Abstract
Market orientation is marketing’s explanation of performance differentials and can be viewed as marketing’s contribution to business strategy. Market orientation research was initiated by Kohli and Jaworski (J Market 54:1–18, 1990) and Narver and Slater (J Market 54:20–35, 1990) and has more recently entered the strategic management literature. In general, market orientation is argued to improve a firm’s market-sensing capability, and thus improve market responsiveness, particularly in hostile and unpredictable environments. More nuanced research on the topic reveals that the performance effects of the construct’s main components – customer orientation and competitor orientation – are context-dependent, being affected, for example, by strategy choice and environmental conditions.
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Market orientation is defined as the responsive as well as proactive organization-wide generation of market information pertaining to customers, competitors and forces affecting them, the internal dissemination of the information, and action taken upon this information.
Market orientation is the field of marketing’s explanation of performance differentials and is positioned as marketing’s contribution to business strategy (Hunt and Lambe 2000; Stoelhorst and van Raaij 2004). Market orientation research was initiated by Kohli and Jaworski (1990) and Narver and Slater (1990) and has recently entered the strategy and management literature (Slater and Narver 1998; Hult and Ketchen 2001; Hult et al. 2005; Ketchen et al. 2007; Zhou et al. 2008; Morgan et al. 2009; Sørensen 2011).
Market orientation highlights the organizational culture dedicated to delivering superior customer value (Narver and Slater 1990; Day 1999). A market-oriented culture is manifested in the behaviours and activities of the organization and its members (Homburg and Pflesser 2000). Market-oriented activities essentially consist of the generation and dissemination of information pertaining to customers and competitors and the forces affecting them, as well as action based on information (Kohli and Jaworski 1990; Narver and Slater 1990). A market orientation is argued to improve a firm’s market-sensing capability (Day 2011) and innovativeness (Hurley and Hult 1998; Han et al. 1998; Atuahene-Gima 2005), and thus improve market responsiveness, particularly in hostile and unpredictable environments (Jaworski and Kohli 1993).
As the field has matured, meta-analyses of the relationship between market orientation and performance are now emerging with regularity (Kirca et al. 2005; Ellis 2006; Grinstein 2008). The main conclusions are that firms with higher levels of market orientation tend to have higher financial performance, such as return on assets and return on investment. Furthermore, a market orientation improves operational performance, including aspects such as innovation and new product success, customers’ perception of product/service quality, overall customer satisfaction and customer loyalty, and employees’ esprit de corps and commitment. Research investigating organizational antecedents to market orientation finds that less centralized and formalized organizational structures supported by an active and market-oriented top management willing to commit necessary resources to market-oriented activities are the main organizational drivers of market orientation (Jaworski and Kohli 1993).
The market orientation literature has evolved to include several definitions of the market orientation construct. A representative definition based on a synthesis of the contemporary market orientation construct is the responsive as well as proactive organization-wide generation of market information pertaining to customers, competitors and forces affecting them, the internal dissemination of the information, and action taken upon this information.
Customer orientation and competitor orientation are considered important, distinct strategic orientations of the market orientation construct as their effects on performance are context dependent, for example, in relation to firms’ strategy and environmental conditions (Slater and Narver 1994; Gatignon and Xuereb 1997; Morgan and Strong 1998; Homburg et al. 2007). Later conceptualizations broaden market orientation to encompass forces, such as suppliers, distributors, stakeholders, and the macro environment (Siguaw et al. 1998; Matsuno and Mentzer 2000).
Market orientation research also distinguishes between responsive and proactive approaches to market orientation, theoretically (Jaworski and Kohli 1996; Slater and Narver 1998) as well as empirically (Narver et al. 2004; Cillo et al. 2010). Broadly stated, the responsive approach to market orientation is focused on the expressed needs of customers, while the proactive approach to marketing attempts to discover and target the unexpressed, latent needs of customers. In relation to this, research has examined the role of market orientation in balancing exploration and exploitation strategies (Kyriakopoulos and Moorman 2004; Atuahene-Gima 2005; Atuahene-Gima et al. 2005).
Market orientation research has frequently investigated constructs from other management and marketing disciplines. Drawing on the strategy literature, studies have investigated the moderating role of Miles and Snow’s (1978) and Porter’s (1980) strategic typologies (Matsuno and Mentzer 2000; Olson et al. 2005). Research on other strategic orientations in relation to market orientation includes, for example, learning orientation (Slater and Narver 1995), entrepreneurial orientation (Atuahene-Gima and Ko 2001), technological orientation (Gatignon and Xuereb 1997; Zhou et al. 2005), sales and production orientation (Pelham 2000), and export market orientation (Cadogan et al. 1999). Lastly, the literature also includes theoretically based research that investigates market orientation as a resource, a capability or a skill (Hunt and Morgan 1995; Slater and Narver 1998; Ketchen et al. 2007; Day 2011).
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Sørensen, H.E. (2018). Market Orientation. In: Augier, M., Teece, D.J. (eds) The Palgrave Encyclopedia of Strategic Management. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-00772-8_355
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DOI: https://doi.org/10.1057/978-1-137-00772-8_355
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