Talking point for market orientation
Ajay K. Kohli & Bernard J. Jaworski Market Orientation: The Construct, Research Propositions, and Managerial Implications The literature reflects remarkably little effort to develop a framework for understanding the implemen- tation of the marketing concept. The authors synthesize extant knowledge on the subject and provide a foundation for future research by clarifying the construct's domain, developing research propositions, and constructing an integrating framework that includes antecedents and consequences of a market ori- entation.
They draw on the occasional writings on the subject over the last 35 years in the marketing literature, work in related disciplines, and 62 field interviews with managers in diverse functions and organizations. Managerial implications of this research are discussed.
T HOUGH the marketing concept is a cornerstone of the marketing discipline, very little attention has been given to its implementation. The marketing concept is essentially a business philosophy, an ideal or a policy statement (cf. Barksdale and Darden 1971; McNamara 1972). The business philosophy can be contrasted with its implementation reflected in the ac- tivities and behaviors of an organization. In keeping with tradition (e.g., McCarthy and Perreault 1984, p.
36), we use the term "market orientation" to mean the implementation of the marketing concept. Hence, a market-oriented organization is one whose actions are consistent with the marketing concept.
In recent years, there has been a strong resurgence of academic as well as practitioner interest in the mar- Ajay K.
Kohli is Assistant Professor, Department of Marketing Admin- istration, The University of Texas at Austin. Bernard J.
Jaworski is As- sistant Professor, Department of Marketing, Karl Eller Graduate School of Management, University of Arizona.
The authors thank Dipankar Chakravarti, Rohit Deshpande, Jonathan Frenzen, Richard Lutz, Deborah Maclnnis, Kent Nakamoto, C. W.
Park, P.
Rajan Varadarajan, Melanie Wallendorf, Frederick Webster, Robert Westbrook, Gerald Zaitman, and four JM reviewers for their helpful comments on previous versions of the article. Research support provided by the Marketing Science Insti- tute is gratefully acknowledged. Both authors contributed equally to the article.
keting concept and its implementation (e.g., Deshpande and Webster 1989; Houston 1986; Olson 1987; Webster 1988).
We seek to further that interest by providing a foundation for the systematic development of a the- ory of market orientation. Given its widely acknowl- edged importance, one might expect the concept to have a clear meaning, a rich tradition of theory de- velopment, and a related body of empirical findings.
On the contrary, a close examination of the literature reveals a lack of clear definition, little careful atten- tion to measurement issues, and virtually no empiri- cally based theory. Further, the literature pays little attention to the contextual factors that may make a market orientation either more or less appropriate for a particular business. The purpose of this article is to delineate the domain of the market orientation con- struct, provide an operational definition, develop a propositional inventory, and construct a comprehen- sive framework for directing future research.
We first describe our method. Essentially, we draw on the literature in marketing and related disciplines, and supplement it with findings from field interviews with managers in diverse functions, hierarchical lev- els, and organizations. Our discovery-oriented ap- proach (cf. Deshpande 1983; Mahrer 1988) is similar to the qualitative, practitioner-based approach used by Parasuraman, Zeithaml, and Berry (1985) and is de- Joumal of Marketing Vol.
54 (April 1990), 1-18 Market Orientation /1 signed to tap the "cause and effect" maps of managers (see Zaltman, LeMasters, and Heffring 1982).
We then compare and contrast the alternative con- ceptualizations in the literature with the view that emerges from the field interviews and provide a syn- thesis.
Next we develop a series of research propo- sitions in the spirit of propositional inventories de- veloped in such diverse areas as sales management (cf. Walker, Churchill, and Ford 1977; Weitz 1981), organization of marketing activities (cf. Ruekert, Walker, and Roering 1985), diffusion of technology (cf. Robertson and Gatignon 1986), information pro- cessing (cf. Alba and Hutchinson 1987), and market- ing control systems (cf. Jaworski 1988). These liter- ature-based and field-based propositions are synthesized in an integrative framework that provides for a par- simonious conceptualization of the overarching fac- tors of interest. Finally, we conclude with a discus- sion that alerts managers to important issues involved in modifying business orientations.
Method Literature Review A review of the literature of the last 35 years reveals relatively little attention to the marketing concept. The limited research primarily comprises (1) descriptive work on the extent to which organizations have adopted the concept (e.g., Barksdale and Darden 1971; Hise 1965; Lusch, Udell, and Laczniak 1976; McNamara 1972), (2) essays extolling the virtues of the business philosophy (e.g.. Business Week 1950; McKitterick 1957; Viebranz 1967), (3) work on the limits of the concept (e.g., Houston 1986; Levitt 1969; Tauber 1974), and to a lesser extent (4) discussions of factors that facilitate or hamper the implementation of the marketing concept (e.g., Felton 1959; Lear 1963; Webster 1988). We draw on these limited writings, especially the last category, and also on related lit- erature in the management discipline.
Field Interviews The field research consisted of in-depth interviews with 62 managers in four U.S. cities. Because the purpose of the study was theory construction (i.e., elicitation of constructs and propositions), it was important to tap a wide range of experiences and perspectives in the course of the data collection. Therefore, a pur- posive or "theoretical" sampling plan (Glaser and Strauss 1967) was used to ensure that the sample in- cluded marketing as well as nonmarketing managers in industrial, consumer, and service industries. Care also was taken to sample large as well as small or- ganizations.
Of the 62 individuals interviewed, 33 held mar- keting positions, 15 held nonmarketing positions, and 14 held senior management positions. A total of 47 organizations were included in the sample; multiple individuals were interviewed in certain organizations.
The organizations of 18 interviewees marketed con- sumer products, those of 26 marketed industrial prod- ucts, and those of 18 marketed services. In size, the organizations ranged from four employees to several tens of thousands. The sample thus reflects a diverse set of organizations, departments, and positions, and hence is well suited for obtaining a rich set of ideas and insights. In addition to managers, 10 business academicians at two large U.S. universities were in- terviewed. The ptirpose of these interviews was to tap insights that might not emerge from the literature re- view and the field interviews.
A standard format generally was followed for the interview. After a brief description of the research project, each interviewee was asked about four issues along the following lines.
1.
What does the term "maricet/marketing orientation" mean to you? What kinds of things does a market/mar- keting-oriented company do?
2.
What organizational factors foster or discourage this orientation?
3.
What are the positive consequences of this orientation?
What are the negative consequences?
4.
Can you think of business situations in which this ori- entation may not be very important?
These questions provided a structure for each inter- view, but it was frequently necessary to explain and clarify some of the questions, as well as probe deeper with additional questions to elicit examples, illustra- tions, and other insights.
The personal interviews typically lasted about 45 minutes and were audiotaped unless the interviewee requested otherwise. The information obtained from these interviews affords novel insights into the mean- ing, causes, and consequences of a market orienta- tion. Though a large number of new insights emerged from the study, we focus on the more "interesting" ones (see Zaltman, LeMasters, and Heffring 1982) and those with the greatest potential for stimulating future research.
Market Orientation: The Construct Comparing Literature and Fieid Perspectives A review of the literature reveals diverse definitions of the marketing concept. Felton (1959, p. 55) defines the marketing concept as "a corporate state of mind that insists on the integration and coordination of all the marketing functions which, in turn, are melded with all other corporate functions, for the basic pur- pose of producing maximum long-range corporate profits." In contrast, McNamara (1972, p. 51) takes 2 / Journal of Marketing, April 1990 a broader view and defines the concept as "a philos- ophy of business management, based upon a com- pany-wide acceptance of the need for customer ori- entation, profit orientation, and recognition of the important role of marketing in communicating the needs of the market to all major corporate departments." Variants of these ideas are offered by Lavidge (1966), Levitt (1969), Konopa and Calabro (1971), Bell and Emory (1971), and Stampfl (1978).
Three core themes or "pillars" underlie these ad hoc definitions: (1) customer focus, (2) coordinated marketing, and (3) profitability (cf. Kotler 1988).
Barksdale and Darden (1971, p. 36), point out, how- ever, that these idealistic policy statements repre- sented by the marketing concept are of severely lim- ited practical value, and assert that "the major challenge is the development of operational definitions for the marketing concept ..." (emphasis added). Hence, though the literature sheds some light on the philos- ophy represented by the marketing concept, it is un- ciear as to the specific activities that translate the phi- losophy into practice, thereby engendering a market orientation. Even so, it appears reasonable to con- clude from the literature that a market-oriented or- ganization is one in which the three pillars of the mar- keting concept (customer focus, coordinated marketing, profitability) are operationally manifest.
The view of market orientation that emerges from the field interviews is consistent with the "received view" in the literature, though certain differences are evident. Importantly, the field interviews provide a significantly clearer idea of the construct's domain and enable us to offer a more precise definition. This pre- cision facilitates theory development, construct mea- surement, and eventually theory testing. In the fol- lowing discussion, we first compare the field-based view of market orientation with the received view on the three commonly accepted pillars—customer fo- cus, coordinated marketing, and profitability—and then elaborate on the elements of the field-based view of the construct.
Customer focus. Without exception, the managers interviewed were consistent in the view that a cus- tomer focus is the central element of a market ori- entation. Though they agreed with the traditional view that a customer focus involves obtaining information from customers about their needs and preferences, several executives emphasized that it goes far beyond customer research. The comments suggest that being customer oriented involves taking actions based on market intelligence, not on verbalized customer opin- ions alone. Market intelligence is a broader concept in that it includes consideration of (1) exogenous mar- ket factors (e.g., competition, regulation) that affect customer needs and preferences and (2) current as well as future needs of customers. These extensions do not challenge the spirit of the first pillar (customer focus); rather, they refiect practitioners' broader, more stra- tegic concerns related to customers.
Coordinated marketing. Few interviewees explic- itly mentioned coordinated marketing in the course of the discussions, but the majority emphasized that a market orientation is not solely the responsibility of a marketing department. Moreover, the executives in- terviewed emphasized that it is critical for a variety of departments to be cognizant of customer needs (i.e., aware of market intelligence) and to be responsive to those needs. Thus, the interviewees stressed the im- portance of concerted action by the various depart- ments of an organization. Importantly, the field find- ings limit the domain of the second pillar of market orientation to coordination related to market intelli- gence. This focused view of coordination is important because it facilitates operationalizing the construct by clearly specifying the type of coordination that is rel- evant.
Profitability. In sharp contrast to the received view, however, the idea that profitability is a component of market orientation is conspicuously absent in the field findings. Without exception, interviewees viewed profitability as a consequence of a market orientation rather than a part of it. This finding is consistent with Levitt's (1969, p. 236) strong objection to viewing profitability as a component of a market orientation, which he asserts is "like saying that the goal of human life is eating." Thus, the meaning of the market orientation con- struct that surfaced in the field is essentially a more precise and operational view of the first two pillars of the marketing concept—customer focus and coordi- nation. The findings suggest that a market orientation entails (1) one or more departments engaging in ac- tivities geared toward developing an understanding of customers' current and future needs and the factors affecting them, (2) sharing of this understanding across departments, and (3) the various departments engag- ing in activities designed to meet select customer needs.
In other words, a market orientation refers to the or- ganization wide generation, dissemination, and re- sponsiveness to market intelligence.
Further, though the term "marketing orientation" has been used in previous writings, the label "market orientation" appears to be preferable for three rea- sons.
First, as Shapiro (1988) suggests, the latter label clarifies that the construct is not exclusively a concern of the marketing function; rather, a variety of depart- ments participate in generating market intelligence, disseminating it, and taking actions in response to it.
Hence labeling the construct as "marketing orienta- tion" is both restrictive and misleading. Second, the Market Orientation / 3 label "market orientation" is less politically charged in that it does not inflate the importance of the mar- keting function in an organization. The label removes the construct from the province of the marketing de- partment and makes it the responsibility of all de- partments in an organization. Consequently, the ori- entation is more likely to be embraced by nonmaiketing departments. Third, the label focuses attention on markets (that include customers and forces affecting them), which is consistent with the broader "manage- ment of markets" orientation proposed by Park and Zaltman (1987, p. 7) for addressing limitations in cur- rently embraced paradigms. We next discuss in more detail each of the three elements of a market orien- tation—intelligence generation, dissemination, and responsiveness.
Explicating the Market Orientation Construct Intelligence generation. The starting point of a market orientation is market intelligence. Market intelligence is a broader concept than customers' verbalized needs and preferences in that it includes an analysis of ex- ogenous factors that influence those needs and pref- erences. For example, several managers indicated that a market orientation includes monitoring factors such as government regulations and competition that infiu- ence the needs and preferences of their customers.
Several interviewees who cater to organizational cus- tomers emphasized that a market orientation includes an analysis of changing conditions in customers' in- dustries and their impact on the needs and wants of customers. Likewise, the importance of monitoring competitor actions and how they might affect cus- tomer preferences emerged in the course of the inter- views.
(Day and Wensley 1983 also point out the lim- itations of focusing on customers to the exclusion of competitors.) Hence, though market intelligence per- tains to customer needs and preferences, it includes an analysis of how they may be affected by exogenous factors such as government regulation, technology, competitors, and other environmental forces. Envi- ronmental scanning activities are subsumed under market intelligence generation.
An important idea expressed by several executives is that effective market intelligence pertains not just to current needs, but to future needs as well. This idea echoes Houston's (1986) assertion and refiects a de- parture from conventional views (e.g., "find a need and fill it") in that it urges organizations to anticipate needs of customers and initiate steps to meet them.
The notion that market intelligence includes antici- pated customer needs is important because it often takes years for an organization to develop a new product offering. As a senior vice president of a large indus- trial services company observed:
[When] should [our company] enter the [certain ser- vices] area? Is there a market there yet? Probably not.
But there's going to be one in 1990, '91, '92, '96.
And you don't want to be too late because it's going to take you a couple of years getting up to speed, getting your reputation established. So you've really got to jump into it two years before you think [the market for it is going to develop].
Though assessment of customer needs is the cor- nerstone of a market orientation, defining customers may not be simple. In some cases, businesses may have consumers (i.e., end users of products and ser- vices) as well as clients (i.e., organizations that may dictate or infiuence the choices or end users). For ex- ample, executives of several packaged goods com- panies indicated that it is critical for their organiza- tions to understand the needs and preferences of not just end customers but also retailers through whom their products are sold. This sentiment reflects the growing power of retailers over manufacturers owing to the consolidation of the former, retailers' access to scanner data, and increased competition among man- ufacturers due to proliferation of brands. As one ex- ecutive indicated, keeping retailers satisfied was im- portant to ensure that they carded and promoted his products, which in turn enabled him to cater to the needs of his end customers.
Interestingly, in the 1920s and 1930s, the term "customer" primarily referred to distributors who pur- chased goods and made payments (McKitterick 1957).
Starting about the 1950s, the focus shifted from dis- tributors to end consumers and their needs and wants.
Today the appropriate focus appears to be the market, which includes end users and distributors as well as exogenous forces that affect their needs and prefer- ences.
Identifying who an organization's customers are is even more complex when service is provided to one party, but payments are received from another. For example, the director of marketing for a health care organization recalled:
In the past we asked patients what they wanted for services, how they wanted the service delivered. Now the patient is no longer making those decisions. [It is] more complicated. [We define] our customers to- day as those paying for the patient's care.
The generation of market intelligence relies not jtxst on customer surveys, but on a host of complementary mechanisms. Intelligence may be generated through a variety of formal as well as informal means (e.g., in- formal discussions with trade partners) and may in- volve collecting primary data or consulting secondary sources. The mechanisms include meetings and dis- cussions with customers and trade partners (e.g., dis- tributors), analysis of sales reports, analysis of world- wide customer databases, and formal market research such as customer attitude surveys, sales response in 4 / Journal of Marketing, April 1990 test markets, and so on. The following quotation from the director of marketing in a high-tech industrial products company illustrates the information collec- tion and analysis activity.
We do a lot of visiting with customers, talking with customers on the phone, we read the trade press—it is full of good information about what our competi- tors are doing. We always want to position relative to competitors. A lot of marketing is information gathering.
Importantly, intelligence generation is not the ex- clusive responsibility of a marketing department. For example, R&D engineers may obtain information at scientific conferences, senior executives might un- cover trends reported in trade joumals, and so on.
Managers in several industrial products companies in- dicated that it was routine for dieir R&D personnel to interact directly with customers to assess their needs and problems and develop new business targeted at satisfying those needs. One company we interviewed goes to extreme lengths to encourage exchange of in- formation between nonmarketing employees and cus- tomers. For its annual "open house," invitations to customers are hand delivered by manufacturing—not marketing—personnel. Customers visit the plant and interact with shop floor personnel as well as white collar employees. This approach not only enables manufac- turing personnel to understand better the purchase mo- tivations of customers, but also helps customers to ap- preciate the limits and constraints of processes involved in manufacturing items they require. As the president of this company described it:
[The "open house"] does two things for you. First, it impresses the customers that the people in manu- facturing are interested in your business, and the other thing is that it impresses on the people in manufac- turing that there are people who buy the product— real, live-bodied, walking-around people. Our peo- ple leam, but our customers are educated at the same time.
To help it anticipate customer needs accurately, one blue chip industrial product company assigns cer- tain individuals exclusively to the task of studying trends and forces in the industries to which major customer groups belong (see related discussion by Lenz and Engledow 1986). This company goes so far as to identify future needs of customers and plan future of- ferings jointly with customers. The important point is that generation of market intelligence does not stop at obtaining customer opinions, but also involves careful analysis and subsequent interpretation of the forces that impinge on customer needs and preferences. Equally important, the field findings suggest that the genera- tion of market intelligence is not and probably cannot be the exclusive responsibility of a marketing depart- ment (see also Webster 1988). Rather, market intel- ligence is generated collectively by individuals and departments throughout an organization. Mechanisms therefore must be be in place for intelligence gener- ated at one location to be disseminated effectively to other parts of an organization.
Intelligence dissemination. As the interviews pro- gressed, it became increasingly clear that responding effectively to a market need requires the participation of virtually all departments in an organization—R&D to design and develop a new product, manufacturing to gear up and produce it, purchasing to develop ven- dors for new parts/materials, finance to fund activi- ties, and so on. Several managers noted that for an organization to adapt to market needs, market intel- ligence must be communicated, disseminated, and perhaps even sold to relevant departments and indi- viduals in the organization. Marketing managers in two consumer products companies developed and circu- lated periodic newsletters to facilitate dissemination of market intelligence. These activities echo sugges- tions in the literature that organizational direction is a result of marketing managers educating and commu- nicating with managers in other functional areas (Levitt 1969) and that marketers' most important role may be selling within the firm (Anderson 1982). As noted be- fore, however, market intelligence need not always be disseminated by the marketing department to other de- partments. Intelligence may fiow in the opposite di- rection, depending on where it is generated. Effective dissemination of market intelligence is important be- cause it provides a shared basis for concerted actions by different departments. A vice president of an in- dustrial products company recounted the intelligence dissemination process for a new product required by a customer:
I get engineering involved. Engineering gets produc- tion involved. We have management lunches and in- formal forums. Call reports circulate. By the time you design, [you have] engineering, production, and pur- chasing involved early in the process.
A formal intelligence dissemination procedure is obviously important, but the discussions with man- agers indicated that informal "hall talk" is an ex- tremely powerful tool for keeping employees tuned to customers and their needs. Despite sparse treatments of the effects of informal information dissemination in virtually any literature (for a rare exception, see Aguilar 1967), the importance of this factor is well recognized by managers and it is tapped extensively.
For example, the vice president of a manufacturing firm indicated that customer information is dissemi- nated in her organization by telling stories about cus- tomers, their needs, personality characteristics, and even their families. The idea is to have the secretaries, engineers, and production personnel "get to know" customers. Her description of informal intelligence dissemination follows.
Market Orientation / 5 One goal when I took over was to know everything about customers, [whether] they liked cats, know [their] wives' names, favorite pet peeve about our products. Our sales reps need to know this . . . I do a lot of storytelling. LJater, [I] developed software to computerize all this. Everyone in the organization has access to this database.
This emphasis on intelligence dissemination par- allels recent acknowledgement of the important role of "horizontal communication" in service organiza- tions (S^ithaml, Berry, and Parasuraman 1988). Hor- izontal communication is the lateral flow that occurs both within and between departments (Daft and Steers 1985) and serves to coordinate people and depart- ments to facilitate the attainment of overall organi- zational goals. Horizontal communication of market intelligence is one form of intelligence dissemination within an organization.
Responsiveness. The third element of a market ori- entation is responsiveness to market intelligence. An organization can generate intelligence and disseminate it intemally; however, unless it responds to market needs, very little is accomplished. Responsiveness is the action taken in response to intelligence that is gen- erated and disseminated. The following statement by an account executive in a service organization de- scribes this type of responsiveness.
We are driven by what the customer wants.
[We] try to gather data, do research, put together new prod- ucts based on this research, and then promote them.
The field findings indicate that responsiveness to market intelligence takes the form of selecting target markets, designing and offering products/services that cater to their current and anticipated needs, and pro- ducing, distributing, and promoting the products in a way that elicits favorable end-customer response. Vir- tually all departments—not just marketing—partici- pate in responding to market trends in a market-ori- ented company.
Synthesis and Commentary From the preceding discussion, we offer the following formal definition of market orientation.
Market orientation is the organizationwide genera- tion of market intelligence pertaining to current and future customer needs, dissemination of the intelli- gence across departments, and organizationwide re- sponsiveness to it.
Defining market orientation as organizationwide generation, dissemination, and responsiveness to mar- ket intelligence addresses the concerns of Barksdale and Darden (1971) by focusing on sp)ecific activities rather than philosophical notions, thereby facilitating the operationalization of the marketing concept. In- terestingly, it appears more appropriate to view a mar- ket orientation as a continuous rather than a dicho- tomous either-or constmct. As the sales manager for Asia in an industrial products company put it:
The first thing to recognize is that there is no abso- lute,' that there are many shades of gray.
In other words, organizations differ in the extent to which they generate market intelligence, disseminate it intemally, and take action based on the intelligence.
It therefore is appropriate to conceptualize the market orientation of an organization as one of degree, on a continuum, rather than as being either present or ab- sent. This conceptualization facilitates measurement by avoiding certain difficulties inherent in asking in- formants to indicate whether or not their organization is market oriented (e.g., it may be somewhat market oriented). The proposed definition suggests that a measure of market orientation need only assess the degree to which a company is market oriented, that is, generates intelligence, disseminates it, and takes actions based on it. Relatedly, the appropriate unit of analysis appears to be the strategic business unit rather than the corporation because different SBUs of a cor- poration are likely to be market oriented to different degrees.
We next discuss antecedents and consequences of a market orientation, and moderators of the linkage between market orientation and business perfor- mance. We draw on the marketing literature, man- agement literature, and field interviews for develop- ing research propositions.
Research Propositions Figure 1 is a conceptual framework for the following discussion. Briefly, the framework comprises four sets of factors: (1) antecedent conditions that foster or dis- courage a market orientation, (2) the market orienta- tion constmct, (3) consequences of a market orien- tation, and (4) moderator variables that either strengthen or weaken the relationship between market orientation and business performance. We discuss each of the four factors and develop propositions based on the litera- ture and the field interviews.
Antecedents to a Market Orientation Antecedents to a market orientation are the organi- zational factors that enhance or impede the imple- mentation of the business philosophy represented by the marketing concept. Our examination of the liter- ature and the insights from the field interviews reveal three hierarchically ordered categories of antecedents to a market orientation: individual, intergroup, and or- ganizationwide factors. We label these as senior man- agement factors, interdepartmental dynamics, and or- ganizational systems, respectively.
6 / Journal of Marketing, April 1990 FIGURE 1 Antecedents and Consequences of a Market Orientation ANTECEDENTS MARKET ORIENTATION MODERATORS OONSEOUENCES SENIOR MANAGEMENT FACTORS INTERDEPARTMENTAL I DYNAMICS I ORGANIZATIONAL SYSTEMS MARKET ORIENTATION CUSTOMER RESPONSES SUPPLY - SIDE MODERATORS BUSINESS PERFORMANCE DEMAND - SIDE MODERATORS EMH-OYEE RESPONSES Senior management factors. The role of senior management emerged as one of the most important factors in fostering a market orientation (see Figure 2).
Interviewees repeatedly emphasized the powerful impact of top managers on an organization. The fol- lowing quotations are representative of the ideas that surfaced in the interviews.
We'll do almost a $100 million [worth of sales] this year. We have a customer that bought [a mere] $10,000 worth of services. [He] calls the president [and launches into a long tirade of complaints].
[The president] writes down what he says and responds to him in writing. He investigates the difficulty. He gets back to him. In that process, if you are a junior en- gineer who just worked on a $10,000 project and the president calls you up and says "let's talk about this and work out some kind of response to him," the word spreads throughout the base of the company [that] we're a customer-oriented company, we're market- place oriented, we want to satisfy customer needs.
—Senior vice president, industrial services company The founder of this organization is a salesman. His shortcoming is that he does not know what marketing is.
We reflect the leader.
—Marketing manager, service organization The critical role of top managers in fostering a market orientation is also reflected in the literature.
For example, Webster (1988) asserts that a market orientation originates with top management and that "customer-oriented values and beliefs are uniquely the responsibility of top management" (p. 37). Likewise, Felton (1959) asserts that the most important ingre- dient of a market orientation is an appropriate state of mind, and that it is attainable only if "the board of directors, chief executive, and top-echelon executives appreciate the need to develop this marketing state of mind" (p. 55). In other words, the commitment of top managers is an essential prerequisite to a market ori- entation.
Additionally, Levitt (1969, p. 244) argues that one of the factors that facilitates the implementation of the marketing concept is the presence of "the right signals from the chief operating officer to the entire corpo- ration regarding its continuing commitment to the marketing concept." In a similar vein, Webster (1988, p.
37) suggests that "CEOs must give clear signals and establish clear values and beliefs about serving the customer." Thus, these scholars assert that in ad- dition to being committed to a market orientation, top managers must clearly communicate their commit- ment to all concerned in an organization.
Interestingly, the management literature goes a step further to provide novel insights. Argyris (1966) ar- gues that a key factor affecting junior managers is the Market Orientation / 7 FIGURE 2 Senior Management Factors and Market Orientation COMMUNICATION - ACnON "GAP" OF TOP MANAGEMENT RISK AVERSION OF TOP MANAGEMENT UPWARD MOBILITY AND EDUCATION OF TOP MANAGEMENT TOP MANAGEMENT ATTITUDE TOWARD CHANGE PIA MIDDLE MANAGERS' AMBIGUITY PIB P2 P3 P4 MARKETING MANAGERS' ABILITY TO WIN TRUST OF NON-MARKETING MANAGERS P5 INTERDEPARTMENTAL CONFLICT P6 MARKET ORIENTATION gap between what top managers say and what they do (e.g., they say "be market oriented," but cut back market research funds, discourage changes). Argyris examined 265 decision-making meetings with senior executives and concluded that the actual behavior of managers does not conform to their verbal espousals.
One could argue, however, that if the gap is consis- tent over time, junior managers may to be able to infer what top managers truly desire. In contrast, if the size and/or direction of the gap is inconsistent over time, junior managers are unlikely to be able to infer top managers' actual preferences. Such variability is likely to lead to ambiguity about the amount of effort and resources junior managers should allocate to market- oriented tasks, thereby leading to lower market ori- entation. Hence:
Pu:
The greater the variability over time in the gap be- tween top managers' communications and actions re- lating to a market orientation, the greater the junior managers' ambiguity about the organization's desire to be market oriented.
Pu,:
The greater the junior managers' ambiguity about the organization's desire to be market oriented, the lower the market orientation of the organization.
A market orientation involves being responsive to market intelligence. Changing market needs call for the introduction of innovative products and services to match the evolving needs. The introduction of new/ modified offerings and programs, however, is inher- ently risky because the new offerings may fail. As two executives noted:
Hospitals cannot survive unless they are innovative throughout the organization. It means taking risks, doing some real concrete things with customers.
—Marketing director, service organization To be marketing oriented is not to be safe because you're running a risk. You have to invest in your ideas.
To not be marketing oriented is to be safe. [It means doing] the same old [thing].
You're not in- vesting in your business, not [taking] risks.
—President, industrial services company In the course of the discussion with the latter execu- tive, it became clear that top managers' response to innovative programs that do not succeed sends clear signals to junior employees in an organization. If top managers demonstrate a willingness to take risks and accept occasional failures as being natural, junior managers are more likely to propose and introduce new offerings in response to changes in customer needs.
In contrast, if top managers are risk averse and in- 8 / Journal of Marketing, April 1990 tolerant of failures, subordinates are less likely to be responsive to changes in customer needs. Hence:
P2: The greater the risk aversion of top managers, the lower the market orientation of the organization.
Because a market orientation involves being re- sponsive to changing customer/client needs with in- novative marketing programs and strategies, it can be viewed as a continuous innovative behavior. Hambrick and Mason (1984) suggest that organizations headed by top managers who are young, have extensive for- mal education, and are of low socioeconomic origin (and, by implication, have demonstrated upward so- cial mobility) are more likely to pursue risky and in- novative strategies. In the diffusion of innovations lit- erature, formal education and upward mobility are reported as being related consistently to innovative behavior (see Rogers 1983, ch. 7). However, the age variable does not produce consistent findings across studies. Taken together, these findings suggest that the market orientation of an organization may be a function of the formal education of its senior man- agers and the extent to which they are upwardly mo- bile.
More formally:
P3:
The greater the senior managers' (1) educational at- tainment and (2) upward mobility, the greater the mar- ket orientation of the organization.
A positive attitude toward change has been linked consistently to individual willingness to innovate. In a comprehensive review, Rogers (1983, p. 260) re- ports that 43 of 57 studies found a positive relation- ship between these two constructs. Willingness to adapt and change marketing programs on the basis of anal- yses of consumer and market trends is a hallmark of a market-oriented firm. Hence, top managers' open- ness to new ideas and acceptance of the view that change is a critical component to organizational suc- cess are likely to facilitate a market orientation. That is:
P4:
The more positive the senior managers' attitude to- ward change, the greater the market orientation of the organization.
Certain characteristics of department managers and the nature of interactions among them appear likely to affect an organization's market orientation through their impact on interdepartmental conflict (see Figure 2).
Interdepartmental conflict is tension between two or more departments that arises from incompatibility of actual or desired responses (cf. Gaski 1984; Raven and Kniglanski 1970, p. 70). Felton (1959) and Levitt (1969) suggest that it is critical for a marketing vice president to be able to win the confidence and co- operation of his or her corporate peers to minimize conflict and engender a maricet orientation, though they do not elaborate on the factors that afford this ability.
The implication is that:
P5:
The greater the ability of top marketing managers to win the confidence of senior nonmarketing managers, the lower the interdepartmental conflict.
Interdepartmental dynamics. Interdepartmental dynamics are the formal and informal interactions and relationships among an organization's departments. In P5 we introduced the first interdepartmental construct, conflict. We begin our discussion in this section with the linkage between interdepartmental conflict and market orientation, then examine additional interde- partmental dynamics (see Figure 3).
Levitt (1969), Lusch, Udell, and Laczniak (1976), and Felton (1959) suggest that interdepartmental con- fiict may be detrimental to the implementation of the marketing concept. Interdepartmental conflict may stem from natural desires of individual departments to be more important or powerful, or may even be inherent in the charters of the various departments. For ex- ample, Levitt (1969) argues that the job of a manu- facturing vice president is to run an efficient plant.
Therefore it is only natural for that individual to op- pose costly endeavors that might be called for by a market orientation. Recent research (e.g., Ruekert and Walker 1987) suggests that interdepartmental confiict inhibits communication across departments. Hence in- terdepartmental confiict appears likely to inhibit mar- ket intelligence dissemination, an integral component of a market orientation. Additionally, tension among departments is likely to inhibit concerted response by the departments to market needs, also a component of market orientation. We therefore expect that:
Pe:
The greater the interdepartmental conflict, the lower the market orientation of the organization.
A second interdepartmental dynamic that emerged in several interviews as an antecedent of a market ori- entation is interdepartmental connectedness. This variable is the degree of formal and informal direct contact among employees across departments. For ex- ample, one executive noted that to improve its market orientation, her organization opened communication channels across departments—in marked contrast to the earlier practice of departments operating indepen- dently of one another and coordinated only by top management. One interviewee indicated that her or- ganization/ormaZfy required periodic meetings of em- ployees from different departments, thereby facilitat- ing the sharing of market intelligence.
The importance of interdepartmental connected- ness in facilitating the dissemination of and respon- siveness to market intelligence is supported by the evaluation literature (cf. Cronbach and Associates 1981) and the marketing literature (cf. E)eshpande and Market Orientation / 9 FIGURE 3 Interdepartmental Dynamics and Market Orientation INTERDEPARTMENTAL CONFLICT P6 INTERDEPARTMENTAL CONNECTEDNESS P7 CONCERN FOR IDEAS OF OTHER DEPARTMENTS P8 MARKET ORIENTATION 1982).
Indeed, the key predictors of research infor- mation utilization in program evaluation settings are the extent and quality of interaction between the eval- uators and the program personnel (see Patton 1978).
Hence:
P7:
The greater the interdepartmental connectedness, the greater the market orientation of the organization.
As Figure 3 illustrates, an additional construct per- taining to interdepartmental dynamics suggested by the literature on group dynamics is concern for others' ideas (Argyris 1965, 1966). Concern for others' ideas refers to openness and receptivity to the suggestions and proposals of other individuals or groups. In the previously noted study on decision making, Argyris (1966) observed that low levels of concern are related directly to restricted information flows, distrust, and antagonism, which result in ineffective group pro- cesses. Therefore, low levels of concern for the ideas of individuals in other departments can be expected to impede the dissemination of market intelligence across departments as well as the responsiveness of individuals to intelligence generated in other depart- ments. That is:
Pg.
The greater the concern for ideas of employees in other departments, the greater the market orientation of the organization.
Organizational systems. The third set of anteced- ents to a market orientation relate to organizationwide characteristics and therefore are labeled "organiza- tional systems" (see Figure 4). A set of barriers to a market orientation briefly hinted at in the marketing literature is related to the structural form of organi- zations. Lundstrom (1976) and Levitt (1969) discuss departmentalization or specialization as a barrier to communication (and hence intelligence dissemina- tion).
Additionally, Stampfl (1978) argues that greater formalization and centralization make organizations less adaptive to marketplace and environmental changes.
These references to organizational structure have their roots in the organizational sciences literature.
Formalization is the degree to which rules define roles, authority relations, communications, norms and sanc- tions, and procedures (Hall, Haas, and Johnson 1967).
Centralization is defined as the delegation of decision- making authority throughout an organization and the extent of participation by organizational members in decision making (Aiken and Hage 1968). Histori- cally, both formalization and centralization have been found to be related inversely to information utilization 10/Journal of Marketing, April 1990 FIGURE 4 Organizational Systems and Market Orientation DEPARTMENTALIZATION P9A P9B FORMALIZATION CENTRALIZATION P9C MARKET - BASED REWARD SYSTEMS PIO ACCEPTANCE OF POLITICAL BEHAVIOR Pll INTERDEPARTMENTAL CONFLICT P6 MARKET ORIENTATION (Deshpande and Zaitman 1982; Hage and Aiken 1970; Zaitman, Duncan, and Holbek 1973). In our context, information utilization corresponds to being respon- sive to market intelligence. Thus, the literature sug- gests that structural characteristics of an organization can infiuence its market orientation.
Interestingly, there is reason to believe that or- ganizational structure may not affect all three com- ponents of a market orientation in the same way. Be- cause a market orientation essentially involves doing something new or different in response to market con- ditions, it can be viewed as a form of innovative be- havior. Zaitman, Duncan, and Holbek (1973, p. 62) characterize innovative behavior as having two stages, (1) the initiation stage (i.e., awareness and decision- making stage) and (2) the implementation stage (i.e., carrying out the decision). In our context, the initia- tion stage corresponds to intelligence generation, dis- semination, and the design of organizational re- sponse, whereas the implementation stage corresponds to the actual organizational response.
Zaitman, Duncan, and Holbek (1973) draw on nu- merous studies to argue that organizational dimen- sions such as departmentalization, formalization, and centralization may have opposite effects on the two stages of innovative behavior. In particular, they in- dicate that whereas these variables may hinder the ini- tiation stage of innovative behavior, they may facili- tate the implementation stage of innovative behavior.
Hence departmentalization, formalization, and cen- tralization may be related inversely to intelligence generation, dissemination, and response design, but positively to response implementation.
Pg^:
The greater the departmentalization, (1) the lower the intelligence generation, dissemination, and response design and (2) the greater the response implementa- tion.
P^b- The greater the formalization, (1) lower the intelli- gence generation, dissemination, and response design and (2) the greater the response implementation.
Pg^:
The greater the centralization, (1) the lower the in- telligence generation, dissemination, and response design and (2) the greater the response implementa- tion.
The management literature refiects a rich history of work on measurement/reward systems and their ef- fects on the attitudes and behavior of employees (see Hopwood 1974; Lawler and Rhode 1976 for reviews).
Recent research in marketing builds on this work by Market Orientation/11 emphasizing the importance of measurement and re- ward systems in shaping both desirable and undesir- able behaviors (cf. Anderson and Chambers 1985; Jaworski 1988). Webster (1988, p. 38) argues that "the key to developing a market-driven, customer-oriented business lies in how managers are evaluated and re- warded." He observes that if managers are evaluated primarily on the basis of short-term profitability and sales, they are likely to focus on those criteria and neglect market factors such as customer satisfaction that ensure the long-term health of an organization.
Webster's observations are supported by the prac- tices of several organizations included in our study.
Though only one organization sampled appears to tie compensation to market-oriented performance, if re- wards are construed more broadly to include appre- ciation, recognition, and approval, a larger number of organizations in the sample measure and reward mar- ket-based performance. For example, several organi- zations make it a point to single out and recognize employees who are identified by customers as being particularly helpful. Other organizations have insti- tuted one or more variations of the "employee of the month" theme.
However, considerable variance is evident in the extent to which organizations measure and reward market-based performance. One marketing manager recounted a current situation in which employees are rewarded for short-term flnancial performance (i.e., units sold). She noted that this system works against a long-run market orientation and any long-run stra- tegic orientation that the organization may decide to take.
A sales manager in an industrial firm made a similar observation, noting that his sales reps may lead the company astray because their reward systems are based on sales in the short run. Currently, no system is in place to encourage them to think strategically.
The preceding discussion suggests that:
Pio:
The greater the reliance on market-based factors for evaluating and rewarding managers, the greater the market orientation of the organization.
All of the preceding organizationwide character- istics involve formal systems within organizations.
Recent writings in the management literature reflect an increasing recognition of the important role of looser, less formal systems in shaping organizational activi- ties (e.g., Feldman and March 1981; Ouchi 1979; Ouchi and Wilkens 1985; Pettigrew 1979; Smircich 1983).
More recently, these informal characteristics have gained the attention of marketing academicians (cf.
Deshpande and Webster 1989; Jaworski 1988). Though several different concepts can be identified, an infor- mal organizational characteristic that appears to be particularly relevant as a determinant of a market ori- entation is political norm structure, a variable dis- cussed in some detail by Porter, Allen, and Angel (1981).
Political behavior consists of individuals' attempts to promote self-interests and threaten others' interests (Porter, Allen, and Angel 1981). Political norm struc- ture is an informal system that reflects the extent to which members of an organization view political be- havior in the organization as being acceptable. A mar- ket orientation calls for a concerted response by the various departments of an organization to market in- telligence. A highly politicized system, however, has the potential for engendering interdepartmental con- flict (thereby inhibiting a market orientation). Hence, Pii:
The greater the acceptance of political behavior in an organization, the greater the interdepartmental con- flict.
Linkages Among the Market Orientation Components Literature suggests that the three elements of a market orientation may be interrelated. For example, the lit- erature on source credibility (cf. Petty and Cacioppo 1986; Zaltman and Moorman 1988) suggests that in- dividuals in an organization are likely to be more re- sponsive to intelligence generated by individual(s) who are regarded as having high expertise and trustwor- thiness. That is, responsiveness to market intelligence is likely to be a function of the characteristics of the source that generates the intelligence. Further, the lit- erature on research utilization (cf. Deshpande and Zaltman 1982) suggests that responsiveness may be a function of such factors as the political acceptability of intelligence and the extent to which it challenges the status quo. Similarly, the extent to which intelli- gence is disseminated within an organization may de- pend on the political acceptability of intelligence and the challenge posed to the status quo. Hence the source of market intelligence and the very nature of intelli- gence may affect its dissemination and utilization (i.e., responsiveness). More formally:
Pn.: The greater the perceived expertise of the source generating market intelligence, the greater the re- sponsiveness to it by the organization.
Pi2b:
The greater the perceived trustworthiness of the source generating market intelligence, the greater the re- sponsiveness to it by the organization.
P,2c: The smaller the challenge to the status quo posed by market intelligence, the greater (1) its dissemination and (2) the responsiveness to it by the organization.
Pi2d: The greater the p>olitical acceptability of market in- telligence, the greater (1) its dissemination and (2) the responsiveness to it by the organization.
Consequences of a Market Orientation Several insights obtained ftom the field interviews and the literature pertain to the consequences of a market orientation. The interviews uncovered an interesting 12 /Journal of Marketing, April 1990 consequence of a market orientation that is of major significance to large corporations. As the sales man- ager for Europe of an industrial products company in- dicated:
[Market orientation leads to a] cohesive product fo- cus, clear leadership, better coordination of sales ac- tivities, much better job of reviewing products from a worldwide basis, help in terms of differentiation.
In essence, the executive suggests that a market orientation facilitates clarity of focus and vision in an organization's strategy. This benefit corresponds to consistency, the first of Rumelt's (1981) four crite- ria—consistency, frame, competence, and workabil- ity—for evaluating strategies. Consistency is the ex- tent to which a strategy reflects mutually consistent goals, objectives, and policies. Though strategies for- mulated by a single individual seldom have internal inconsistencies, the likelihood of inconsistencies in- creases when strategies emerge from interactions and negotiations among multiple individuals in different parts of an organization. A market orientation appears to provide a unifying focus for the efforts and projects of individuals and departments within the organiza- tion, thereby leading to superior performance.
Not surprisingly, virtually all of the executives in- terviewed noted that a market orientation enhances the performance of an organization. The typical response to our question about positive consequences was a "laundry list" of favorable business performance in- dicators such as ROI, profits, sales volume, market share, and sales growth. Preliminary support for some of these consequences is reported by Narver and Slater (1988).
Hence:
P,3:
The greater the market orientation of an organization, the higher its business performance.
The second set of consequences that emerged from the interviews relate to the effects of a market ori- entation on employees. These effects are not ad- dressed in the extant literature. A large number of ex- ecutives noted that a market orientation provides psychological and social benefits to employees. Sev- eral respondents noted that a market orientation leads to a sense of pride in belonging to an organization in which all departments and individuals work toward the common goal of serving customers. Accomplish- ing this objective results in employees sharing a feel- ing of worthwhile contribution, as well as higher lev- els of job satisfaction and commitment to the organization. The vice president of a consumer prod- ucts company described some of these consequences as:
. . . better esprit de corps. [You get the feeling] that what you are doing is satisfying. I think people feel the need to contribute, to help individuals, the so- ciety, to make a contribution.
The espirit de corps construct has received some attention in the management literature (e.g., Jones and James 1979) and is very similar to the teamwork con- struct identified by Zeithaml, Berry, and Parasuraman (1988) in a services marketing context. The latter au- thors suggest that this variable is instrumental in re- ducing the gap between service quality specifications and actual delivery, thereby improving consumers' perceptions of service quality. Interestingly, our find- ings suggest that the espirit de corps within an orga- nization may itself be improved by a market orien- tation. Therefore we propose that:
P14:
The greater the market orientation, the greater the (1) espirit de corps, (2) job satisfaction, and (3) organi- zational commitment of employees.
The third set of consequences of a market orien- tation identified by the respondents involves customer attitudes and behavior. The thrust of the comments is that a market orientation leads to satisfied customers who spread the good word to other potential cus- tomers and keep coming back to the organization. The following quotations illustrate these ideas.
. . . customer satisfaction, [positive] word of mouth, repeat business is enhanced. Customer retention is better for us, [it is] much less expensive.
—Executive vice president, consumer products company . . . develops firm reputation, happy customers.
Coming through when a customer is in a jam helps [our] reputation.
—Vice president, industrial products company These ideas also reflect Kotler's (1988) assertion that a market orientation is likely to lead to greater cus- tomer satisfaction and repeat business. Hence:
P15:
The greater the market orientation, (1) the greater the customer satisfaction and (2) the greater the repeat business from customers.
The literature reflects few empirical studies of the consequences of a market orientation. Most studies focus primarily on the extent to which the marketing concept has been adopted by organizations, rather than its specific consequences. One noteworthy exception is the Lawton and Parasuraman (1980) study. The au- thors found that the adoption of the marketing concept had no apparent effect on the sources of new product ideas, the use of marketing research in new product planning, and the innovativeness of new product of- ferings. In a sense, these findings run counter to the assertions of such authors as Bennett and Cooper (1981), Kaldor (1971), and Tauber (1974), who argue that the adoption of the marketing concept inhibits or- ganizations from developing truly breakthrough in- novations. Lawton and Parasuraman (1980) caution, however, that additional research using new measures is needed before firm conclusions can be drawn.
Market Orientation/13 Environmental Moderators of the Market Orientation-Business Performance Linkage With a few exceptions, writings in the literature tend to view the marketing concept as a universally rele- vant philosophy. In contrast, the field interviews elic- ited several environmental contingencies or conditions under which the impact of a market orientation on business performance is likely to be minimal. That is, the field findings suggest that certain contingencies moderate (i.e., increase or decrease) the strength of the relationship between market orientation and busi- ness performance. In the following discussion, we consider four such contingencies or moderator vari- ables.
One moderator that surfaced in the course of the interviews is market turbulence—changes in the com- position of customers and their preferences. This vari- able is more focused than the widely studied environ- mental turbulence construct. The role of market turbulence in influencing the desirability of a market orientation was highlighted by the experience of two consumer (food) products companies that marketed their products in a specific region in the United States. The population in this region had remained unchanged for years, and the preferences of the customers were known and stable. Neither company did much market re- search. Over the last few years, however, the region had received a tremendous influx of population from other parts of the country. Both companies were forced to initiate research to assess the needs and preferences of the new potential customers, and to develop new products to suit their particular preferences. These ex- periences suggest that when an organization caters to a fixed set of customers with stable preferences, a market orientation is likely to have little effect on per- formance because little adjustment to a marketing mix is necessary to cater effectively to stable preferences of a given set of customers. In contrast, if the cus- tomer sets or their preferences are less stable, there is a greater likelihood that the company's offerings will become mismatched with customers' needs over a pe- riod of time. An organization therefore must ascertain the changed preferences of customers and adjust its offerings to match them. That is:
P,a: The greater the market turbulence, the stronger the relationship between a market orientation and busi- ness performance.
Several authors (e.g., Bennett and Cooper 1981; Houston 1986; Kaldor 1971; Tauber 1974) point out that many generic product class innovations do not evolve from consumer research. Rather, these inno- vations are developed by R&D personnel who are often outside the industries into which the innovations even- tually assimilate. Similar notions emerged in the in- terviews. As two of the managers interviewed indi- cated:
[It is important to] recognize that new products do not always originate from the customer, [particularly] in high-tech industry. [An organization needs] to bal- ance R&D [initiated] projects as well as customer/ market driven products.
—Sales manager, industrial products company Let ine explain why we are not marketing oriented.
We are a complex business, the industry is changing dramatically. Some of our products did not exist three years ago. The technology is changing. Everyone is getting wrapped up in production/operations.
—Marketing manager, service organization The basic idea expressed in the quotations is that in industries characterized by rapidly changing tech- nology (note that firms in such industries often sell to other firms), a market orientation may not be as im- portant as it is in technologically stable industries.
"Technology" here refers to the entire process of transforming inputs to output and the delivery of those outputs to the end customer. The proposition is not that a market orientation is unimportant in technolog- ically turbulent industries, but rather that it is less im- portant. That is:
P17:
The greater the technological turbulence, the weaker the relationship between a market orientation and business performance.
Several executives noted that the degree of com- petition in an industry has a straightforward bearing on the importance of a market orientation. Strong competition leads to multiple choices for customers.
Consequently, an organization must monitor and re- spond to customers' changing needs and preferences to ensure that customers select its offerings over com- peting alternatives. As two executives indicated:
Historically, [we] were a technically driven com- pany. In the early years it was a successful approach.
If we had a better mousetrap, customers would search [us] out. However, as more companies came up with more solutions, we had to become more market ori- ented. Find out what solution [the] customer is look- ing for, and try to solve it. In the past little time was spent with customers. Now coordinate with cus- tomer, solution for him, try to utilize that develop- ment energy to provide solution for segment.
—Sales manager, industrial product firm One thing is that marketing and advertising change so much. What worked last year may not work this year. A lot of it has to do with the competitive nature that you're in at the time because people's needs change. ... If you don't have competition, you don't need it as much." —Marketing director, service organization Thus, an organization with a monopoly in a market may perform well regardless of whether or not it mod- ifies its offerings to suit changing customer prefer- ences (see also Houston 1986, p. 84). As one service executive noted, "If one has a patent or lock on the 14 / Journal of Marketing, April 1990 product, it may not be efficient to allocate resources to marketing." In other words, the benefits afforded by a market orientation are greater for organizations in a competitive industry than for organizations op- erating in less competitive industries.
Pig: The greater the competition, the stronger the rela- tionship between a market orientation and business performance.
Several executives indicated that in strong econ- omies characterized by strong demand, an organiza- tion may be able to "get away with" a minimal amount of market orientation. In contrast, in a weak econ- omy, customers are likely to be very value conscious and organizations must be more in tune with and re- sponsive to customer needs in order to offer good value for money. Paradoxically, marketing seems to require more resources precisely at times when the organi- zation is short of resources because of weak business conditions. As one academician noted:
I think in weak economies, on the one hand [there is a] need to be more marketing oriented [because] con- sumers might need better inducements, their dollar has to go farther. On the other hand, to be marketing oriented requires greater amounts of money that they may not be able to provide at that point.
The preceding observations suggest the following proposition.
P,,:
The weaker the general economy, the stronger the re- lationship between a market orientation and business performance.
Our 19 research propositions fit the broad frame- work depicted in Figure 1. Note that the moderator variables discussed are labeled supply-side and de- mand-side moderators. The latter relate to the nature of demand in an industry (e.g., customer preferences, value consciousness) whereas the former refer to the nature of competition among suppliers and the tech- nology they employ. The framework in Figure 1 fa- cilitates parsimonious conceptualization and, more importantly, offers the potential for extending re- search by identifying additional constructs that may fit into each of the broad categories (senior manage- ment factors, interdepartmental dynamics, etc.).
Managerial Implications Our propositions have direct managerial implications.
First, our research suggests that a market orientation may or may not be very desirable for a business, de- pending on the nature of its supply- and demand-side factors. Second, the research clearly delineates the factors that can be expected to foster or discourage a market orientation. These factors are largely control- lable by managers and therefore can be altered by them to improve the market orientation of their organiza- tions.
Overall, our research gives managers a com- prehensive view of what a market orientation is, ways to attain it, and its likely consequences.
To Be or Not To Be Market Oriented Our study suggests that though a market orientation is likely to be related to business performance in gen- eral, under certain conditions it may not be critical.
A market orientation requires the commitment of re- sources. The orientation is useful only if the benefits it affords exceed the cost of those resources. Hence, under conditions of limited competition, stable market preferences, technologically turbulent industries, and booming economies, a market orientation may not be related strongly to business performance. Managers of businesses operating under these conditions should pay close attention to the cost-benefit ratio of a market orientation.
Implementing a Market Orientation Our research provides very specific suggestions about the factors that foster or discourage a market orien- tation in organizations. Because the factors identified are controllable by senior managers, deliberate en- gendering of a market orientation is possible.
For example, our findings suggest that senior managers must themselves be convinced of the value of a market orientation and communicate their com- mitment to junior employees. Though annual reports and public interviews proclaiming a market orienta- tion are helpful, junior employees need to witness be- haviors and resource allocations that reflect a com- mitment to a market orientation. Senior managers must develop positive attitudes toward change and a will- ingness to take calculated risks. A market orientation is almost certain to lead to a few projects or programs that do not succeed. However, supportive reaction to failures is critical for engendering a change-oriented philosophy represented by the marketing concept.
We also identify interdepartmental dynamics that can be managed through appropriate in-house efforts.
Interdepartmental variables—conflict, connected- ness—clearly have a key role in influencing the dis- semination of and responsiveness to market intelli- gence. Some inexpensive ways to manage these two antecedents (conflict, connectedness) include (1) in- terdepartmental lunches, (2) sports leagues that re- quire mixed-department teams, and (3) newsletters that "poke fun" at various interdepartmental relations. More advanced efforts include (1) exchange of employees across departments, (2) cross-department training pro- grams, and (3) senior department managers spending a day with executives in other departments. Such ef- forts appear to foster an understanding of the person- alities of managers in other departments, their culture, and their particular perspectives.
Market Orientation/15 The third set of variables that senior managers might alter to foster a market orientation pertains to orga- nizationwide systems. The impact of structural factors such as formalization and centralization is unclear be- cause, though they appear to inhibit the generation and dissemination of market intelligence, these very fac- tors are likely to help an organization implement its response to market intelligence effectively. How an organization should structure itself appears to depend on the activity involved. Clearly, however, senior managers can help foster a market orientation by changing reward systems from being completely fi- nance based (e.g., sales, profits) to being at least partly market based (e.g., customer satisfaction, intelligence obtained). Simultaneously, informal norms such as the acceptability of political behavior in the organization should be changed to facilitate concerted response by the departments to market developments.
The Pace and Dynamics of Change A change in orientation takes place slowly. We were apprised of certain organizations that were actively in- volved in becoming more market oriented, but planned to complete the change process over a period of about four years. In describing a change to a market focus, an executive director noted that there is always a "pull and tug between a new idea and old ways of doing things." It appears especially difficult to "carry" em- ployees who are concerned that a movement along the market orientation dimension might jeopardize their power in the organization or expose other inadequa- cies related to their jobs.
Further, the balance of power across departments must be managed carefully in any effort to become more market oriented. Though a market orientation involves the efforts of virtually all departments in an organization, the marketing department typically has a larger role by virtue of its contact with customers and the market. Individuals in marketing departments may try to relegate other departments to a secondary status.
One health care administrator recounted that when the organization had begun to emphasize a mar- ket philosophy, it had started treating marketing per- sonnel as tile "blue-eyed boys" of the organization.
Within a very short time, personnel in other depart- ments began to resent this treatment and raised ques- tions with the chief executive ("What are you doing for us?").
For any change to take place, an organization first must perceive a gap between its current and its pre- ferred orientation. We were apprised of several in- stances in which members of an organization felt they were very customer oriented, but in fact were hardly so.
An executive narrated the example of a service organization's employees who felt they were very re- sponsive to customer needs. However, when the in- teractions of these employees with customers (hos- pital patients) were videotaped and played back to the employees, they were horrified at the callous manner in which they saw themselves treating customers. As Weick (1979) notes, it is the perceptions of situations that are the triggers of action.
The Quality of Market Orientation Though in general organizations that develop market intelligence and respond to it are likely to perform better and have more satisfied customers and employees than ones that do not, simply engaging in market-oriented activities does not ensure the quality of those activi- ties.
The quality of market intelligence itself may be suspect or the quality of execution of marketing pro- grams designed in response to the intelligence may be poor. In such instances, a market orientation may not produce the desired functional consequences. For ex- ample, to meet a customer's needs, one industrial products company went to extreme lengths to custom- ize small batches of products for the customer, which resulted in poor financial performance. Similarly, one executive noted that a company's efforts may so raise customer expectations about product quality, response time, and other factors as to result in eidier uneco- nomical operations or dissatisfied customers. This dif- ficulty parallels the problem posed by overpromising in service settings discussed by Zeithaml, Berry, and Parasuraman (1988). Though we do not address the issue of variations in the quality of market intelli- gence, its dissemination, and organizational response, these variations clearly are important and warrant con- sideration by both managers and researchers.
Conclusion We attempt to clarify the domain of the market ori- entation construct and provide a working definition and a foundation for developing a measure of the con- struct. Additionally, we identify three classes of fac- tors affecting a market orientation and interrelation- ships among the elements of market orientation. We highlight the impact of a market orientation on an or- ganization's strategy, employee dispositions, and cus- tomer attitudes and behavior. Finally, and in a sig- nificant departure from previous work, we introduce supply- and demand-side factors as potential moder- ators of the impact of market orientation on business performance.
Our propositional inventory and integrative frame- work represent efforts to build a foundation for the systematic development of a theory of market orien- tation. However, the objective of our research is the- ory construction rather than theory testing. Much work 16/Journal of Marketing, April 1990 remains to be done in terms of developing a suitable measure of market orientation and empirically testing our propositions.
In recent years, considerable interest has focused on organizational resources and positions that repre- sent sustainable competitive advantages (e.g., Day and Wensley 1988). Much less attention has focused on organizational processes, such as market orientation, that represent a long-term advantage. Because a mar- ket orientation is not easily engendered, it may be considered an additional and distinct form of sustain- able competitive advantage.
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