Academic journal article Journal of Managerial Issues

Implementing Interfunctionally-Coordinated Market Orientation in Industrial SMEs: Lessons Learned in Commodity Markets

Academic journal article Journal of Managerial Issues

Implementing Interfunctionally-Coordinated Market Orientation in Industrial SMEs: Lessons Learned in Commodity Markets

Article excerpt

Market orientation was conceptualized by Narver and Slater (1990) as a framework of organizational culture that creates superior customer value through three behaviors, namely, (1) customer orientation (i.e., organizational focus on satisfying customer needs), (2) competitor orientation (i.e., organizational focus on understanding major competitors' strategies), and (3) interfunctional coordination (i.e., organizational focus on disseminating information about customers and competitors among all functional units). Generally speaking, the market-oriented organizational culture positively influences business performance for various types of firms (Homburg and Pflesser, 2000; Matsuno and Mentzer, 2000; MatsunorfaZ., 2002; Agarwal et al., 2003; Zhou et al, 2009; Kumars al, 2011). Market orientation has also received a great amount of attention in the area of small business management (e.g., Kara et at., 2005; Baker and Sinkula, 2009; Martin et al., 2009; Dibrell et al., 2011; Pena et al., 2011; Lado et al., 2013). According to these previous studies, a market-oriented organizational culture is helpful for SMEs to achieve positive outcomes in organizational innovativeness, profitability, and financial performance.

This study focuses on the implementation of market-oriented organizational culture in industrial SMEs (hereafter, "ISMEs") that are manufacturing-centered, operating in the commodity markets in the U.S. According to the U.S. Census Bureau (2010), small- and medium-sized manufacturing firms with less than 500 employees accounted for 89.5% of the 300,000 industrial firms in the U.S. Thus, how well market orientation is implemented in ISMEs can directly impact the majority of the manufacturing industry. The conventional understanding was that a market-oriented organizational culture positively influences the quality of customer relationship, which, in turn, leads to improved business performance (Kirca et al., 2005). However, the understanding of the market-oriented organizational culture in ISMEs was incomplete due to three reasons. First, different patterns have been identified between manufacturing firms and service firms in regard to how market orientation practices affect business performance (Agarwal et al., 2003; Kirca et al., 2005; Sin et al., 2005). By nature, manufacturing-centered firms have a distinctive manufacturing-centered organizational structure. Thus, conventional market orientation practices may not fit a production-dominant business model because manufacturing-centered firms are primarily concerned about production capacity and efficiency (Lynch et al., 2012). Second, from an internal perspective, the marginalization of marketing function and the lack of synergies between functional departments have been experienced by industrial firms (Verhoef and Leeflang, 2009). Third, from a market perspective, customer firms in the industrial sector make rational decisions based on comparison of suppliers' customer value (Moller, 2006; O'Cass and Ngo, 2012), especially when those suppliers are small in size (Pelham, 2000). Commodity goods produced by ISMEs frequently fall upon intensive price competition in the market, and many industrial suppliers survive on price leadership due to this (Dastidar, 2004; Hirata and Matsumura, 2011). In this circumstance, any increase in cost may cause catastrophe for ISMEs in the competition. Due to these unusual situations, it is essential to closely examine the nature of interfunctional coordination in shaping the market-oriented organizational culture for ISMEs competing in commodity markets. Accordingly, the research question was: "What is the nature of interfunctional coordination in ISMEs competing in commodity markets?" Empirically speaking, the study focuses on examining how the level of interfunctional coordination efforts in ISMEs influences their market orientation outcomes.

The rest of the study is organized as follows. Following the introduction, the theoretical framework with hypotheses was elaborated to depict the effects of market orientation components in a customer relationship management context. …

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