The effect of market orientation on bussiness profitability(report)


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report about market orientation
relation between market orientation and profitability

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The effect of market orientation on bussiness profitability(report)

  2. 2. TABLE OF CONTENT CONTENT PAGES TABLE OF CONTENT 2 ABSTRACT 3 INTRODUCTION 4 MARKET ORIENTATION 5 What Is Market Orientation? Key Element Of Market Orientation 1) Target Market 2) Customer Relationship 3) The Marketing Team Market Orientation Component Market Orientation Concept - Concentrate On Customer Needs And Wants - Combines All Organization Activities - Achieve Long-Term Goals 5 5 5 5 5 5 6 6 6 7 BUSINESS PROFITABILITY 8 What Is Business? What Is Business Profitability? 8 8 THE EFFECT S OF A MARKET ORIENTATION ON BUSINESS PROFITABILITY 9 Tools For Gaining Business Profitability More Suitable For Big Organization Or Company Assist To Predict The Customer Change High In Cost 9 9 10 10 CONCLUSION 11 REFERENCES 12 2
  3. 3. ABSTRACT The study about market and what is exactly it is; the place for people purchase and sales product and services. Market orientation to internally oriented approaches stressing productive efficiently, selling and promoting.This study the effect of these different emphases on profit performance. The effect indicates to the customer needs has a positive association with profitability(Kohli, 1996). Market orientation is the theory or principles behaviour seize that a sales does not be rely on an aggressive sales force but more precisely on a customer decision(Philip Kotler, 15th Edition). We simply study about differences between market orientation and marketing orientation. In pair of to identify the market orientation component; customer orientation, competitor orientation and interfunctional coordinate. Next we discuss the expected relationship between market orientation and business profitability. Besides, with continuing discuss the relationship between the business profitability and market orientation. Either it is related or not, or might be other substances that surely give an effect of business profitability towards the manufacturer(Stanley, Oct 1990). 3
  4. 4. INTRODUCTION What is market? Market is the place for people purchase and sales product and services. Concept of market; conclude goods, services and person in charge that means seller and buyer or manufacturer and customer. Marketing is managing profitable customer relationship, which is created value for customers in order to capture value from customers in return. For example, (Philip Kotler, 15th Edition). Besides, marketing also can be defined as the management process responsible for identifying, anticipating and satisfying customer requirements profitably. On the other hand, in marketing, manufacturer satisfy the customer’s need and wants and added the marketing activities for a successful business in the long term. Market orientation is a business approach or technique that focuses on identifying and meeting the stated or hidden needs or wants of customers. The function of market orientation is to study customer want, develop and produce those goods/ services. Other than that, market orientation is the group of broad layer of market intelligence relate directly to current and future needs of customers, dissemination of intelligence within an organization and responsiveness to it (Kohli Ajay K, 1990). Other definition of market orientation is the organizational culture that most effectively and efficiently creates the necessary behaviours for the creation of superior value for buyers and thus superior performance for business (Narver John C, 1990). Market orientation is important to the manufacturer to learn, know and understand the space or the competitive advantage and also stated the competitor’s weakness and strength. Explore the concept, define evaluation criteria and highlight the implication of surrounding that effect the manufacturer and also customer is the purpose of market orientation. Then, we go through to the conceptual model of market orientation and performance is must create sustainable value for the customers. It is related to the definition of marketing and collaborates with competitive advantage which the manufacturer took an advantage by using their speciality of the products or services by built strong relationships in order to sustain their customer. For example, Starbucks’ give low price menu for their registered members for purchases the food and beverage. Furthermore, it is focusing on the customer wants and need. Again it is repeated the beginning of the stage that stated about market orientation. They can distinguish its products from the competitors’ offering(Carl McDaniel, 2006) 4
  5. 5. MARKET ORIENTATION What Is Market Orientation? A theory or principle behaviour seize that a sales does not be rely on an aggressive sales force but more precisely on a customer’s decision. Differences between Market Orientation and Marketing Orientation For market orientation is generally referred to the basic orientation that governs the relationship of a firm with its market and with its customers. Market orientation is more than just a management function as production, finance and human resources, and it represents rather a management philosophy that should guide the overall organization. Next, marketing orientation is more treated like marketing concept and relate to the 4P which is focusing on customer orientation(Jean-Jacques Lambin, 2000). Market Orientation Component: 1) Customer orientation 2) Competitor orientation 3) Interfunctional coordination Key element of market orientation There are also form base on the key element of market orientation(Hugo Daniel, 2010): 1. 2. 3. 4. Target market The customer relationship The marketing team Business profit 1. Target market Is a starting point of trying and discover what customers actually want. It is refer as primary stage in market orientation elements. It is look for current probability of current needs and the future of the needs. 2. The customer relationship Is the extension of marketing to a customer with the expectation of a long term relationship? In this extension they segment their target markets to the small ‘portion’ of customer or individual customer. 3. The marketing team An organization need to work with other departments and concentrate to the organization effort on selected market. 4. Business profit The organization tries to make profit with what their work on. 5
  6. 6. Market Orientation Concept Market orientation concept is the thought that the social and economic justification for an organization’s existence is the satisfaction of customer wants and needs while meeting organizational objectives(Carl McDaniel, 2006). In marketing there are have three simple concepts must be following: - Concentrate on customer wants and needs Combine all the organization activities Achieve long term goals Concentrate On Customer Needs and Wants Concept Basic fundamental of market orientation is the important of market activity that most interest and give more attention. That means, market orientation give effect on business profitability based on their purpose; they focusing on what customer want and need so that the organization can distinguish its product from competitors’ offering. For example, if we talk about Maybelline we already know it is all about cosmetic product products. In fact Maybelline meet and interview at least 15,000 customers every year to keep track customer perception and knowledge of the brand. They actually test the market of a new product before the products actual widely come out for market. So, they might know the future of the product although the product is not already sold. During them doing this interview or meeting session they identified the needs and wants and also determine the failure of the product and try took the competitive advantage for the products. Implementing of this concept may assist the rate of profit in the manufacturer business. It is challenge the competitor; on weakness and strength. Also the flow of products comes out from the stores depending on customer’s decision to purchase the products. Furthermore, the product will be change along the season base on customer’s ability to buy and needs. Other than that, the seller’s or manufacturer follows the customer’s desire for the product. By this, buyer or customer may highly conclude that they’re have been appreciate by the effort of the seller. In fact, the value of a seller’s offering to a buyer is the difference between what the buyer perceives as the offerings expected total acquisition and use coasts(Zeithaml, 1988). The market orientation concept generously can be said as the organization culture that most effectively creates behaviours for the creation superior value for buyer. A seller creates value for a buyer by increasing benefits to the buyer in relation to the buyer’s costs and decreasing the buyer’s costs in relation to the buyer’s benefits. For the simple explanation that means seller or manufacturer understand enough the buyer’s economic. Combines All Organization Activities In organizational activities of the seller, they combine of the activities only for their customer. They tend to make it possible based on customers need and want. If the customer need to buy the product by the seller based on their economic rate, the seller must followed the customers demand. Besides, the seller must satisfy the customer for their own benefit. Example for the demand of perfumes, Body Shop brand come out with apple blossom flavour with high price for customer to purchase and the ingredient content is might not be allowed for the certain customer; that means the ingredient have high in percentage of alcohol content which is not suitable for Muslim customers or might be can cause skin irritation. So, 6
  7. 7. the other company such as One Drop Perfume taka the weakness of Body Shop (competitor) as advantage and come out with ‘Apple Blossom’ inspired by Body Shop. It is not as plagiarize the Body Shop flavour perfume but it’s come out with the same flavour which is inspired by Body Shop with different ingredient based on seller’s consider about the customer needs. In addition, the One Drop Perfumes think wisely not to invest more on promote their product. It is because the apple blossom is already well known for the Body Shop brand. That means, they take the competitor weakness as their strength to be also well known in the market place. Achieve Long-term Goals Refer to the focusing or concentration on customer needs and want and combines all organization activities may conclude to achieve long-term goals. Achieving long-term goals for the organization by satisfying customer wants and need legally and responsibly(Carl McDaniel, 2006). Perhaps, the organizational planning based on all key elements in market orientation helps the increases of business profit and can be in the market for the long term. 7
  8. 8. BUSINESS PROFITABILITY What Is Business? Business is the organization that involved in the trade of goods, services or both to consumer with exchanged for one another or for money. Indeed, market is the places of business have done. What Is Business Profitability? In market orientation concept has achieving organizational for long-term goals. Business profitability is the primary goal of all business ventures. Without Profitability Company, organization or business will not survive for the long-term of the business stand in market place.Income and expenses is the rate profitability. The activities in the business can be generating by the income (money). Income also can be defined as simply a cash transaction between the businesses. Other explanation is, people or customer buy the product from the seller and the get the product. For the same time, the seller gets the money as an income of the selling product. End user demands or customer demands is the major determinants to create the potential for economic gains and again it is the same definition of profitability. Other than that, the customer demands may be utilize profitability, but are also a source of uncertainty. Utilizing or exploiting the opportunities will often require transaction specific investment based on the production facilities and marketing channel that committed to the certain group of customer. From exploiting profitability it might go through to the expenses gain for profitability. Expenses are the cost of resources used up or consumed by the activities of the business of the business. For example, wheat seed is an expense of a farm business because it is used up in the production process. Followed by that, business profitability is measured with an ‘income statement’(McGraw-Hill, 1996): Income Statement. Income Sale of crop products RM 60,000 Sale of livestock products RM 35,000 Government payments RM 15,00 Total income RM 111,000 Expenses Seed Fertilizer Feed Processing Marketing Interest Depreciation Total expenses Net income RM 20,000 RM 30,000 RM 20,000 RM 20,000 RM 10,000 RM 10,000 RM 20,000 RM 130,00 RM 19,000 8
  9. 9. THE EEFECTS OF A MARKET ORIENTATION ON BUSINESS PROFITABILITY Tools for Gaining Business Profitability Market orientation and business profitability have been explained previously and it can be assumed that this isrelated to each other. Based on market orientation organization behaviours; customer orientation, competitor orientation and interfunctional coordination also may developed the business performance(Stanley, Oct 1990). Research finding business profitability is orientation and business market orientation with business profitability. by Narver& Slater’s (1990) stated that market orientation and retested in a broad sample. The result show that the market profitability it is positively related between them. Application of continuously or rapidly in business may provide increasing on We close up to the market orientation concept which is concentrate and ensuring the customers’ needs and want, fulfil the customer satisfaction. It is stated that there consist connection between business profitability and market orientation. By using the all elements in the market orientation, it might be proving that the uses in the organization with highest degree of market orientation may have the highest profitability. Market orientation and firm performance stated that achieve greater financial returns from advance quality by stressing generation income only, along with its highlighting focus on customer satisfaction(Roland T. Rust, 2002). The organization used to follow on market orientation; they apply the market orientation to gain the business profitability for the long-term. In fact, if there any organization refuse or not use the market orientation as their based in business, it is also can gain profit but need or took long period for gain their business profitability. For example, Nokia 3310 a Germany cellular phone model which is OS type is still available sell and used by the buyers until today but they need keep going sell their product without consider with the customers satisfaction. Whereas, the other cellular phone company such as Samsung and HTC struggle to compete each other in producing touch screen and Android software type of cellular phone for crave in return of customers and highly tend to satisfy the customer based on their current needs. More Suitable For Big Organization or Company Although market orientation make the company increasing gain business profitability, it is not suitable for small medium entrepreneur (SME) company and dog’s stages in BCG. The fact is, small company usually produced only one product for the long of market period. It is because, the small company are divest or low-growth, low share business and products(Philip Kotler, 15th Edition). They may generate the production with enough cash to maintain themselves but do not promise to be large sources of cash, also called as break-even. Break-even is the point at which revenues equal expenses(Goodman, 2011). So, if they tend to follow the market orientation, they will face many problems especially on business profitability. They will suffer with liability losses and decreasing on business profitability. Moreover, based on PLC they can be determining as growth stage of 9
  10. 10. sales and profits. They are in rapid market acceptance and try to keep sustaining for increasing their business profitability. Assist To Predict the Customer Change When we know what customer needs and wants, we may realize the change based on past and current sales. For example, people outfit, they wants product (clothes) which is in trend and up-to-date. So, the company try to produce products based on what they want. Indeed, many factor that assist the organization to predict the customer change such as climate, competitor and etc. Climate or season may give an advantage to the organization in focusing and make it the product reliable and possible to the customer hand. By using the market orientation they try to make the product been sold to the customer and because of this it might be come out with the best business profitability rate. High in Cost Application of market orientation could affect the cost of the organization. The organization need to follow the concept of market orientation concept; concentrate on customer need and want, combines all organization activities and achieve long-term goals. If the organization practises this concept it might be interfere in sort of high cost preparation and also production. They need to keep going upgrade and produce the product(Kohli, 1996). 10
  11. 11. CONCLUSION Connection between market orientation and the business profitability can be conclude as link or related to each other. Actually, element and concept of market orientation assist the organization to gain business profitability and motivate the organization or seller to be progressive production to keep them stable and sustain their profitability in the long period. Besides, organization are able to works and establish and also maintaining which give an advantage to the customer. For example, organization able to reward the customer such as low price products to purchase for the membership holder, give the membership card to the loyal customer and etc. By following the market orientation, tendency of an organization to legally, willingness and responsible to examine the information which related to the competitors. Moreover, marketing products will run and flow smoothly in production regarding to build the higher business profitability. In a nutshell, an organization will know their ability and strength. Seller must understand enough with the market orientation purpose which is a sales does not depend on an aggressive sales force, but rather on customer’s decision either they want to purchase the products or not. 11
  12. 12. REFERENCES Carl McDaniel, C. W. (2006). Introduction to Marketing. China: Thomson South Western. Goodman, K. (2011). Focusing Studies of the Small Business. Financial Research Associates, 1-22. Hugo Daniel, O. R. (2010). Market Orientation Antecedents and Conceptual of Marketing. Marketing Orientation Atecedents, 1-77. Jean-Jacques Lambin, R. C. (2000). Market-Orientation and Corporate Performance. Emerging Issue in Management, 1-15. Kohli Ajay K, J. B. (1990). Market Orientation: The construct, research propositions, and managerial implications. Journal of Marketing, 1-18. Kohli, P. (1996). Marketing Management, 9th ed. Marketing Management, 1-18. McGraw-Hill, P. E. (1996). Budgeting and Finance. First Books for Business, 22. Narver John C, S. F. (1990). The effect of a market orientation on business profitability. Journal of Marketing, 20-36. Narver, J. C. (October 1990). The Effect of a Market Orientation on Business Profitability. Journal of Marketing, 20-35. Philip Kotler, G. A. (15th Edition). Principles of Marketing. United Stated: Pearson Education @ 20114. Roland T. Rust, C. M. (2002). Getting Return on Quality: Revenue Expansion, Cost Reduction, or Both? Journal of Marketing, 7-24. Stanley, J. C. (Oct 1990). The Effect of a Market Orientation on Business Profitability. Journal of Marketing, 1-16. Zeithaml, V. A. (1988). Consumer Perceptions of Price, Quality and Value: A Means-End Model and Synthesis of Evidence. Journal of Marketing, 2-22. 12