See discussions, stats, and author profiles for this publication at: http://www.researchgate.net/publication/279191519 RELATIONSHIP BETWEEN MARKET ORIENTATION AND ORGANIZATIONAL PERFORMANCE (Special Reference to Small and Medium Scale Manufacturing Organizations in Sri Lanka) ARTICLE · JUNE 2015 DOWNLOADS 28 VIEWS 51 1 AUTHOR: Umesh Gunarathne University of Ruhuna 4 PUBLICATIONS 0 CITATIONS SEE PROFILE Available from: Umesh Gunarathne Retrieved on: 02 July 2015
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1. ResearchGateSee discussions,stats,and author profiles for
this publication at:http: //www. researchgate. net/
publication/279191519RELATIONSHIP BETWEEN MARKET ORIENTATION AND
ORGANIZATIONAL PERFORMANCE (Special Reference to Small andMedium
Scale Manufacturing Organizations in Sri Lanka)ARTICLE - JUNE
2015DOWN LOADS VIEWS 28 51 1 AUTHOR: Umesh Gunarathne l University
ofRuhuna 4 PUBLICATIONS 0 CITATIONSSEE PROFILEAvailable from:Umesh
Gunarathne Retrieved on:02 July 2015
2. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka I . , Published at Research
Gate - June 2015 l RELATIONSHIP BETWEEN MARKET ORIENTATION AND
ORGANIZATIONAL PERFORMANCE(Special Reference to Small and Medium
Scale Manufacturing Organizations in Sri Lanka)By Umesh Gunarathne
W. H.D. P.MF/2010/2708Department of MarketingMay 2015 Dissertation
Presented to the Faculty of Management and Finance of University of
Ruhuna in Partial Fulfillment of the Requirements for the Degree of
Bachelor of Business Administrationin MarketingUmesh Gunarathne W.
H.D. P. -2015
3. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka I . .Published at Re. 'earch
Gate - June 2015AcknowledgementI would like to take this
opportunity to thank several people who have been truly important
over the past few months,especially in the preparation of my
dissertation.This dissertation would not have been possible without
the guidance and the help of several individuals who in one way or
another contributed and extended their valuable assistance in the
preparation andcompletion of this study. First and
foremost,Iheartily grateful to my supervisor,Dr.T. S.L. W
Gunawardhana,Senior Lecturer,Department of Marketing for his
admirable guidance,supervision,continuous encouragement and
support.In addition to that he provided me with a very good
academicand work environment,which helped me in developing my
ideas. Then,I am very grateful to Branch Manager of the Regional
Development Bank City Branch,Matara for spending valuable time to
help me in order to collect data from the respondents.I must also
express my full gratitude to the managers who allowed me to collect
data in their firms as well as those I met and who confirmed the
practicalimportance of my research. Secondly,I would like to very
thankful all the Lectures of Department of Marketing,Faculty of
Management and Finance,University of Ruhuna who encourage me
tocomplete this research study without any hesitation. I also thank
my all University friends especially including best friends Danuka
Sasanga,Dileesha Jayawardhana,Nadeeshanka Abeywickrama,Nuwan
Kumarasinghe,Tharika Seuwandi,and Sammani Hapugoda for always being
present in the good as well as in the bad moments,and who were
really encouraging duringthis special period of my life. Finally,I
would like to record my everlasting love and gratitude to my
parents,my sisters and cousins,and relatives who has assisted me in
numerous ways to make thisstudy success. Umesh Gunarathne W. H.D.
P. -2015
7. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka V 4Published at ResearchGate
- June 2015List of Tables Table 2.1: Summary of previous research
findings . ... ... ... ... ... ... ... ... ... ... ... ... ... ...
... .....26 Table 3.1: Determinants of manufacturing organizations
selection . ... ... ... ... ... ... ... .. . .47 Table 3.2: Results
of the Pilot Test . ... ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... ... ... ... ... ... ... ... . . .54 Table 3.3:
Measurement items of Organizational Performance . ... ... ... ...
... ... ... ... ... .. . .56 Table 3.4: Measurement items of
Customer Orientation . ... ... ... ... ... ... ... ... ... ... ...
... ... . . .57 Table 3.5: Measurement items of Competitor
Orientation . ... ... ... ... ... ... ... ... ... ... ... ... . .
.58 Table 3.6: Measurement items of Inter Functional Coordination .
... ... ... ... ... ... ... ... .....59 Table 3.7: Measurement
items of Social benefit Orientation . ... ... ... ... ... ... ...
... ... ... .....61 Table 4.1: Demographic Data Position of the
Respondents . ... ... ... ... ... ... ... ... ... ... .. . .63
Table 4.2: Demographic Data Age Composition of the Sample . ... ...
... ... ... ... ... ... . . .64 Table 4.3: Demographic Data Gender
Composition of the Sample . ... ... ... ... ... ... .. . .66 Table
4.4: Demographic Data Educational Level of the Respondents . ...
... ... ... ... . . .67 Table 4.5: Background Data Line of the
Business . ... ... ... ... ... ... ... ... ... ... ... ... ... ...
... . . .68 Table 4.6: Background Data Main Production . ... ...
... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .70
Table 4.7: Background Data Established Year of the Business . ...
... ... ... ... ... ... ... .....71 Table 4.8: Confirmatory Factor
Analysis (Original Model) . ... ... ... ... ... ... ... ... ... ...
... .. . .73 Table 4.9: Confirmatory Factor Analysis (Final Model)
. ... ... ... ... ... ... ... ... ... ... ... ... ... . . . 82
Table 4.10: Assessment of the Reliability . ... ... ... ... ... ...
... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .85
Table 4.11: Results of PLS path model Estimation . ... ... ... ...
... ... ... ... ... ... ... ... ... ... ... .....86 Table 4.12:
Discriminant Validity of the Constructs . ... ... ... ... ... ...
... ... ... ... ... ... ... ... .....87 Table 4.13: Summery of the
Hypotheses Testing . ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... .....90Umesh Gunarathne W. H.D. P. -2015
8. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka V IPublished at ResearchGate
- June 2015Figure 2.1: Figure 2.2: Figure 2.3: Figure 3.1: Figure
3.2: Figure 3.3: Figure 4.1: Figure 4.2: Figure 4.3: Figure 4.4:
Figure 4.5: Figure 4.6: Figure 4.7: Figure 4.8: Figure 5.1: Figure
5.2:List of Figures Kholi and Jawoskis view on Market Orientation .
... ... ... ... ... ... ... ... ... ... .. . . 16 Narver and
Slaters view on Market Orientation . ... ... ... ... ... ... ...
... ... ... .....17 Developed Conceptual Framework . ... ... ...
... ... ... ... ... ... ... ... ... ... ... ... ... ... .....35
Basic research Designs . ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .43
Sampling Techniques . ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... ... ... ... ... ... ... ... ... .....48 Primary
Measurement Scales . ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... ... ... ... ... .....55 Demographic Data
Position of the Respondents . ... ... ... ... ... ... ... ... ...
... . . .64 Demographic Data Age Composition of the Sample . ...
... ... ... ... ... ... .....65 Demographic Data Gender Composition
of the Sample . ... ... ... ... ... ... . . .66 Demographic Data
Educational Level of the Respondents . ... ... ... ... .....67
Background Data Line of the Business . ... ... ... ... ... ... ...
... ... ... ... ... ... ... .....69 Background Data Main Production
. ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
.....70 Background Data - Established Year of the Business . ...
... ... ... ... ... ... ... .. . .72 Structural Model . ... ... ...
... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... ... ... . . . 88 Slater and Navers view of
Market Orientation (MKTOR model) . ... .....95 NEWMKTOR model . ...
... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... ... .....96Umesh Gunarathne W. H.D. P.
-2015
9. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka V I Published at
ResearchGate - June 2015 List of AppendicesAppendix 1: Covering
LetterAppendix 2: Survey Questionnaire (English)Appendix 3: Survey
Questionnaire (Sinhala Translation) Appendix 4: Detailed Pilot
Study ResultsAppendix 5: Standardized Loading Values (Original
Model) Appendix 6: T values (Original Model)Appendix 7:
Standardized Loading Values (Final Model) Appendix 8: T Values
(Final Model)Umesh Gunarathne W. H.D. P. -2015
10. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015DeclarationI hereby declare that this dissertation is my
own work and effort and that,to the best of my knowledge and
belief,it contains no material previously published or written by
another person nor material which has been accepted for the award
of any other degree or diploma of the university or other institute
of higher learning,except wheredue acknowledgment has been made in
the text. Signature of the student:Name of the student:Registration
number of the student: Date: Umesh Gunarathne W. H.D. P. -2015
11. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015CertificationThis is to certify that this dissertation
submitted by Gunarathne W. H.D. P.U (MF/2010/2708) in partial
fulfillment of the requirement for the Degree of Bachelor of
Business Administration in Marketing at the Faculty of Management
and Finance of the University of Ruhuna is a record of the own work
carried out by the studentunder my supervision.This dissertation
has been submitted with my approval. SupervisorDr.Thusitha
Gunawardhana Department of MarketingFaculty of Management and
FinanceUniversity of RuhunaHead,Department of Marketing Faculty of
Management and FinanceUniversity of Ruhuna10 Umesh Gunarathne W.
H.D. P. -2015
12. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015AbstractStudying the relationship between Market
Orientation and Organizational Performance has become a popular
research topic in recent years.However,there is a lack of research
conducted related to this topic in Sri Lankan Context.This Research
addresses the relationship between Market Orientation and
Organizational performance in Small and Medium scale manufacturing
organizations in Sri Lanka.Based on the literature review developed
four hypotheses that can be tested in this research
study.Descriptive research design has undertaken and 240
respondents were in the sample.After developing the
questionnaire,conducted a pilot test in order to measure the
accuracy of the questionnaire.Data was analyzed by using both smart
PLS and SPSS software and Demographic data analysis,CFA and SEM are
used to analyze the data and test the hypotheses.Results shows that
sub variables of market orientation (Competitor orientation,Inter
functional Coordination and Social Benefit Orientation) are
positively correlated with Organizational Performance while
Customer Orientation is negatively correlated with the
Organizational Performance insmall and medium scale manufacturing
industry in Sri Lanka. Managerial and theoretical implications are
made based on the major findings and discussed the importance of
the customer orientation for an organization in detail.The research
study contributes to the managers for making and implementing
market oriented strategies specially highlighting the importance of
the customer centric approach.Future researchers can apply
NEWMAKTOR model which is developedthrough this research study to
measure the Market Orientation in different contexts. Key
Words:Competitor Orientation,Customer Orientation,Inter
FunctionalCoordination,Market Orientation,Organizational
Performance and Social BenefitOrientationll Umesh Gunarathne W.
H.D. P. -2015
13. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015CHAPTER 1 INTRODUCTION1.1. Chapter IntroductionThis is the
rst chapter of present research study and it introduces the topic
to be covered by the study.The purpose of this chapter is to put
forward an overview of the research and its contents.The reasons
why this research area was undertaken,the main objectives of the
study and the research gap also are detailed in this chapter.This
chapter has been concluded with a contraction on the structure of
the research study on the relationship between Market Orientation
and OrganizationalPerformance. Further,second section of this
chapter attempts to get an approach to the research study and it
describes the background of the research study in detail.The third
section of this chapter exhibits the problem identification and the
research gap of this research study while the fourth section of
this chapter identies the importance of the study indetail.
Determined main objective and the sub objectives of the research
study included in the section ve of this chapter.Section six of
this chapter shows the structure of theresearch study. 12 Umesh
Gunarathne W. H.D. P. -2015
14. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 20151.2. Background of the StudyDuring the last two decades
with the rapid growth of the business economy Marketing has become
a signicant area in the business industry and Marketing plays vital
role in the today organizations.Due to this reason Market oriented
strategies received a significant amount of attention from
researchers (e. g. Eris and Ozmen N.T,2012; Lopez M.B,2010; Rettab
and K.Mellahi,2010; A. P. Schalk,2008; Kholi and Jawoski,1996;
Slater and Narver,1990).Researches in the area of marketing,has
exploded in the decade of the 1990s.This growth is due in large
part to the seminal work of Narver and Slater (1990) that developed
scales to measure the components ofmarket orientation. Today,each
and every organization pay more consideration in order to maximize
the prot through satisfying customers needs and wants and keeping
protable relationship with customers,because every organization has
realized that without concerning needs and wants of the consumers
it is very harder to survival within the industry while earning
prots.Not only that when considering about customers
perspective,especially today consumers are more knowledgeable and
rational when compare with the past.They always expect higher level
of satisfaction by fullling their needs and wants through products
and services.Therefore organizations should give priority to fulll
the consumers needs and wants.In other words organizations should
implement business strategies and established organizational
policies by identifying the things that consumers are expecting
from the organizations (Albert and Nora,2009). The concept of
market orientation is considered as the corner stone of the
marketing management eld and emerged in the literature as the
implementation of the marketing (Schalk,2008).The marketing concept
is essentially a business philosophy where superior financial
performance is considered to be the result of being moreeffective
than competitors in determining and satisfying customer needs.
Furthermore market orientation is conceptualized as a supplement to
the marketing concept as it expands the focus from customer to
market,including customers,competitors and other factors affecting
customer needs (Goldman and Grinstein,2010and Narver and
Slater,1990).Slater and Narver (1990) concluded that market13 Umesh
Gunarathne W. H.D. P. -2015
15. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015orientation consists of three behavioral
components:Customer Orientation,Competitor Orientation,and Inter
Functional Coordination.They conceptualized an organizations degree
of market orientation as the sum total of its emphasis on
thesethree components. Marketing concept has represented a
fundamental tenet of marketing thought.As the philosophical
foundation of a market orientation by Kholi and Jawoski (1993),the
marketing concept serves as the primary justification for the clear
role of customers inthe planning and execution of market
strategies. As the marketing concept and theory of market
orientation aim at explaining why some organizations achieve
greater performance than their competitors,this is the closest
thing the field of marketing management has to its own competitive
theory.Also,Market Orientation is acknowledged by practitioners as
an important characteristic of successful enterprises,as Deutschman
(1991) found that Americas fastest growing companies primarily put
the customers first,and listen to,understand and serve them.These
all type of strategies has been linked with the development
ofmarketing concept. Market oriented organizations typically have a
long term focus related to prots and to implementing a high degree
of market orientation (Felton,1999).A short run focus on profits is
not inconsistent with long run profit performance.According to
Levitt (1980),the relationship between them is as follows:At all
times a business organization attempts to create superior value to
their customers.As competitors respond and diminish business's
customer value superiority,the business discoversand implements
additional value for its customers (e.g.it augments its product).
To grow and survive in a competitive environment they must focus on
long term investment strategies that are important for building the
market orientation.Market orientation is not a business mode that
can be switched on or off,which also implies a long term
focus.Considering as a whole it is very essential to understand the
importance of the market oriented practices in order to ensure the
survival within theindustry by an organization. 14 Umesh Gunarathne
W. H.D. P. -2015
16. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015Result of the implementation of business practices can be
identied based on the performance of the organization.That is how
an organization achieves their established goals and
objectives.Performance is the most important criteria that
determine survival of a business organization.Therefore this
research study cover the marketing practices implemented by the
managers for achieve goals and objectives ofthe organization. 1.3.
Problem IdentificationAlthough the Market Orientation is an old
concept,today it has become very important and complex.Most of the
large organizations try to establish policies,by focusing on
market,needs and wants of customers and the business strategies to
gain competitive advantage.An organization becomes market oriented
only if its employees are market oriented (Brown et al. ,
2002).Therefore,the variables inuence attitude toward Market
Orientation need to be studied at the individual organizational
level and not only at the employee level.Core aspects to persons
are individual values and personality traits (Roccas et al. ,
2002).Individual values and personality traits inuence attitudes
people have toward different aspects of their lives including
attitudes toward Market Orientation (Homer and Kahle,1988).These
attitudes,in turn,inuence the way in which individuals behave
(Homer and Kahle,1988). Researches have shown that market oriented
organizations perform better than non- market oriented
organizations in terms of efficiency,effectiveness,adaptability,and
overall performance (Jaworski and Kohli,1993; Slater and
Narver,1994).Moreover,rm performance largely depends on market
performance and employee performance (Hansen and
Wernerfelt,1989).This is the rationale for studying the inuence of
Market Orientation on market performance and individual employee
performance.When developing the Marketing strategies to implement
with the purpose of increasing organizational performance through
the market oriented practices specially Customer
Orientation,Competitor Orientation,Inter Functional Coordination
and Social Benefit Orientation,it is very important to examine the
current situation,because if new strategies are based on this
relevant information there may be an efcient and effective
progress.Not only that,therefore,before plan new
marketingstrategies or to evaluate current system it essential to
conduct a research study.Based15 Umesh Gunarathne W. H.D. P.
-2015
17. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015on the research findings managers can make decisions in
order to achieve betterorganizational performance. Most of the
large scale manufacturing businesses are market oriented than small
and medium scale manufacturing businesses in Sri Lanka.When
considering the last few years there was an emerging situation for
establishing the small and medium scale manufacturing
organizations.But at the same time many of those established
businesses are quickly vanished from the industry due to lack of
practicing the market oriented applications.Most of the decision
makers could not identified the importanceand real need of the
market orientation. Although there are many researchers have
conducted researches in order to examine the relationship between
market orientation and organizational performance,they have given
concentration only to the Market Orientation and Organizational
Performance as a whole.But in this research study the researcher
has developed conceptual framework with new sub independent
variables such as Customer orientation,Competitor Orientation,Inter
Functional Coordination and Social Benet Orientation.Therefore the
conceptual framework of this research study is a new one to the
world and to marketing research process.And also researchers have
done researches only related with their contexts and it is rare to
see researches in Sri Lankan context.But in this research study the
researcher applied these concepts in Sri Lankan context.And also
for the rst time this research study considered about smalland
medium scale manufacturing business organizations located in Sri
Lanka. Several researchers have identified and applied three
components of Market Orientation such as Customer
Orientation,Competitor Orientation and Inter Functional
Coordination developed by the Narver and Slater in 1990. Hence,the
researcher has adopted a new sub component called Social Benefit
Orientation to the Market Orientation.The rationale behind that
today,it is very important to consider about social benets by an
organization on behalf of increase of performance of the
organization and it will help to make a good image in customers
mind about the organization and its products.And also it comes with
the Societal MarketingConcept and the concept Corporate Social
Responsibility as well. 16 Umesh Gunarathne W. H.D. P. -2015
18. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015 1.3.1. Research questionsOnce problem has identified,it
is needed to developed research questions for answer through the
research study.Therefore this research study gives the answer to
the main question which is What is the relationship between Market
Orientation andOrganizational Performance? In addition to main
research question sub questions are, 0 What is the relationship
between Customer Orientation and Organizational Performance? 0 What
is the relationship between Competitor Orientation and
Organizational Performance? 0 What is the relationship between
Inter Functional Coordination and Organizational Performance? 0
What is the relationship between Social Benefit Orientation
andOrganizational Performance? 1.4. Objectives of the StudyThe main
objective of this research study is, 0 To examine the relationship
between Market Orientation and theOrganizational Performance. In
addition to that sub objectives are, 0 To examine the relationship
between Customer Orientation and the Organizational Performance. 0
To examine the relationship between Competitor Orientation and the
Organizational Performance. 0 To examine the relationship between
Inter Functional Coordination and Organizational Performance. 0 To
examine the relationship between Social Benet Orientation
andOrganizational Performance. 17 Umesh Gunarathne W. H.D. P.
-2015
19. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 20151.5. Significance of the StudyMainly this research study
provides contribute to decision makers of the organization
(Managers),Academic and Policy makers.It is very important to
consider about Market Orientation by any organization and how the
market oriented activities leads to performance of the organization
because that is the most suitable way to achieve goals and
objectives of the organizations while earning fair profits and
maintaining protable relationships with customers.Ultimately,any
organization tries to achieve goals and objectives.When
organizations are going towards to achieve goals and objectives
they should consider about their customers,their major
competitors,coordination of inter functions within the organization
as well as social benefits and responsibilities.In order to get
clear understand about customers,competitors,inter functional
coordination and social benefits it is very essential to study
about marketorientation and organizational performance. Different
scholars has been conducted researches and developed many theories
related to Market orientation.According to the scholars
like,Boshoff and Matheson (1998),further testing of the Kohli and
Jaworski (1990) and Narver and Slater (1990) instruments in wider
business environments and cultures will help in developing more
strong and trustworthy measures of the market orientation
concept.Businesses and scholars alike are interested in its effects
on daily operations and in the costs of introducing market oriented
behavior.At the micro level,many marketing issues have not been
fully discussed in Sri Lanka.It is unknown how Sri Lankan managers
implement and practice marketing theories such as market
orientation.This study might shed some light on whether Sri Lankan
managers and staff understandmarketing theories differently from
their counterparts in other economies. Building on the initial
research by,Kholi and J aworski (1990) and Narver and Slater
(1990),signicant progress has been made in the conceptualization
and measurement of market orientation and also in evaluating its
impact upon business performance.Although,studies of the impacts of
market orientation have demonstrated a significant and positive
relationship between market orientation and business performance in
developed economies.A number of studies,however,mainly in
non-United States contexts,have suggested that the relationship is
context specic.Market orientation isoften considered to be
marketings contribution to business strategy (Hunt and18 Umesh
Gunarathne W. H.D. P. -2015
20. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015Lambe,2000),and its salient dimensions,competitor
orientation and customerorientation,are considered important
strategic orientations. When consider about the last four decades
in Sri Lanka,most of organizations are tended to produce more
products without considering customer needs and wants.As a result
of that they could not be able to make profitable relationship with
customers and most organizations vanished from the market.With the
time they realized that in order to be a successful organization
with in the industry they should consider about not only profits
but also needs and wants of the customers,competitors
reactions,coordination of different functions within the
organization and social benets that can be delivered to the society
as a whole.Therefore this study provides a contribution to get
clear understanding about the relationship between Market
Orientation and Organizational Performance.It will help make
decisions by the managers to achieve goals and objectives of the
organization while concerning the ways to gain prots.Further,this
provides what kind of marketing strategies should be taken on
behalf of the organizational success and the increase the marketing
performance of theorganization. Finally,this research study
contributes to the academics.There are no significant amounts of
research studies have been conducted related to market orientation
area.Therefore the findings of the research study will help to
academic for conducting researches in different contexts regarding
market orientation.As well as this will helps to make proper
directions for future researchers to confirm the
relationshipbetween Market Orientation and Organizational
Performance. 19 Umesh Gunarathne W. H.D. P. -2015
21. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka V V, Publisllczl at
Rcscurcl1Gutc - June 20151.6. Chapter OutlineThe rst chapter
describes the introduction of the research study,problem
identication and research questions,the objectives which are going
to achieve through the research and significance of the research
study.Further it includes thestructure of the research study
(Chapter outline of the research). Chapter two consists with two
parts and the first part relate with the literature review
regarding variables (Dependent and Independent variables) and
theoretical background behind the concepts developed by the
different researchers in different perspectives.It provides
guidance to the research study.In part two of chapter two,
conceptual framework and hypotheses development can be seen. Third
chapter of the research study deal with the Methodology of the
research study and it includes philosophy,research design,research
context,population and Sample, data collection,questionnaire
design,pilot test and the measurement and scaling. Chapter four is
the Data Analysis.It includes the relevant data analysis procedures
need to analyze the collected data.Further it is included
Conrmatory Factor Analysis(CFA),Structural Equation Modeling (SEM)
and the Hypotheses Testing. Chapter five is the final chapter of
research study and it consists with the ndings & conclusion and
managerial implications.Further,it includes limitations of the
research study and future directions for future researchers.And
also theoreticalcontribution for the market orientation is included
in this chapter five. 20 Umesh Gunarathne W. H.D. P. -2015
22. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka I . .Published at Re.
'em'cI1Gute - June 2015CHAPTER 2 LITERATURE REVIEW2.1. Chapter
IntroductionThis is the second chapter of this study and it
consists with the literature review related to main variables of
this study namely Market Orientation (i. e.,Customer
Orientation,Competitor Orientation,Social Benet Orientation,and
Inter functional Coordination) and Organizational Performance.In
addition to that in this chapter include the models and
theories,definitions related to the variables of this study
developed by the professional Scholars.(E.g.Slater and Naver,1990;
Gronroos,1992 and Kohli and Jaworski,1996). The second section of
this study focuses the literature review of the
dependentvariable,Organizational Performance. The third section of
this chapter is described and the review of literature about the
independent variables in this study such as Customer
Orientation,Competitor Orientation,Social Benefit Orientation and
Inter Functional Coordination.Especially in third section in
addition to the denitions and the concepts,there are main two
theories has been identified.Those theories are essential to get
proper understandingand directions to the progress of the research
study. And also in fourth section of research study exhibit
integration of dependent variable (Organizational Performance) and
Independent variables,(Customer Orientation,Competitor
Orientation,Inter Functional Coordination and Social Benefit
Orientation) while fifth section discuss about the conceptual
framework developed for the research study.Sixth section describes
the hypotheses development.There are four hypotheses can be seen in
this research study and developed those hypotheses based on
theprevious research ndings. 21 Umesh Gunarathne W. H.D. P.
-2015
23. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 20152.2. Organizational PerformancePerformance is a fairly
broad concept,and it is meaning changes in accordance with users
perspective and needs (Lebas,1995).Traditionally,firm performance
has been viewed and measured in accounting terms (Avci et al. ,
2011).An additional issue should be raised here;due to
confidentiality concerns,it is often challenging to obtain actual
accounting data from organizations unless they are publicly quoted
companies.As a result,previous research studies looking into
performance related issues used self-reported nancial and
non-financial performance measures.However,Sink and Tuttle (1989)
noted that performance should not be treated only as a financial
concept.Thus,it is suggested that particularly in the service
sector,non-financial performance should receive serious
consideration.In addition,Law et al.(1995) recommend the use of
nonfinancial performance measures based on the fact that tourism
establishments are labour intensive and customer-oriented.The
marketing literature is replete with evidence of the positive
relationship between market performance and nancial performance
(Anderson,1997).Similarly,studies demonstrate the inuence of market
performance variables such as market share on return on sales
(Buzzell,2004).On the other hand,marketing performance measurement
continues to be a large and growing concern for marketing scholars
and managers a like (OSullivan, 2009)Organizational performance
refers to the rms market and nancial performance,which is
positively related to the r1ns economic value (Slater and
Narver,1994) According to the denition there are three important
concepts can be highlighted.Those are Market performance,Financial
Performance and Economic value.In this study specially consider
about the market performance of the manufacturing industry.Not only
that according to Hunt and Morgan (1995) organizational performance
in competitive terms (i. e.,compared to relevant
competitors),because a market oriented culture has been posited as
one of a rms competitive capabilities and sources of advantage.The
literature argues that a market oriented culture provides a
unifying focus of organizational efforts in the delivery of value
to customers while also providing a comparative impetus with
competitors activities (Kohli and Jaworski 1990).Therefore,a market
oriented rm is more likely to achieve high levels ofcustomer
satisfaction,to keep existing customers loyal,to attract new
customers,and22 Umesh Gunarathne W. H.D. P. -2015
24. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015subsequently to attain the desired level of growth,market
share,and hence oforganizational performance (Homburg,2000).
According to another scholars like Yamin (2001),Gunasekruan (1998)
and Mavondo,(1990),organizational performance refers to how well an
organization achieves its market oriented goals as well as its
financial goals (Yamin,2001; Gunasekruan,1998; Mavondo,1990).When
consider about this definition there are two importantconcepts
illustrated.In this study consider about the market oriented goals.
Organizational Performance can be seen as a multidimensional
construct consisting of more than simply financial performance
(Baker and Sinkula,2005).Organizational performance is described as
the extent to which the organization is able to meet the needs of
its stakeholders and its own needs for survival
(Grifn,2003).Professional scholars namely Stoel horst (2001) and
Van Raaij (2004) describe market orientation as marketings
explanation of performance differentials between rms.Market
orientation enhances a rms performance by providing differentiation
and cost advantages.First,the concept of organizational performance
is based on the idea that an organization is the voluntary
association of productive assets,including human,physical,and
capital resources,for the purpose of achieving a shared purpose
(Alchian and Demsetz,1972).Those providing the assets will only
commit them to the organization so long as they are satisfied with
the value they receive in exchange,relative to alternative uses of
the assets.As a consequence,the essence ofperformance is the
creation of value. However,marketing performance measurement is the
assessment of the relationship between marketing activities and
business performance (Clark and Ambler,2001).Academic interest in
marketing performance measurement is largely based on the
assumption that greater marketing accountability enhances firm
performance and marketings stature (Rust et al. , 2004).One study
to date (OSullivan and Abela,2007) has demonstrated a positive
relationship between the ability to measure marketing
performance,and actual rm performance (OSullivan and
Abela,2009).However,marketing performance is the subjective
assessment of an organizations performance relative to its
competitors over the previous three years across three
attributes:market share growth,revenue growth and sales
growth.Therefore,thestudy evaluates marketing performance using the
subjective approach to measuring23 Umesh Gunarathne W. H.D. P.
-2015
25. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015performance.A number of authors defend the adequacy of
subjective measures as opposed to objective ones (Pertusa Ortega et
al,2010).Conceptually,growth reects increases in sales and is often
reected in market share gains.Growth in sales and market share are
important to a business to ensure long term viability and resource
availability.Profitability primarily reects current performance
(Venkatraman,1989).Similarly,profitability is viewed by some
scholars (e. g. Hunt and Morgan,1995) as the ultimate
organizational outcome and is commonly used in strategic management
studies.In addition,customer satisfaction represents the
effectiveness of theorganization in delivering value to its
customers and is often viewed as an antecedentto profitability
(Vorhies and Harker,2000). 2.3. Market OrientationMarket
Orientation receives a signicant amount of attention from
researchers (e. g.,Etgar,Slater and Naver,1990; Gronroos,Kohli and
Jaworski,1990; Ruekert,1992; Gainer and Pandanyi,2005; Carr and
Lopez,2007).Market orientation can be defined as a form of
organizational culture where employees are committed to
continuously create superior customer value,or as a sequence of
marketing activities that lead to better performance.Most of
researches have concluded that high market oriented companies
perform better than companies that are less market oriented.They
focus on adapting their products and services to the needs and
expectations of their customers instead of those who are product
oriented and focus on developing a product or service that is then
marketed and hopefully sold (Gronroos,2006).To achieve this
customer focus,a rm with a high degree of market orientation
cultivates a set of shared values and beliefs about putting the
customer first and reaps results in form ofa defendable competitive
advantage,decreased costs and increased prots(Desphande,1999).
Market orientation is not a new concept to the marketing and
management literature.Scholars argued that the postulate by Drucker
(1954) that the customer must be focus of organizations operations
and the subsequent support given to this idea by Levitt (1960) that
the customer is the reason for the organizations existence were all
pointing to the fact that market orientation behavior was necessary
at that time.This idea was extended to become known as the
marketing concept (McNamara,1972). The market orientation concept
focuses on coordinated business intelligence24 Umesh Gunarathne W.
H.D. P. -2015
26. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015generation,dissemination and responsiveness to market
information for efcient and effective decisions
(Sundqvist,Puumalainen and Saminen,2000; Kohli and J
aworski,1990).The concept is also concerned with issues including
organizational culture, innovation,human resource planning and
organizational learning (Narver and Slater,1990; Ruekert,1992;
Baker and Sinkula,1999; Greenley,Cadogan and Fahy,2005;
Keskin,2006). Market orientation scholars such as Kohli and
Jaworski (1990),Narver and Slater (1990),Ruekert (1992),Gainer and
Pandanyi (2005),Carr and Lopez (2007) have argued that market
orientation traces its origins from the market concept and has
consequences to overall business strategy.The marketing concept is
concerned with customer orientation,competitor
orientation,innovation and profit as an inducementfor creating
satisfied customers (Narver and Slater,1994; Hunt and Morgan,1995).
Although there are four concepts of marketing concepts,in this
study consider about Customer Orientation and Competitor
Orientation.Market orientation has been widely accepted by scholars
as the implementation of the market concept,as an organizational
culture,or as a mix of those two (Greenley,1995; Han,Kom and
Srivastave,1998).Other scholars argued that market oriented
behaviour in marketing new solutions leads to better
performance,has positive effects on customer satisfaction and
loyalty as well as innovation,employee satisfaction and cooperation
(Twaites and Lynch,1992; Deshpande,Farely and Webster,1993;
Gatignon and Xuereb,1997). In addition to that,there are so many
scholars tried to view Market Orientation in different ways.Those
are very important to get a sound understanding about theconcept of
Market Orientation and progress of the research Study. According to
Drucker (1954) and Levitt (1960) market orientation is a central
element of a management philosophy . Similarly;the market
orientation construct is at the very heart of modern marketing and
a frequently studied research subject.It was presented in the 1990s
as the actions that firms undertake to implement a customer
orientation,and include a set of behaviours and the organizational
culture that supports them(Grinstein,2008).Accordingly,Baker and
Sinkula (2005) stated that market orientation is a value-based
strategic philosophy exhibiting itself in behaviours whichhelp
firms stay close to their consumers (Hsieh et
al.2008).Conceptually,market25 Umesh Gunarathne W. H.D. P.
-2015
27. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015oriented organizations are organizations that are well
informed about the market and that have the ability to use that
information advantage to create superior value for their target
customers.Two main perspectives on market orientation have emerged
as a result:a behavioural perspective based on Kohli and J aworski
(1990),and a cultural perspective based on Narver and Slater
(1990).But in this research study paidattention to the behavioural
perspective than Cultural Perspective. Narver and Slater (1990)
proposed that market orientation is the extent to which culture is
devoted to meeting customer needs.They defined Market orientation
as the competitive strategy that most efciently generates the right
kinds of behaviour to create enhanced value for the consumer and
therefore assures better long-term results for corporations
(Maydeu-Olivares and Lado,2003). Therefore,market orientation
comprises three components:customer orientation,competitor
orientation,and inter functional coordination.Customer orientation
and competitor orientation include all the activities involved in
acquiring information about the customers and competitorsin the
target market and disseminating this information throughout the
organization. Inter functional coordination involves coordinated
efforts,which typically involves more than the marketing
department,to use this information to create superior customer
value (Narver and Slater,1990; Kumar et al. , 1998).A long range
investment perspective is implied in market orientation due to the
need to prevent the organizations competitors from overcoming the
superior customer value created by the organization
(Subramanian,2009) . The three components of market orientation
collectively form a unique strategic marketing resource and are
vital to the performance of the firms (Hsieh et al. , 2008).Market
orientation is indeed a learning process in which organizations
learn from all aspects of their environment,including customers and
competitors,and take both short and long term organizational goals
into consideration (Kohli and Jaworski,1990).According to Narver
and Slater (1990);Shapiro (1988),being market oriented implies
delivering products and services valued by consumers,usually
accomplished through (1) on-going monitoring of market conditions
and (2) adaptation of organizational responses.However,top
management plays a critical role in fostering market
orientation.Given the importance of market orientation,it comes as
no surprise that this construct has received scrutiny from
marketing scholars (Grewal and Tansuhaj,2001).A standard argument
in themarket orientation literature suggests that market-oriented
firms are in a better26 Umesh Gunarathne W. H.D. P. -2015
28. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka 7 . Publisllczl at
Rcscarcl1Gutc - June 2015position to satisfy the needs of their
customers (Narver and Slater,1990).Therefore,researchers expect
market orientation to be manifested in enhanced firm performance
(Grewal and Tansuhaj,2001).In addition,some academics consider
market orientation as a resource and/ or a capacity of the company
to provide a sustainable competitive advantage (Aldas
Manzano,2005).The definition of market orientation adopted in this
study is that put forward by Narver and Slater (1990).According to
whom market orientation is the organization culture that most
effectively and efciently creates the necessary behaviours for the
creation of superior value for customers and,thus,continuous
superior performance for the business (Narver and Slater,The effect
of a market orientation on business protability,Journal of
Marketing,1990). They conceptualized market orientation as a one
dimensional construct that incorporates three behavioural
components (customer orientation,competitor orientation,and inter
functional coordination) and use a single aggregated measure of
market orientation (MKTOR).The three components of market
orientation collectively form a unique strategic marketing resource
and are vital to the performance of the rms (Hsieh et al. ,
2008).However,a firm generally seeks to develop its own market
orientation to ensure the continuous needs assessment of its
customers,the early detection of shifts in the marketplace,and to
prompt internal review and realignment of marketing strategies and
activities where required.Nevertheless,research in the area of
marketing orientation continues to be veryprolic (Farrelly and
Quester,2003). 2.3.1. Different views of Market OrientationAlthough
there are several scholars have developed the theories regarding
Market orientation concept this research study consider the
theories which have been developed by the Most famous research
scholars called Kohli and Jaworski,(1990) and Slater and Naver,(
1998) based on their perspectives. 2.3.1.1. Kohli and Jaworski s
View of Market OrientationIt is important to say that two papers
have established the concept of market orientation into the
academic of business research by Kohli and Jaworski in 1990. The
rst paper,by Kohli and Jaworski (1990),viewed market orientation as
theimplementation of the marketing concept.In the model they
proposed emphasizes the27 Umesh Gunarathne W. H.D. P. -2015
29. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Publisllczl at Rcscarcl1Gutc
- June 2015collection of marketing data,dissemination of this data
across functions within the organization and the action that is
taken based on this intelligence.The model was built on the results
of interviews with 62 managers in both marketing and non- marketing
positions in United State America companies.The main finding was
that protability is a consequence of market orientation but not a
component of it.Later Jaworski and Kohli ( 1993) published another
paper where the goal was to review and measure the antecedents that
lead to market orientation and the consequences of it forthe
company. ;' L1::2:: :;: Market Orientation .
IntelligenceResponsweness disseminationFigure 2.1:- Kohli and J
aworskis view on market orientation. Source:Kohli and J aworski
(1990). Figure 2.1 shows the interaction between intelligence
generation,dissemination and responsiveness.Intelligence gathering
is just what the name implies,gatheringintelligence about
customers,competitors and the market place. Responsiveness only
happens if the formalized process for sharing business intelligence
in not too burdensome.If management emphasized sharing,and if the
organizational systems reward system provides an incentive to do so
or there is no penalty for doing so.In other words,a
department,manager or employee is onlywilling to share information
if it implies no cost. 28 Umesh Gunarathne W. H.D. P. -2015
30. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Publisllczl at Rcscarcl1Gutc
- June 20152.3.1.2. Narver and Slater s View of Market
OrientationThe professional scholars John C.Narver and Stanley
F.Slater published their famous article about Market Orientation in
1990, several months after their distinguished colleagues Kohli and
Jaworski.Narvers and Slaters goal was to shed light on the
components that build a market orientation and propose a useable
definition of the concept.They interviewed managers in 113
strategic business units in onecorporation.Narver and Slater viewed
market orientation as an organization culture, just like Desphande
and Webster (1987). However,they took the definition further and
argued that market oriented rms are focus not only on customers but
also equally much on competitors.Additionally,they placed emphasis
on inter functional coordination that is meant to create unison
between all functions in the organization and become part of the
organizational culture.So they have developed this defmition:Market
orientation consists of three behavioural components such as
customer orientation,competitor orientation,and inter functional
coordination and two decision criteria long term focus
andprotability. Narver and Slater ( 1990) defined three equally
important behavioural dimensions of market orientation,them being
customer orientation,competitor orientation and inter functional
coordination.They add two decision criteria that are long term
focus andprotability to their model.Customer orientionxC""Pem'
lnterfunctional "i""i" coordinationTargetmarket Figure 2.2: N arver
and Slaters View on market orientation. Source:N arver and Slater
(1990). 29 Umesh Gunarathne W. H.D. P. -2015
31. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015Figure 2.2 shows the interaction between the three
behavioural components;customerorientation,competitor orientation
and inter functional coordination. Research shows that the
consequence of market orientation materializes in all tasks
performed by a firm.The degree of market orientation shows through
employee and customer satisfaction,as well as content
shareholders.Customers of a company with a high degree of market
orientation experience great value for money and excellent service
that is gladly delivered by skilled and professional employees of
that company. Gray (1998) found that the more market oriented
companies have more satisfied and loyal customers and employees
there.Also not only that,Day and Wensley (1988) found that market
orientation means that organizations do not only understand the
customer,but also its customers customers and their business
environment and how that will develop in the future.This concept
matches with Kohlis and Jaworskis (1990) suggestion that companies
must collect and assess data on customers current and future
needs.These companies employees should emphasize service delivery
and manage their customer relations well.Employees should spend
considerable time with their customers (Narver and
Slater,1994).Competitor orientation is the second component of
market orientation and states that organizations should
identify,analyse and use the strengths,weaknesses,opportunities and
capabilities of both current and future competitors.This is very
logical although not entirely new.Already in 1960, Levitt said that
parallel to customer analysis,companies must do competitor analysis
and contemplate possible solutions that might full ll current and
future customerneeds and expectations (Levitt,1960). Inter
functional coordination or integrated marketing means that all
departments within the company play a critical role in satisfying
customers.This idea concurrent with Shapiro's (1988) research that
found that market orientation is not marketing orientation,because
a market orientation does not suggest that only the marketing
department has the most important role here.On the contrary,market
orientation emphasizes that all departments and all employees are
aware of the fact that their job attitude towards internal and
external customers is crucial.According to Narver and Slater
(1998),competitor and customer orientation include all activities
that involve generating market intelligence about customers and
competitors,analysing it anddistributing that knowledge throughout
the organization.This means that the market30 Umesh Gunarathne W.
H.D. P. -2015
32. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Publisllczl at Rcscarcl1Gutc
- June 2015oriented company must provide adequate business
processes and systems for data input and coordinate the
communication of disseminated business info in order tocreate
superior value for customers. According to Narver and Slater
(1998),continuous innovation is implicit in each of these
components.If there is no innovation and continuous data
generation,employees will not have the right prerequisites to offer
that extra service to theC11SlIOI11CI'. The two decision criteria
shown in the figure 2.2 are a long term prot focus and
protability.It is through the continuous creation of superior
customer value that a business creates its long-run prot
performance.A short period marketing campaign or sales action might
boost sales,but the organizational image and generation ofrepeat
customers only evolves over time along with reputation and word of
mouth. The two views on market orientation are quite similar and
complementary and very useful to anyone seeking knowledge on market
orientation.Both papers view market orientation as a concept that
leads to a greater competitive advantage and both agree that
business intelligence about customers and competitors is a key
prerequisite to build market orientation.Both of them conclude that
all managers and staff members need to participate in creating and
maintaining the market and that market orientation is a construct
with three equally important components.However,the two views have
important differences.Kohli and Jaworski ( 1996) put more emphasize
on customers than Narver and Slater (1990),which focuses on human
role and explain market orientation as a corporate culture which
leads to certain customer/ competitor oriented behaviour throughout
the organization creating specific atmosphere that leads tobetter
performance. Although both papers by Slater and N aver (1998) and
Kohli and J aworski (1990) have considered about the importance of
market orientation and Organizational performance the current study
pay high consideration to the three behavioural components model
developed by the Slater and N aver (1990).In addition to the three
behavioural components model the researcher added another component
called Social Benefit Orientation to three component behavioural
model on behalf of investigate therelationship between Market
Orientation and Organizational Performance. 31 Umesh Gunarathne W.
H.D. P. -2015
33. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015Accordingly,entire current research study is based on the
four behaviouralcomponents of the Market Orientation. 2.3.2.
Customer OrientationThe heart of the market orientation is its
customer focus.To create superior value for buyers continuously
requires that a seller understand a buyers entire value chain,not
only as it is today,but also as it evolves over time.Buyer value
can be created at any point in the chain by making the buyer either
more effective in its markets or more efcient in its operation
(Slater and Narver,1996).Global competition increases market
turbulence as well as the richness and diversity of knowledge
possessed by customers and competitors (Achrol,1991).Customer
orientation can be dened as a group of actions taken by a business
to support its sales and services staff in considering client needs
and satisfaction their major priorities (Slater and
Narver,1996).Business strategies that tend to reect a customer
orientation might be include,developing a quality product
appreciate by consumers,responding promptly and respectfully to
consumer complaints and queries,and dealing sensitively
withcommunity issues. To be customer oriented implies that a firm
is actively engaged in the organization wide
generation,dissemination of,and responsiveness to,market
intelligence (Kohli and J aworski,1990).Usually,this term is
described as an organizational culture that stresses the customer
as the focal point of strategic planning and execution
(Deshpande,1993).This culture should be pervasive throughout the
company such that employees consistently exhibit customer oriented
behaviours,and consumersthereby become accustomed to this
philosophy (Ritchie,and Zerbe,2000). A rms ability to cheaply and
swiftly introduce new products that meet customer needs is the key
to long term success (Datar and Srinivasan,1997).There are so many
perspectives that can be included in this study.Customer
orientation evolved from the marketing concept.Saxe and Weitz
(1982) suggest that customer oriented selling is a behavioural
concept that refers to the level to which salespeople practice the
marketing concept by trying to help their customers make purchase
decisions that will satisfy customer needs,sometimes either through
cross selling and up-sellingstrategy. 32 Umesh Gunarathne W. H.D.
P. -2015
34. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015Narver and Slater (1990) described customer orientation as
the sufcient understanding of a companys target customers to be
able to create superior value for them continuously.It requires
that marketers understand a buyer's entire value chain (Day and
Wensley,1988).This dimension has received a good deal of attention
in the research literature (Deng and Dart,1994; Kohli and J
aworski,1990) found in their interviews with company managers that
a customer focus is a critical element indetermining market
orientation. 2.3.3. Competitor OrientationAccording to Narver and
Slater (1990) competitor orientation,as an element of market
orientation means that a seller understands the short term
strengths and weaknesses and long term capabilities and strategies
of both the key current and potential competitors.According to
Slater and Narver (1993),competitor orientation centers around the
following questions,(1) where are the competitors are?(2) What
technologies do they offer?And (3) whether they represent an
attractive alternativefrom the perspective of the target customers?
.The purpose of a competitor orientation is to provide a solid
basis of intelligence pertaining to present and potential
competitors for executive actions.Competitors are dened as rms
offering products or services that are close substitutes,in the
sense that they serve the same customer need (Porter,1980;
Kotler,2000).For example,in serving the coffee sweetener market,a
provider of beet sugar faces competition from other providers of
beet sugar,as well as from providers of cane sugar and synthetic
sugar.A rms current and potential competitors may therefore be
found among rms with similar and dissimilar production technology
platforms.A competitor orientation may lead to a cost advantage
because competitor oriented businesses tend to watchcosts
closely,so they may quickly match the marketing initiatives of
competitors. However,small organizations seem to view competitor
orientation differently and are not as concerned with long term
strategies.The literature suggests that most businesses are
short-term oriented (Carson,1990; Harris and Watkins,1998),and that
short term results are perceived to be more important than long
term strategic issues (Harris and Watkins,1998).Managers in
businesses are more concerned with runningdaily operations than
with long term business planning (Amer and Bain,1990;33 Umesh
Gunarathne W. H.D. P. -2015
35. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015Robinson and Pearce,1984).Hence,for businesses,short term
results are often apriority over projected long term
benefits.However,in order to gain a sustainable competitive
advantage,managers may need toimprove appropriate business
marketing and planning skills. Competitor orientation can enhance a
rms competitive advantage by allowing it to benchmark with,learn
from,imitate,and improve on the products of successful competitors
(Drew,1997; Day and Wensley,1988).Unlike the long term benefits of
customer orientation,empirical research has produced widely
divergent findings on the relationship between competitor
orientation and organisational performance.Narver and Slater (1990)
and Noble,Sinha,and Kumar (2002) identified a positive relationship
between competitor orientation and organizational
performance.Harrison Walker (2001) discovered that no such
relationship exists between competitor orientation and
organizational performance.Armstrong and Green (2007) and Armstrong
and Collopy (1996) found the existence of a negative relationship
between competitor orientation and organizational performance and
Luo,Rindeisch,and Tse (2007) claimed that there is a curvilinear
relationship between the two variables competitor orientation and
organizational performance.Armstrong and Collopy (1996) argued that
competitor orientation reduces the protability of a firm and
suggested that rms should focus on maximising their own prot and
ignore theircompetitors tactics completely. Another way of
explaining competitor orientation,to be better informed of new
trends and market oriented,company must consider not only how well
its products suit and satisfy customer needs but how well it
performs better relatively to its competitors (Hsieh et al. ,
2008).Organization must gather market intelligence on the short and
long term strengths,weaknesses,absorption capabilities and
strategies of both the current and the potential competitors (Hsieh
et al. , 2008; Narver and Slater,1990).The analysis of competitors
long term absorption capabilities,strengths and weaknesses is a key
factor in determining market orientation and culture of an
organization (Harrison and Shaw,2004).Employees from every function
in a market oriented organization share information about their
competitors because suchinformation can be used to build a
competitive advantage in the industry it operates. 34 Umesh
Gunarathne W. H.D. P. -2015
36. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 20152.3.4. Inter Functional CoordinationInter functional
coordination is dened as the integration and collaboration of
various functional areas (or departments) within an organization as
a way of enhancing communication and information to better meet the
organizations goal (Narver and Slater,1990).According to Porter
(1985),inter functional coordination can be defined as every
department,facilities,branch ofce and other organizational units
has a role that must be dened and understood.This is defined as the
co- ordinated utilization of organizational resources in creating
superior customer value for the target segment.All
employees,regardless of their distance from the strategy
formulation process,must recognize their role in helping a firm
achieve and sustainable competitive advantage.Inter functional
coordination is defined in this study as the communication and
sharing of information and resources,and integrationand
collaboration of different functional areas or departments. Inter
functional coordination describes the ability of different
functional areas to accommodate disparate views and work around
conicting perspectives and mental models by putting aside
functional interests for the better of the organization as awhole.
As the literature on internal marketing is rapidly growing,Inter
Functional Coordination is also viewed as an important criterion of
internal marketing.Raq and Ahmed (1993) defined the boundary
between marketing and human resources management while arguing that
organizations need to look at ways of increasing cross functional
coordination.Though mentioned as early as in 1993, Inter Functional
Coordination was not ofcially identied as one of the criteria of
internal marketing until in 1993, when Rafiq and Ahmed (1993)
proposed a comprehensive definition of internal marketing.Rafiq and
Ahmed (1993) reviewed conceptual and empirical literature on the
definition of internal marketing and identified Inter
FunctionalCoordination as one of the five main criteria of internal
marketing. Another way,Inter functional coordination is defined as
the integration and collaboration of various functional areas (or
departments) within an organization as a way of enhancing
communication and information to better meet the organizations goal
(Narver and Slater,1990).According to the definition of Slater and
Narver in1990, to become customer oriented organization
communication of information is35 Umesh Gunarathne W. H.D. P.
-2015
37. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015must.Inter functional coordination describes the ability
of different functional areas to accommodate disparate views and
work around conicting perspectives and mental models by putting
aside functional interests for the better of the organization as a
whole.Nakata and Sivakumar (2001) highlighted that inter functional
coordination represent a key form of internal social capital of an
organization.Organizational resources often have conicting
priorities,different perspectives,and strategies (Nakata and
Sivakumar,2001).Academics and practitioners have long contended
that synergy among company members is needed.A culture of
integrating all departments towards better and continuous creation
of customer value should lead to a market orientation within the
company and successful implementation of the marketingconcept
(Harrison and Shaw,2004). 2.3.5. Social Benefit OrientationSocial
benets can be defined as the increase in the welfare of a society
that is derived from a particular course of action.Most social
benets cannot be quantified (Paul and kwon,2002).Through this
definition it is crystal clear that Social benet orientation is
attached with the welfare of the customers or the society and each
and every business organization should pay high consideration to
the social benefits.It comes with the concept of Corporate Social
Responsibility.Furthermore,according to Paul and kwon (2002),Social
benefit is the total benefit to society from producing or consuming
a good or service.Social benefits include all the private benefits
plus any external benets of production or consumption.Although in
this denition they highlighted that Private benefit is a part of
Social Benefit this study concern about the External benefits
provided by the Organizations.If a good or service has significant
external benefits,then the social benefit will be greater than the
private benefit (Paul and Kwon,2002).The social benefit achieved by
a social project can be defined as the improvements attained in the
living conditions of its beneficiaries that are directly
attributable to the project.All different kinds of improvements can
be related to one of the four groups of benefits shown below,which
refer to as the components of the social benefit:(1) Individual
tangible goods (economic nature);Individual intangible goods
(intellectual or spiritual nature);(3) Collective tangible goods
(ecological nature and basic infrastructure);(4) Collective
intangible goods (socio-cultural nature, for the community). 36
Umesh Gunarathne W. H.D. P. -2015
38. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Publisllczl at Rc. 'carcl1
Gate - June 2015Another way of explaining about Social benefit is
defined by measurement against a thirdparty standard, and all
statutes permit incorporators to also pursue more specic Social
benets Providing (low income or underserved) individuals or
communities with beneficial products or services;Promoting economic
opportunity for individuals or communities beyond the creation of
jobs in the normal course of business,Preserving (or improving) the
environment,Improving human health,Promoting the arts,sciences,or
advancement of knowledge;Increasing the ow of capital to entities
with a public benefit purpose,or The accomplishment of any other
particular,identifiable benefit for society or the environment
(Matthew F.Doeringer,2010).Based on above perspectives importance
of social benefit oriented activities has been increased.Most of
the organizations are aimed to use strategies in order
topositioning in consumers mind about the organizations as well as
the products. When it comes to Sri Lankan context because of the
cultural situations,Social Benethas become very important and
essential concept today business industry. 2.4. Market Orientation
and Organizational PerformancePrior to the late 1980s,there was
little success in the development of constructs related to market
orientation.However,the late 1980s witnessed an increased academic
and practitioner interest in the development of practical models to
define key marketing constructs such as market orientation (Bruning
and Lockshin,1994).While a number of studies present market
orientation as synonymous with other constructs such as customer
orientation (Shapiro,1988),more recent studies suggest that market
orientation is distinct and implies a less politicized nature
(Kohli and Jaworski,1990) and a more proactive,longer term focus
(Slater and Narver,1998).Research into market orientation is
dominated by the conceptualizations of two sets of
theorists.First,the information-based conceptualization of Kohli
and J aworski (1990),which presents market orientation as
collecting,disseminating,and responding to intelligence about the
market.Second,there exists the culture oriented approach of Narver
and Slater (1990),which denes market orientation as the
organizational culture that most effectively and efficiently
creates the necessary behaviours for the creation of superior value
for buyers. " While there is merit in both views,the Kohli and J
aworski (1990) view has been subjected to criticism (Diamantopoulos
and Hart, 1993) while the Narver and Slater (1990)
conceptualization has been praised (e. g., 37 Umesh Gunarathne W.
H.D. P. -2015
39. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Publisllczl at Rc. 'carcl1
Gate - June 2015Greenley,1995).The resurgence of interest into the
concept of market orientation can be attributed to its association
with organizational performance.Indeed,an examination of the
substantial proportion of literature examining various aspects of
the marketing concept finds an over-riding and sometimes explicit
assumption that implementing the marketing philosophy will increase
organizational performance (see for instance,Felton,1959;
Houston,1986; Brownlie and Saren,1992).Since the development of
empirical models of market orientation in the early 1990s,there has
been a proliferation of studies claiming an association between
market orientation and organizational performance.A review of the
literature finds that studies linking market orientation and
organizational performance fall into three distinct categories.The
first are those studies that evaluate the utility of
conceptualizations of market orientation and the association with
performance.The second group comprises those studies that examine
the association between market orientation and performance in
certain national contexts.The third category consists of those
studies that examine theforms of orientation and performance. 38
Umesh Gunarathne W. H.D. P. -2015
40. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015 Table 2.1:- Summary of the previous research
ndingsAuthor/ s Research Questions/Findings ObjectivesSlater and To
examine the relationship '2 Major nding was there is a Narver
between Market orientation,Strong relationship between (1990)
Customer value and market orientation and superior superior
Performance.performance.A substantive Market orientation must be
the foundation for a business competitive advantagestrategy. Fred
To determine how critical '2 The Results provide evidence that
Langerak,NPD activities are for a a market orientation is related
Erik Jan market-oriented firm to positively to product advantage
Hultink,achieve superior and to the prociency in market and Henry
performance testing,launch budgeting,launch S.J .strategy,and
launch tactics.Robben Product advantage and the (2010) proficiency
in launch tactics are related positively to new product
performance,which itself is related positively to organizational
performance.Market Orientation has no direct relationship to new
product performance and toorganizational performance. Laith
Investigate the Relationship '2 There is a Positive
RelationshipAlrubaiee between New Service between New Service(2013)
Development,Market Development,Market Orientation39 Umesh
Gunarathne W. H.D. P. -2015
41. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015 Orientation and Marketing and Marketing Performance.
Performance. Michael The main objective is '2 Finding was in
service sector K.Brady,investigates the effect of customer
orientation is a more J .Joseph being customer oriented on
important and it highly inuence Cronin,service performance to
Perceptions and outcome Jr. (2009) perceptions and outcome
behaviours. behaviours. Mohamme What is the relationship They
highlighted that the d Abdulai between Market Orientation
development of market and and Business Performance orientation in
this sector rests Mahmoud among SMEs in Ghana?more on the attitude
of owners/(2011) managers and,more importantly,the repeatedly
reported performance implication of market orientation does not
elude Ghanaian SMEs.More specically,market orientation.Jin K
Han,Main objective was to '2 Exhibited in conclusion there are
Namwoon Examine the role that two components of Market Kin and
organizational innovations orientation are unimportant.And,
Rajendra play in the context of the '2 Competitor orientation is
veryK relationship between Market important to the Organizational
Srivastva.orientation and performance.(1996) Organizational
performance. 7 Ronald E.Measuring Customer '2 Tentatively conclude
that the Michaels Orientation of Salespeople:SOCO scale works as
well with and Ralph A Replication With buyers as with
salespeople.We L.Day Industrial Buyers.hope further testing of the
SOCO (2010) construct in the future will lead toits renement and
that its use will contribute to improvements in thequality of
research on40 Umesh Gunarathne W. H.D. P. -2015
42. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015I || |salesperson-buyer interactions.| 8 Aaron
J.Incorporates market '2 The more successful firms are
Johnson,orientation theory more internally focused (inter Clay
C.(competitor orientation,functional coordination and
Dibrell,customer orientation,and innovativeness) than externally
and Eric inter functional focused (competitor and customer Hansen
coordination) and firm orientation). ( 2004) innovativeness to
explaindifferences in firm nancialperformance. Seigyoung Top
management team '2 Results generally supported Auhl,diversity and
hypothesis in that the effect of Bulent innovativeness:The TMT
diversity on Menguc moderating role of inter innovativeness was
positive as (2005) functional coordination.inter functional
coordinationincreased. Thorsten How does Customer '2 Considering as
a whole,they Hennig- Orientation impact on found that especially
customer Thurau customer satisfaction,oriented activities highly
impact (1999) commitment,and retention?to the customer satisfaction
andretention.Anis Ben How do Market Orientation '2 CSR signicantly
moderates theBrik and CSR impact on association between
customerBelaid Business Performance orientation and financialRettab
performance. Kamel '2 All interactions are insignificant, Mellahi
with the exception of the (2010) relationship between customer
orientation and financialperformance.'2 Customer orientation has a
significant negative moderatingeffect on financial performance. 41
Umesh Gunarathne W. H.D. P. -2015
43. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri Lanka Published at ResearchGate -
June 2015Mark Schreiner(2002)Vasilis Theoharak is and Graham Hooley
(2009)Thorhallur Gudlaugsson andAdrianus Philip Schalk
(2009)But,this association becomes positive,albeit weak,at a high
level of CSR. A Framework for the '2 They found in
microfinanceDiscussion of the Social social benefits are not
important. Benets of Microfinance Because there is no any
directimpact of Social benets to theMicro finance industry. Examine
the relationship '2 Customer orientation practicesbetween Customer
are particularly effective inorientation and enhancing
firrn-levelinnovativeness:differingAnd oldperformance for firms
from Newroles in new European transition economies. Europe.'2 Core
finding is that returns oncustomer orientation andorganizational
innovativeness are different in Old and NewEuropean countries.
Examine the Effects ofMarket'2 The bank has a strong external focus
combined with a focus onThe (theOrientation onBusines s
stability.adaptabilityPerformance:Empirical dimension measure
ofEvidence from Iceland market orientation) scores a 3.57 on a
5-point scale and has a weak positive relation with five out of six
performance indicators,and amoderately strong relation withemployee
satisfaction. '2 The bank is very prot-oriented, which might
explain its lowscore on some dimensions.The42 Umesh Gunarathne W.
H.D. P. -2015
44. Department of Marketing,Faculty of Management and
Finance,University of Ruhuna:Sri LankaPublished at ResearchGate -
June 2015Ken How do EntrepreneurialMatsuno,Proclivity and
MarketJohn C OrientationMentzer,Business Performance? and Aysegul
Ozsomer(2002)Deshpand Organizational e,R. and
marketFarley,innovativeness, J .U.performance:
(1996),internationalodyssey. effectculture,orientation, and
firmresearchresults from this study are in line with the results
from other Icelandic studies that have used DOCS to measure the
shape oforganizational culture. '2 The results indicate
thatEntrepreneurial Proclivity has not only a positive and direct
relationshi