Marinov et al., 1993). This approach attempts to uncover orientation broadly representative in terms of industry sectors but there
was a slight bias towards larger firms. through presenting respondents with a set of alternative priori-ties and asking them to indicate the statement that most closely describes their company’s approach to doing business. The
Constructs
review of previous research in the region and the preliminary MARKET ORIENTATION. The market orientation scale
devel-interviews conducted revealed seven alternative orientations, oped in the United States by Narver and Slater (1990) was
or sets of priorities (see Table 2). These were carefully worded used as the basis for measuring market orientation in central
to use the language of the respondents and tested through Europe. The parsimonious set of key indicators of market
the pilot survey. After refinement, they were incorporated in orientation covering the three underlying components of
cus-the main survey, and cus-their association with cus-the MO scale was tomer orientation, competitor orientation, and interfunctional
assessed. coordination was presented to respondents as seven-point
scales where 15strongly agree, and 75 strongly disagree.
Strategic Priorities and Objectives
Two approaches to computing overall market orientationhave been adopted in the literature. In the original Narver The in-depth case studies in the transition economies revealed and Slater (1990) approach, orientation was calculated first that many firms were simply setting their sights on survival on three separate scales (customer orientation, competitor as their prime objective in the difficult trading conditions of orientation, and interfunctional coordination) and then aver- the mid-1990s. A three-point construct therefore was devel-aged across the three scales to give one market orientation oped to encapsulate the three main priorities emerging score for each firm. Reliability tests on each subscale produced through both the literature and this specific study: survival, alphas above 0.7 indicating each scale was separately reliable short-term profit orientation, and longer term building of (Nunnally, 1967). The averaging across the three separate market position.
subscales implies equal weight given to each of the three Hooley, Saunders, and Piercy (1998) discuss strategic fo-underlying components. Other researchers, however, (e.g., cus. They identify two underlying alternatives, the second of Deng and Dart, 1994) suggest that different weightings should which has two subalternatives. The basic distinction is be-be given to the components, specifically more weight attached tween an internal, efficiency focus, and an external, market to customer orientation than the other two dimensions. development focus. Under the former, the firm is driven by The second approach (Greenley, 1995b) has been to aver- the constant need to find economies in its actions and opera-age across the original scales directly rather than using sub- tions. This may lead to reductions in product variety and scales as intermediaries. Given that six of the fourteen items tight control over marketing investment expenditures (such are components of customer orientation, whereas four each are as customer relationship building, promotional activities, and components of competitor orientation and of interfunctional marketing research). Under the latter, market development coordination, this approach automatically gives greater weight focus firms seek either to expand their total market (typically to the customer orientation items (six-fourteenths of the over- a strategy adopted during the introductory and growth stages all market orientation score rather than one-third). To test of the market life cycle) or to win a greater share of the market the reliability of the MO scale, we collected data on the 14 from their competitors (more often pursued once growth of original scale items and analyses performed both on the sepa- the total market has been exhausted, during maturity and rate components and on the composite scale. decline). The three alternatives (efficiency focus, market expansion focus, and market share focus) were tested in the
Business Approach
in-depth interviews and the pilot studies and shown toencap-sulate the views of the respondents. Through the initial, in-depth interviews, it became clear that
horizon addressed, the marketing objectives being pursued (less ambitious managers may set less ambitious objectives) and market or industry factors (it may be relatively easy to centered around the degree of aggression pursued in the
mar-ket place. Kotler and Singh (1981) have emphasized the funda- improve performance in some industries, but more difficult in others), this final set of performance measures compare mental differences between attack and defense strategies.
Three broad sets of marketing objectives emerged from review like with like and in many ways form the most useful measures available. On each of the three bases, performance was judged of the literature and the in-depth interviews: defense of current
position, the achievement of steady sales growth, and the against four criteria, two financial (profit and ROI) and two market based (sales volume and market share). Respondents achievement of more aggressive growth to dominate the
market. were asked to judge whether results on each were above,
below, or the same as budget, previous financial year, and competitors. Scores were averaged over the four criteria for
Marketing Strategy Variables
each basis forming three performance scales of four items A central tenet of marketing theory (see Brown, 1993;
McDon-each. Alphas were 0.76, 0.82, and 0.82 for each scale, respec-ald and Dunbar, 1995) is focus or targeting. As discussed
tively, all at acceptable levels. above, targeting decisions fall along a spectrum from targeting
the whole market to targeting individual customers. Based on
the preliminary case studies, and drawing on previous work
Results and Discussion
on targeting in central Europe (see Hooley, Beracs, and Kolos,Reliability of the
1993), three levels of targeting were examined: attack thewhole market, attack selected market segments, and target
Market Orientation Scale
specific individual customers. These encapsulate the main A total of 1,396 firms provided data enabling MO to be calcu-alternatives open to firms. lated. Initial analyses of the three underlying scales produced Competitive positioning (see Ries and Trout, 1981; Hooley, an acceptable alpha (0.79) for the customer orientation sub-Saunders, and Piercy, 1998) was explored on three main scale but unacceptable alphas (0.58 and 0.57, respectively) for dimensions: technical product quality, level of customer ser- the competitor orientation and interfunctional coordination vice and support offered, and pricing. All were measured subscales. This suggests that the separate scales are unreliable compared to major competitors in the firm’s own market as measures of competitor orientation and interfunctional co-sector. Conceptually, it is possible for each to be higher, the ordination. Overall market orientation then was computed same, or lower than major competitors. following the procedure used by Greenley (1995b), as the average score across the 14 scales. The alpha for the scale was
Performance
acceptable at 0.86 (see Nunnally, 1967), and item-to-totalcorrelations were all in the expected direction and statistically Initially, performance was measured in financial terms as
re-turn on investment. This measure was very familiar to respon- significant demonstrating internal consistency of the scale (see Table 1). The averaging across the 14 scales without the inter-dents (CEOs), and most were prepared to give return on
investment (ROI) results in categories. Percentage return on mediary step of subscales also up-weights the customer orien-tation component of market orienorien-tation.
investment provides a readily understood and accepted
finan-cial measure of commerfinan-cial success. The categories selected Across the 1,396 respondents that the overall market orien-tation (MO) score was computed, the mean orienorien-tation was followed from the preliminary case research.
Absolute performance figures, however, such as ROI and 2.97 with a standard deviation of 0.94. The sample then was divided into three roughly equal groups based on the market profit levels, sales volume, and market share, are notoriously
difficult to compare between firms of different sizes, operating orientation score labeled “high MO,” “medium MO,” and “low MO” for further analyses. These three groups represented in different markets, using different accounting standards, and
defining their markets in different ways. For the purposes of significantly different levels of market orientation as measured by the Narver and Slater scales.
this study, therefore, performance also was measured on a
relative, as well as absolute, (ROI) basis. Differences between the three MO groups were tested across standard criteria. No differences in market orientation First, performance was judged against original objectives
set. This shows the extent to which firms are achieving their category were found with regard to industry sector (10 stan-dard SIC codes) or market type (consumer vs. industrial, original goals and is consequently an indicator of managerial
satisfaction with results achieved. Second, performance was services vs. manufacturing, fast moving vs. durables). Small but significant differences were found by size of enterprise. judged against performance in the previous financial year.
This shows the extent to which firms are improving year on Perhaps surprisingly smaller firms (less than 100 employees) appeared slightly more market oriented whereas larger firms year. Third, performance was judged against major market
competitors. This shows where firms are outperforming simi- (3001employees) appeared less market oriented. This differ-ence is due to the presdiffer-ence in the sample of state-owned firms lar firms facing similar market conditions. Whereas the first
counter-Table 1. Market Orientation (MO) Scale
Meana Standard Item-Total Alpha if Item
Market Orientation Item (n51396) Deviation Correlationb Removed
Our commitment to serving customer needs is
closely monitored 2.56 1.40 0.64 0.83
Sales people share information about competitors 3.28 1.86 0.49 0.85
Our objectives and strategies are driven by the
creation of customer satisfaction 2.03 1.29 0.61 0.84
We achieve rapid response to competitive actions 3.06 1.59 0.64 0.83
Top management regularly visits important
customers 2.82 1.71 0.54 0.84
Information about customers is freely
communicated throughout the company 3.69 1.96 0.44 0.85
Competitive strategies are based on understanding
customer needs 2.58 1.40 0.68 0.83
Business functions are integrated to serve market
needs 2.78 1.60 0.65 0.83
Business strategies are driven by increasing value
for customers 2.56 1.41 0.59 0.84
Customer satisfaction is frequently assessed 3.51 1.73 0.66 0.83
Close attention is given to after sales service 3.45 1.78 0.62 0.84
Top management regularly discuss competitors’
strengths and weaknesses 3.29 1.71 0.64 0.83
Our managers understand how employees can
contribute to value for customers 3.02 1.56 0.62 0.83
Customers are targeted when we have an
opportunity for competitive advantage 2.93 1.64 0.43 0.85
Standard MO Scale Characteristics Mean Deviation
MO (n51396) 2.97 0.94
Low MO (n5442) 4.07 0.54
Medium MO (n5468) 2.96 0.24
High MO (n5486) 1.98 0.40
aMean score on seven-point scale where 1
5strongly agree and 75strongly disagree.
bProduct moment correlations all significant at 0.001 level.
Cronbach alpha for scale 0.86
parts and because of their previous monopoly positions under tion concept generally was understood, many managers indi-state planning that did little to encourage a market orientation. cated that their goals and subsequent guiding principles in Differences also were observed by country with Hungarian doing business were more complex. Specifically many men-firms scoring highest on the MO scale and Polish men-firms lowest. tioned the need to provide security of employment for manag-These differences can be attributed to the longer and faster ers and workers being a major driver. Others indicated that pace of market reform in Hungary and to the relatively high decisions were driven primarily by a focus on short-term influx of foreign investment bringing in Western marketing financial goals, irrespective of market requirements. Still oth-approaches and attitudes. They also may be related to differ- ers suggested that they actually were implementing a market ences in national privatization processes (see Cox et al., 1998). orientation through focusing on producing technically the best possible products in their industry. Thus, whereas the
Content Validity of the Scale
market orientation concept demonstrated a degree of content validity, it was clear that it was only one of many approaches The case studies were used to explore local managers’under-to doing business in central Europe. standing of marketing terminology, concepts, and tools. In
Table 2 shows the relationship between the MO groups particular, the appropriateness of the MO scales for measuring
and the answers to the business orientation question. The orientation was preliminarily assessed during the case studies
spread of answers across the total sample is first of interest as a first step in assessing content validity. Case investigators
indicating a wide variety of orientations prevalent in the transi-explored alternative business goals and orientations. A key
Table 2. Market Orientation and Business Approach
Total Sample Low MO Medium MO High MO (1371) (%) (436) (%) (458) (%) (477) (%)
Use selling and advertising to help sell our
products and services 12.0a 11.7 13.5 10.7
Endeavor to offer the best technical product in
our industry 22.1 16.5 20.3 28.9
Identify the demands and requirements of customers and ensure our products and
services meet them 29.8 24.5 31.4 32.9
Concentrate on manufacturing efficiency to achieve low unit costs to sell our products at
lowest possible prices 11.5 14.0 11.6 9.0
Use our assets and resources to maximize
short-term profits or other financial measures 4.9 7.1 5.0 2.7
Organize our activities to provide security and continuity of employment for our staff and
employees 15.8 20.6 14.6 12.4
Provide the goods and services society in general needs rather than simply satisfying individual
customers 4.1 5.5 3.5 3.4
Chi-square552.1, significance50.0001.
aFigures are column percentages.
The single most often cited approach approximates to a balance between market and product orientation. Similarly, customer orientation (identifying and meeting the needs of Parkinson and Chambers (1998) found that market orienta-customers) and as such would be expected to be closely related tion and quality orientation were complementary rather than to MO. Indeed, it is evident that the High MO group show contradictory orientations.
a significantly greater tendency to select this orientation than In the research reported above, it can be seen that the High Low MO firms (but not a significantly different tendency MO firms were almost equally divided in taking a customer than the Medium MO firms). There is also, however, a high focus or a product quality focus in their operations. Thus, incidence of the High MO firms reporting a focus on offering market orientation and technical product quality orientation the best technical product in the industry (a classic product are not necessarily mutually exclusive alternatives as suggested orientation in the terminology of Doyle, 1998). Among the in the mainstream marketing literature (see, e.g., Kotler, 1997; Low MO firms, a relatively high proportion report a focus on Doyle, 1998). Similarly, nearly one-third of High MO firms providing continuity of employment. adopted other strategic priorities, most notably providing se-The results suggest that, whereas the questions in the MO curity and continuity of employment provision (an “employ-scale were considered relevant by managers in both the in- ment orientation”). These different emphases also are not nec-depth interviews and the final survey, a high proportion of essarily contradictory. Whereas measurement of the degree of firms more readily identified with other strategic orientations market orientation has been, perhaps understandably, a major when forced to choose the best description of their firm. This focus in the marketing literature, there has been relatively suggests that measurement of MO alone is incomplete in little development of scales to measure other (complementary encapsulating strategic orientation in the transition econo- and/or contradictory) orientations. Much as it is now recog-mies. Indeed, it begs the question whether MO alone is ade- nized that firms can exhibit a degree of market orientation, quate in other economies. in the same way they may exhibit simultaneously a degree of
Recent research in the West has sought to take a stakeholder
other orientations that, when combined, give a unique busi-perspective on orientation (see, e.g., Greenley and Foxall,
ness orientation for the firm. 1996, 1997), and it is becoming increasingly evident that
different orientations are not necessarily mutually exclusive.
Nomological Validity
Simon (1996), for example, found that amongst his “hiddenThe nomological validity of the scale was assessed through champions” (mid-sized German firms that were world leaders
testing the propositions P1 to P4 developed above. Table 3 in their very focused market niches) a balance was struck
shows the responses to the three questions designed to test between a technical/innovations orientation and a high degree
the first proposition. In all three cases, a statistically significant of market sensitivity (market orientation). Wong and Saunders
Table 3. Market Orientation and Strategic Priorities
Total Sample (%) Low MO (%) Medium MO (%) High MO (%)
Strategic Priorities over last two years (1372) (437) (460) (475)
Survival 49.0 57.0 49.8 40.8
Good short-term financial returns or profits 15.6 15.6 18.0 13.3
Long-term building of market position 35.4 27.5 32.2 45.9
(Chi-square539.5, significance50.0001)
Strategic Focus over last two years (1326) (423) (446) (457)
Focus on cost reduction and efficiency gains 58.4 62.9 59.2 53.4
Focus on expanding the total market for our
products 30.5 29.6 30.3 31.7
Focus on winning market share from competitors 11.1 7.6 10.5 14.9
(Chi-square514.6, significance50.01)
Marketing objectives (1391) (440) (466) (485)
To maintain or defend our current position 29.9 38.0 27.0 25.4
To achieve steady sales growth 63.0 57.3 66.5 64.9
To achieve aggressive sales growth or to
domi-nate the market 7.0 4.8 6.4 9.7
(Chi-square526.0, significance50.0001)
The High MO firms were more likely to adopt long-term note that the differences found in targeting contradict proposi-tion P2. Indeed, whereas more than half of all firms surveyed market position building goals, more likely to focus on
win-ning market share and more likely to pursue growth or market report the adoption of a target market approach (segments and individuals), the High MO firms are more likely than domination objectives. These all add up to a more aggressive,
long-term stance in their markets. The Low MO firms, on others to seek to attack the whole of their markets. An explana-tion might lie in their general levels of aggressiveness and the other hand, were more likely to focus on survival, cost
reduction and efficiency gains, and defensive objectives. Prop- desire to dominate their markets.
Further analyses were able to shed more light on the find-osition P1 therefore is supported.
Targeting and positioning (see O’Shaughnessy, 1995) deci- ing. A later question in questionnaires concerned the degree of product standardization or adaptation used across the mar-sions are presented in Table 4. Statistically significant
differ-ences emerged with regard to targeting and product and ser- kets in which the firm operates. Firms were asked to indicate the extent of their agreement with the phrase: “We modify our vice positioning, but not with regard to pricing. In addition,
Table 4. Market Orientation and Marketing Strategy
Total Sample (%) Low MO (%) Medium MO (%) High MO (%)
Market targeting approach (1388) (439) (465) (484)
Attack the whole market 20.6 21.4 14.4 25.8
Attack selected market segments 58.1 55.1 62.8 56.4
Target specific, individual customers 21.3 23.5 22.8 17.8
(Chi-square522.17, significance50.001)
Product positioning (1281) (406) (423) (452)
Technical quality higher than main competitors 32.1 24.6 29.3 41.4
About the same as main competitors 66.4 71.9 70.0 58.0
Lower than main competitors 1.6 3.4 0.7 0.7
(Chi-square541.28, significance50.0001)
Service positioning (1352) (424) (452) (476)
Service quality higher than main competitors 38.2 27.8 34.7 50.8
About the same as main competitors 58.9 67.2 62.6 47.9
Lower than main competitors 2.9 5.0 2.7 1.3
(Chi-square559.78, significance50.0001)
Price positioning (1383) (440) (463) (480)
Price higher than main competitors 13.0 13.9 11.0 14.2
About the same as main competitors 67.2 65.2 70.2 66.0
Lower than main competitors 19.8 20.9 18.8 19.8
Table 5. Market Orientation and Performance
Total Sample Low MO Medium MO High MO
(%) (%) (%) (%)
Return on Investment (1281) (413) (428) (440)
Loss 19.5 27.1 18.7 13.2
Break even 12.1 12.1 12.1 12.0
1–9% 45.1 44.8 45.6 45.0
10–19% 15.7 11.4 15.2 20.2
20% or more 7.6 4.6 8.4 9.5
Chi-square539.67, significance50.0001 Performance relative to budgeta(n
51,343) 2.08 2.20 2.08 2.00
Performance relative to last yeara(n
51,335) 1.78 1.86 1.79 1.71
Performance relative to main competitorsa(n
5929) 1.99 2.14 2.00 1.87
High MO group significantly different from other groups on all three scales at 0.05 level by usingt-tests.
aPerformance scales are average summed score across profit, sales volume, market share, and ROI on scale 1
5better than target/last year/competitors, 25on target/same as last year/same as competitors, 35below target/worse than last year/worse than competitors.
products and services according to different markets’ needs”. long-term position. These they see better achieved through higher quality than through cut price deals.
Analysis of firms that had indicated market-wide targeting
Finally, Table 5 presents the results of the analyses of showed that the High MO firms were more likely to agree
performance variables by market orientation group. Signifi-with this statement than the Low MO firms. Indeed, 76%
cant differences were found with regard to both the absolute agreed with the statement compared to only 50% of Low MO
and the relative performance measures, all in the direction firms (statistically significant difference at 0.001 level). It thus
proposed. With regard to ROI, a higher proportion of the High seems that the High MO firms adopting market-wide targeting
MO group reported higher returns (10% or more), whereas the are achieving this through offering a range of products
de-Low MO group were more likely to report a loss. signed to meet the needs of their different markets.
On the relative performance scales, the High MO group Significant differences were found between the MO groups
consistently reported better market and financial performance with regard to product and service positioning, but not price
against all three criteria—budget, previous financial year, and positioning. The High MO group were the most likely to adopt
main competitors. The High MO firms are more likely to both higher technical product and service quality positions
exceed their targets, to show year on year improvement in than the other firms. Low MO firms more often positioned
performance and outperform their sectoral competitors. The their offerings at competitive parity. With regard to price,
how-weakest performance on each scale was observed among the ever, no statistically significant differences were observed
be-Low MO firms. Overall both absolute and relative performance tween groups. Proposition P3 thus is supported in part only.
results support proposition P4. Avoiding reliance on low price as a means of differentiation
by high MO firms is consistent with their superior product
and service quality positioning. Given the emphasis of High
Conclusions, Future Research
MO firms on superior product and service quality, low pricesDirections, and Limitation
could be seen as incompatible with those premium positions
Irma Agardi, Marin Marinov, Svetla Marinova, Damjan Mumel, Matjaz Irsic, beneficial in turbulent transition economies as in Western
and Vladimir Gabrijan to the wider four country study are gratefully acknowl-developed markets.
edged. The research also has shown, however, that other business
orientations may coexist with a market orientation providing
a more complex, richer insight into the stance these firms
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