By Lambin, Jean-Jacques; Chumpitaz, Ruben
European Business Forum , No. 2
It would probably be hard to find anyone these days to argue against the idea that all activities of a business should be responsive to customer needs. It is our contention in this article, though, that being customer-oriented is not enough in the present complex economic environment. Successful players need to be market-driven, a concept that broadens customer orientation to other key market actors (distributors, competitors and prescribers) and which implies that superior customer value creation is the responsibility of all individuals across all functions of the organisation.
The objective of this paper is to consider three fundamental questions. (1) What does it mean for a firm to be market-oriented? (2) How can we measure the level of market orientation in a firm? (3) Does stronger market orientation lead to superior business performance? In support of this discussion we present new empirical evidence from a survey of 290 European managers operating in companies recognised for their good business performance (1).
What does it mean to be market-oriented?
Market orientation (MO) is generally referred to as the firm's relationship to its market, and particularly to its customers--but a lot of definitional confusion appears when one tries to go further by defining the players participating in the market. (See the literature review on the EBF web site). Peter Drucker is often credited with having first articulated the market orientation concept with the idea that the customer should be at the centre of management thinking. In Drucker's view, market orientation is more than a function alongside the production, finance and human resources functions, but an overall guiding philosophy for the firm as a whole. In many companies, however, market orientation is assimilated to the marketing concept and to marketing's functional role in coordinating the four Ps to make a firm more responsive to customers' needs.
This conventional view of the marketing concept has two major shortcomings. First, it tends to neglect the market players other than customers, i.e. distributors, competitors and, in some markets, prescribers, which can also be very powerful players. Second, it confines the market orientation concept in practice to activities conducted solely in the marketing department with the risk that the potential of other functions is underestimated or even inhibited.
We believe that the market orientation concept has three dimensions and that a distinction must be made between marketing as a business philosophy (culture), marketing as strategy (analysis) and marketing as an operational programme (action). But while in a market-driven firm, as shown in Table 1, each of these three dimensions is assumed, it is the cultural dimension that should really be emphasised.
The market orientation concept defined
As illustrated in Figure 1--the general case--there are four market stakeholders (customers, distributors, competitors, and prescribers) and three types of market oriented activity (action, analysis and culture). The cultural component can be measured by the degree of inter-functional co-ordination. We shall briefly review the four main components of the proposed MO concept.
End-customer orientation is the central element of MO and is at the core of the traditional marketing concept. A customer-oriented firm is a firm having the ability and the willingness to identify, analyse, understand and meet direct and indirect customers' needs and expectations through the design and the delivery of superior value solutions to people's and/or organisation's problems. In this definition, the word design refers to strategic marketing and the word delivery to operational marketing.
The view that distributors (industrial distributors, wholesaling or retailing organisations) are key market actors, is important in many sectors, and in particular in the field of fast manufacturing consumer goods given the shift in power observed in industrialised economies from brand manufacturers to mass merchandisers. …