Academic journal article Journal of Small Business Management

The Effect of a Market Orientation on Business Performance: A Study of Small-Sized Service Retailers Using MARKOR Scale

Academic journal article Journal of Small Business Management

The Effect of a Market Orientation on Business Performance: A Study of Small-Sized Service Retailers Using MARKOR Scale

Article excerpt

Conventional marketing wisdom holds that a market orientation provides a company with a better understanding of its customers, competitors, and environment, which subsequently leads to superior firm performance. While researchers have explored the relationship between market orientation and business performance in different organizations, such studies in small-sized service retailers are scarce. This study investigates potential influences of market orientation on small-sized service retailer performance. Data for this study were collected through personal interviews, and Kohli, Jaworski, and Kumar's market orientation scale was used to specify the dimensions of a market-oriented organization. Results indicated that Kohli, Jaworski, and Kumar's market orientation scale provided a good measure of market orientation in this setting. Also, the results of analyses indicated a significant link between market orientation and small-sized service retailer performance. The managerial implications are discussed.

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Introduction

For over four decades, market-oriented corporate strategy has been recognized as a pillar of superior company performance by both academics and practitioners. Market orientation in both manufacturing and service industries has attracted a significant amount of academic and practitioner interest in the current marketing literature (Han, Kim, and Srivastava 1998; Day 1994a; Kohli and Jaworski 1990). Implementation of the marketing concept characterizes a firm's intentions to deliver superior value to its customers (by satisfying their wants and needs) on a continuous basis (Slater and Narver 1994). Market orientation refers to the organization-wide generation of market intelligence through decision support systems, marketing information systems, marketing research efforts, dissemination of the intelligence across company departments, and organization-wide responsiveness to the changes taking place in the environment (Kohli and Jaworski 1990).

There is a large body of literature dedicated to studying whether marketing orientation results in superior organizational performance. Some studies have verified a strong link between marketing orientation and performance (Matsuno, Mentzer, and Ozsomer 2002; Greenley 1995; Ghosh et al. 1994; Speed and Smith 1993), while other studies did not support a direct positive relationship between performance and market orientation (Han, Kim, and Srivastava 1998; Jaworski and Kohli 1993).

Although there have been several studies investigating the market orientation-performance relationship in small businesses (Pelham 2000, 1997), most of these studies have used small manufacturing firms as opposed to small retailers. Pelham (1999, 1997)'s study identified several mediating variables, such as firm effectiveness, that influenced the relationship between market orientation and performance in small industrial firms. However, these results are not generalizable to small-sized service retailers as the latter differ from industrial firms in terms of having greater firm-wide contact with the customers, competition, and profit margins, among others. Therefore, because of the nature of service retailers, a more customer-oriented approach might be required of them for a better performance. The objective of this study therefore is to investigate the role of market orientation on small-sized service retailer performance. The current study's emphasis is designed to provide small-sized service retailer managers more understandable guides to specific market-oriented activities.

Measuring Market Orientation

Marketing is a management function typically responsible for understanding the consumer and keeping the rest of the organization informed about the customer so that superior value is delivered to the customer. Companies must make long-term commitments to maintain the relationship through quality, service, and innovation. …

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