Date of Award

2000

Degree Type

Thesis

Degree Name

Doctor of Philosophy

Faculty

Faculty of Business and Public Management

First Advisor

Mr Barry Chapman

Second Advisor

Professor Geoffrey Soutar

Abstract

The market orientation construct has emerged as a key marketing theme in the 1990's. While the concept of being focussed on the market (customers and competitors) has been known since the early 1950's (e.g. Drucker,1954), putting the concept into practice through a set of specific actions has eluded many organisations and academics. As a result, market orientation (also termed market focus, customer focus and competitor focus) had remained a business philosophy (Bennett & Cooper, 1979: Felton, 1959; Konopa & Calabro,1971) more than a strategic approach. While there have been sporadic attempts at defining or operationalisinga marketing or customer orientation in the past (Gronrnos, 1989: Kotler, 1977: Masiello, 1988: Webster,1988), the first serious effort in the early 1990's when Kohli and Jaworski (1990) and Narver and Slater (1990 defined market orientation as a set of organisational activities or behaviours. Narver and Slater also found a positive link between having such an orientation and business performance. The emphasis in both models was on obtaining and understanding customers and competitors and responding to customers' needs better than competitors through a coordinated effort across the organisation. Subsequently a number of studies have supported the positive relationship between market orientation and business performance. However, results have not been consistent and several variables have been shown to moderate the market orientation performance relationship. All of the major market orientation studies have been undertaken within large organisations and very little is known about the market orientation of small and medium enterprises (SMEs), or of its relationship to their performance. It is recognised that SMEs are different from large businesses some of their marketing practices are unique to SME. Given this uniqueness, the present research examined the applicability of existing market orientation constructs and models to SMEs. For this purpose, Kohli and Jaworski's and Narver and Slater's constructs were modified and some unique SME items were added. Following a staged research approach, as recommended by Churchill (1979), a randomly chosen sample of Australian SMEs was surveyed. In all, more than 700 responses were received, of which 542, were used in the present study. The results obtained suggested that while a form of market orientation existed in SMEs, its operationalisation was different. Of Kohli and Jaworski’s (1990) three dimensions, (intelligence generation, dissemination and organisational response), organisational response could not be supported. The study also provided support for Narver and Slater's (1990) customer and competitor orientation constructs. The third construct 'inter-functional coordination' was not included as early qualitative interviews made it clear that it had no meaning in an SME context. Customer and competitor orientations emerged as distinct constructs but the interrelationship between the two suggested the presence of a higher order 'market orientation' construct. Compared to the organisations analysed in earlier studies, the SMEs in the current study were small in size and very few had multiple functional areas. In most of the businesses, marketing did not exist as a separate function. Consequently there was 110 support for constructs such as organisational response and inter-functional coordination. The informal nature of SMEs marketing activities was evident in the market orientation constructs. It appeared that SMEs collect their intelligence through informal means. Their marketing activities were also based more on intuition than logic. Apart from customer and competitor orientations, a customer service orientation emerged as an important element. Having a customer service orientation led to customer satisfaction and, hence, to repeal business, which was considered to be extremely important by the small businesses surveyed. Having a customer service orientation also had a positive impact on the organisational commitment of employees, repeat business and business performance. The overall impact of customer orientation and competitor orientation on business performance was positive, but small. This was not surprising as respondents took a casual or intuitive approach to marketing. It seems that small business performance is constrained by factors other than marketing, such as the availability of resources. Further, even among large businesses. The market orientation-performance relationship has not been consistently positive or significant. The present results suggest that market orientation, as practised in large businesses, or as articulated by academics, may not be applicable to SMEs and that customer service elements needed to be included in the model. As regards performance, the results obtained suggest that factors other than marketing are also critical and fun her research is needed to tease out the nature of these additional factors.

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