Market orientation and organizational performance

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

Department of Marketing, Faculty of Management and Finance, University of Ruhuna: Sri Lanka
Published at ResearchGate - June 2015
1
Umesh Gunarathne W.H.D.P. -2015
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/2010/2708
Department of Marketing
May 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 Administration
in Marketing

2
Acknowledgement
I 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 and
completion of this study.
First and foremost, I heartily 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 academic
and 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 practical
importance 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 to
complete 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 during
this 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 this
study success.

3
Table of Contents
Page
1. INTRODUCTION..............................................................................................1
1.1. Chapter Introduction ....................................................................1
1.2. Background of the Study .............................................................2
1.3. Problem Identification .................................................................4
1.3.1. Research Question ......................................................5
1.4. Objectives of the Study................................................................5
1.5. Significance of the Study.............................................................6
1.6. Chapter Outline............................................................................8
2. LITERATURE REVIEW .................................................................................9
2.2. Organizational Performance ........................................................10
2.3. Market Orientation.......................................................................12
2.3.1. Different views of Market Orientation .......................15
2.3.1.1. Kholi and Jaworski’s View..................15
2.3.1.2. Slater and Narver’s View.....................16
2.3.2. Customer Orientation..................................................19
2.3.3. Competitor Orientation...............................................21
2.3.4. Inter Functional Coordination.....................................22
2.3.5. Social Benefit Orientation...........................................24
2.4. Market Orientation and Organizational Performance..................25
2.5. Conceptual Framework................................................................35
2.6. Hypotheses Development ............................................................36
2.6.1. Customer Orientation & Organizational Performance36
2.6.2. Competitor Orientation & Organizational Performance
.....................................................................................37
2.6.3. Inter Functional Coordination & Organizational
Performance................................................................37
2.6.4. Social Benefit Orientation & Organizational
Performance................................................................38

4
3. RESEARCH METHODOLOGY .....................................................................40
3.2. Philosophy....................................................................................41
3.3. Research Design...........................................................................43
3.3.1. Exploratory Vs. Conclusive Research ........................43
3.3.2. Quantitative Vs. Qualitative Research........................42
3.4. Research Context .........................................................................45
3.5. Determination of Population and Sample....................................47
3.5.1. Population ...................................................................47
3.5.2. Sampling and Sample ................................................48
3.5.2.1. Sampling ..............................................48
3.5.2.2. Sample..................................................49
3.5.3. Extent..........................................................................50
3.6. Data Collection ............................................................................50
3.6.1. Primary data and Data Collection...............................50
3.6.1.1. Primary Data Collection Method.........51
3.6.2. Secondary Data ...........................................................51
3.7. Questionnaire Design...................................................................52
3.8. Pilot Study....................................................................................53
3.9. Data Collection ............................................................................54
3.10. Measurement and Scaling............................................................55
3.10.1. Primary Measurements ...............................................55
3.10.2. Organizational Performance .......................................55
3.10.3. Customer Orientation..................................................56
3.10.4. Competitor Orientation...............................................58
3.10.5. Inter functional Coordination......................................59
3.10.6. Social Benefit Orientation...........................................60
4. DATA ANALYSIS............................................................................................62
4.2. Demographic Factor Analysis......................................................63
4.2.1. Position of the Respondents........................................63
4.2.2. Age Composition of the Sample.................................64

5
4.2.3. Gender Composition of the Sample............................66
4.2.4. Educational Level of the respondents.........................67
4.3. Background Data Analysis ..........................................................68
4.3.1. Line of the Business....................................................68
4.3.2. Main Production of the Business................................70
4.3.3. Established Year of the Business................................71
4.4. Measurement Model ....................................................................72
4.4.1. Confirmatory Factor Analysis.....................................72
4.5. Validity and Reliability................................................................85
4.6. Structural Model ..........................................................................88
4.7. Hypothesis Testing.......................................................................89
5. DISSCUSSTION AND CONCLUSION .........................................................91
5.2. Summary of the Study .................................................................92
5.3. Findings of the Study...................................................................93
5.4. Contribution of the Study.............................................................94
5.4.1. Managerial Contribution.............................................94
5.4.2. Theoretical Contribution.............................................95
5.5. Limitations and Future research...................................................97
5.5.1. Limitations..................................................................97
5.5.2. Future Research ..........................................................98
References

6
List 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......................................................90

7
List of Figures
Figure 2.1: Kholi and Jawoski’s view on Market Orientation...................................16
Figure 2.2: Narver and Slater’s view on Market Orientation ....................................17
Figure 2.3: Developed Conceptual Framework.........................................................35
Figure 3.1: Basic research Designs............................................................................43
Figure 3.2: Sampling Techniques ..............................................................................48
Figure 3.3: Primary Measurement Scales ..................................................................55
Figure 4.1: Demographic Data – Position of the Respondents..................................64
Figure 4.2: Demographic Data – Age Composition of the Sample ...........................65
Figure 4.3: Demographic Data – Gender Composition of the Sample......................66
Figure 4.4: Demographic Data – Educational Level of the Respondents..................67
Figure 4.5: Background Data – Line of the Business................................................69
Figure 4.6: Background Data – Main Production......................................................70
Figure 4.7: Background Data - Established Year of the Business.............................72
Figure 4.8: Structural Model .....................................................................................88
Figure 5.1: Slater and Naver’s view of Market Orientation (MKTOR model) .........95
Figure 5.2: NEWMKTOR model ..............................................................................96

8
List of Appendices
Appendix 1: Covering Letter
Appendix 2: Survey Questionnaire (English)
Appendix 3: Survey Questionnaire (Sinhala Translation)
Appendix 4: Detailed Pilot Study Results
Appendix 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)

9
Declaration
I 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 where
due acknowledgment has been made in the text.
Signature of the student: ________________________________
Name of the student: ________________________________
Registration number of the student: ________________________________
Date: ________________________________

10
Certification
This 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 student
under my supervision. This dissertation has been submitted with my approval.
____________________________
Supervisor
Dr. Thusitha Gunawardhana
Department of Marketing
Faculty of Management and Finance
____________________________
Head, Department of Marketing
Faculty of Management and Finance

11
Abstract
Studying 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 in
small 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 developed
through this research study to measure the Market Orientation in different contexts.
Key Words: Competitor Orientation, Customer Orientation, Inter Functional
Coordination, Market Orientation, Organizational Performance and Social Benefit
Orientation

12
CHAPTER 1
INTRODUCTION
1.1. Chapter Introduction
This is the first 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 Organizational
Performance.
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 identifies the importance of the study in
detail.
Determined main objective and the sub objectives of the research study included in
the section five of this chapter. Section six of this chapter shows the structure of the
research study.

13
1.2. Background of the Study
During the last two decades with the rapid growth of the business economy
“Marketing” has become a significant 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 of
market orientation.
Today, each and every organization pay more consideration in order to maximize the
profit through satisfying customer’s needs and wants and keeping profitable
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 profits. Not only that when considering about customer’s
perspective, especially today consumers are more knowledgeable and rational when
compare with the past. They always expect higher level of satisfaction by fulfilling
their needs and wants through products and services. Therefore organizations should
give priority to fulfill the consumer’s 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 field 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 more
effective 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, 2010
and Narver and Slater, 1990). Slater and Narver (1990) concluded that market

14
orientation consists of three behavioral components: Customer Orientation,
Competitor Orientation, and Inter Functional Coordination. They conceptualized an
organization’s degree of market orientation as the sum total of its emphasis on these
three 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 in
the 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 America’s
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 of
marketing concept.
Market oriented organizations typically have a long term focus related to profits 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 discovers
and 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 the
industry by an organization.

15
Result of the implementation of business practices can be identified 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 of
the organization.
1.3. Problem Identification
Although 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
influence 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 influence attitudes people have toward different aspects of their lives
including attitudes toward Market Orientation (Homer and Kahle, 1988). These
attitudes, in turn, influence 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,
firm performance largely depends on market performance and employee performance
(Hansen and Wernerfelt, 1989). This is the rationale for studying the influence 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
efficient and effective progress. Not only that, therefore, before plan new marketing
strategies or to evaluate current system it essential to conduct a research study. Based

16
on the research findings managers can make decisions in order to achieve better
organizational 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 importance
and 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 Benefit
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 first time this research study considered about small
and 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 benefits by an organization on behalf of increase of performance
of the organization and it will help to make a good image in customer’s mind about
the organization and its products. And also it comes with the Societal Marketing
Concept and the concept Corporate Social Responsibility as well.

17
1.3.1.Research questions
Once 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 and
Organizational Performance?”
In addition to main research question sub questions are,
 What is the relationship between Customer Orientation and Organizational
Performance?”
 What is the relationship between Competitor Orientation and Organizational
Performance?”
 What is the relationship between Inter Functional Coordination and
 What is the relationship between Social Benefit Orientation and
1.4. Objectives of the Study
The main objective of this research study is,
 To examine the relationship between Market Orientation and the
Organizational Performance.
In addition to that sub objectives are,
 To examine the relationship between Customer Orientation and the
 To examine the relationship between Competitor Orientation and the
 To examine the relationship between Inter Functional Coordination and
 To examine the relationship between Social Benefit Orientation and

18
1.5. Significance of the Study
Mainly 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
profitable 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 market
orientation 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 understand
marketing theories differently from their counterparts in other economies.
Building on the initial research by, Kholi and Jaworski (1990) and Narver and Slater
(1990), significant 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 specific. Market orientation is
often considered to be marketing’s contribution to business strategy (Hunt and

19
Lambe, 2000), and its salient dimensions, competitor orientation and customer
orientation, 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, competitor’s reactions,
coordination of different functions within the organization and social benefits 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 profits.
Further, this provides what kind of marketing strategies should be taken on behalf of
the organizational success and the increase the marketing performance of the
organization.
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 relationship
between Market Orientation and Organizational Performance.

20
1.6. Chapter Outline
The first chapter describes the introduction of the research study, problem
identification and research questions, the objectives which are going to achieve
through the research and significance of the research study. Further it includes the
structure 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 Confirmatory 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 findings &
conclusion and managerial implications. Further, it includes limitations of the
research study and future directions for future researchers. And also theoretical
contribution for the market orientation is included in this chapter five.

21
CHAPTER 2
LITERATURE REVIEW
2.1. Chapter Introduction
This 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 Benefit 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 dependent
variable, 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 definitions and the concepts, there are main two
theories has been identified. Those theories are essential to get proper understanding
and 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 the
previous research findings.

22
2.2. Organizational Performance
Performance is a fairly broad concept, and it is meaning changes in accordance with
user’s 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 financial 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
financial performance (Anderson, 1997). Similarly, studies demonstrate the influence
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 (O’Sullivan,
2009).
Organizational performance refers to the firm’s market and financial performance,
which is positively related to the firm’s economic value (Slater and Narver, 1994)
According to the definition 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 firm’s 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 firm is more likely to achieve high levels of
customer satisfaction, to keep existing customers loyal, to attract new customers, and

23
subsequently to attain the desired level of growth, market share, and hence of
organizational 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 important
concepts 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 (Griffin, 2003). Professional
scholars namely Stoel horst (2001) and Van Raaij (2004) describe market orientation
as marketing’s explanation of performance differentials between firms. Market
orientation enhances a firm’s 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 of
performance 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
marketing’s stature (Rust et al., 2004). One study to date (O’Sullivan and Abela,
2007) has demonstrated a positive relationship between the ability to measure
marketing performance, and actual firm performance (O’Sullivan and Abela, 2009).
However, marketing performance is the subjective assessment of an organization’s
performance relative to its competitors over the previous three years across three
attributes: market share growth, revenue growth and sales growth. Therefore, the
study evaluates marketing performance using the subjective approach to measuring

24
performance. A number of authors defend the adequacy of subjective measures as
opposed to objective ones (Pertusa Ortega et al, 2010). Conceptually, growth reflects
increases in sales and is often reflected 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 reflects 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 the
organization in delivering value to its customers and is often viewed as an antecedent
to profitability (Vorhies and Harker, 2000).
2.3. Market Orientation
Market Orientation receives a significant 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 firm 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 of
a defendable competitive advantage, decreased costs and increased profits
(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 organization’s operations and the subsequent support given to this idea by Levitt
(1960) that the customer is the reason for the organization’s 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 intelligence

25
generation, dissemination and responsiveness to market information for efficient and
effective decisions (Sundqvist, Puumalainen and Saminen, 2000; Kohli and Jaworski,
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 inducement
for 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 the
concept 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 which
help firms stay close to their consumers (Hsieh et al. 2008). Conceptually, market

26
oriented 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 Jaworski (1990), and a cultural
perspective based on Narver and Slater (1990). But in this research study paid
attention 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 efficiently 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 competitors
in 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
organization’s 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 the
market orientation literature suggests that market-oriented firms are in a better

27
position 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
efficiently 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 profitability”, 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 firms (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 very
prolific (Farrelly and Quester, 2003).
2.3.1. Different views of Market Orientation
Although 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 Orientation
It 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
first paper, by Kohli and Jaworski (1990), viewed market orientation as the
implementation of the marketing concept. In the model they proposed emphasizes the

28
collection 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
profitability 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 for
the company.
Figure 2.1:- Kohli and Jaworski’s view on market orientation.
Source: Kohli and Jaworski (1990).
Figure 2.1 shows the interaction between intelligence generation, dissemination and
responsiveness. Intelligence gathering is just what the name implies, gathering
intelligence 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 system’s 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 only
willing to share information if it implies no cost.

29
2.3.1.2. Narver and Slater’s View of Market Orientation
The 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. Narver´s and Slater´s 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 one
corporation. 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 firms 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 definition: “Market orientation consists of three
behavioural components such as customer orientation, competitor orientation, and
inter functional coordination and two decision criteria long term focus and
profitability.”
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 and
profitability to their model.
Figure 2.2: Narver and Slater’s view on market orientation.
Source: Narver and Slater (1990).

30
Figure 2.2 shows the interaction between the three behavioural components; customer
orientation, 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 customer´s customers and their business environment and how
that will develop in the future. This concept matches with Kohli´s and Jaworski´s
(1990) suggestion that companies must collect and assess data on customer´s 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 fill current and future customer
needs 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 and
distributing that knowledge throughout the organization. This means that the market

31
oriented company must provide adequate business processes and systems for data
input and coordinate the communication of disseminated business info in order to
create 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 the
customer.
The two decision criteria shown in the figure 2.2 are a long term profit focus and
profitability. It is through the continuous creation of superior customer value that a
business creates its long-run profit performance. A short period marketing campaign
or sales action might boost sales, but the organizational image and generation of
repeat 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 to
better performance.
Although both papers by Slater and Naver (1998) and Kohli and Jaworski (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 Naver (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 the
relationship between Market Orientation and Organizational Performance.

32
Accordingly, entire current research study is based on the four behavioural
components of the Market Orientation.
2.3.2. Customer Orientation
The heart of the market orientation is its customer focus. To create superior value for
buyers continuously requires that a seller understand a buyer’s 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
efficient 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 defined 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 reflect 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 with
community 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 Jaworski, 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 consumers
thereby become accustomed to this philosophy (Ritchie, and Zerbe, 2000).
A firm’s 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-selling
strategy.

33
Narver and Slater (1990) described customer orientation as the sufficient
understanding of a company’s 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 Jaworski, 1990) found in their
interviews with company managers that a customer focus is a critical element in
determining market orientation.
2.3.3. Competitor Orientation
According 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 alternative
from 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
defined as firms 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 firm’s current and potential competitors may therefore be found among firms
with similar and dissimilar production technology platforms. A competitor orientation
may lead to a cost advantage because competitor oriented businesses tend to watch
costs 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 running
daily operations than with long term business planning (Amer and Bain, 1990;

34
Robinson 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 to
improve appropriate business marketing and planning skills.
Competitor orientation can enhance a firm’s 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, Rindfleisch,
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 profitability of a firm
and suggested that firms should focus on maximising their own profit and ignore their
competitor’s 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 such
information can be used to build a competitive advantage in the industry it operates.

35
2.3.4. Inter Functional Coordination
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 organization’s goal”
(Narver and Slater, 1990). According to Porter (1985), inter functional coordination
can be defined as every department, facilities, branch office and other organizational
units has a role that must be defined 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 integration
and collaboration of different functional areas or departments.
Inter functional coordination describes the ability of different functional areas to
accommodate disparate views and work around conflicting perspectives and mental
models by putting aside functional interests for the better of the organization as a
whole.
As the literature on internal marketing is rapidly growing, Inter Functional
Coordination is also viewed as an important criterion of internal marketing. Rafiq 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 “officially” identified 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 Functional
Coordination 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 organization’s
goal (Narver and Slater, 1990). According to the definition of Slater and Narver in
1990, to become customer oriented organization communication of information is

36
must. Inter functional coordination describes the ability of different functional areas to
accommodate disparate views and work around conflicting 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 conflicting 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 marketing
concept (Harrison and Shaw, 2004).
2.3.5. Social Benefit Orientation
Social benefits can be defined as the increase in the welfare of a society that is derived
from a particular course of action. Most social benefits cannot be quantified (Paul and
kwon, 2002). Through this definition it is crystal clear that Social benefit 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 benefits of production or consumption. Although in this definition 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).

37
Another way of explaining about Social benefit is defined by measurement against a
“third-party standard,” and all statutes permit incorporators to also pursue more
“specific Social benefits” 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 flow 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 to
positioning in consumer’s mind about the organizations as well as the products.
When it comes to Sri Lankan context because of the cultural situations, Social Benefit
has become very important and essential concept today business industry.
2.4. Market Orientation and Organizational Performance
Prior 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 Jaworski (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 defines 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 Jaworski (1990) view has been subjected to criticism (Diamantopoulos and Hart,
1993) while the Narver and Slater (1990) conceptualization has been praised (e.g.,

38
Greenley, 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 the
forms of orientation and performance.

39
Table 2.1:- Summary of the previous research findings
Author/s Research Questions/
Objectives
Findings
1 Slater and
Narver
(1990)
To examine the relationship
between Market orientation,
Customer value and
superior Performance.
 Major finding was there is a
Strong relationship between
market orientation and superior
performance.
 A substantive Market orientation
must be the foundation for a
business competitive advantage
strategy.
2 Fred
Langerak,
Erik Jan
Hultink,
and Henry
S. J.
Robben
(2010)
To determine how critical
NPD activities are for a
market-oriented firm to
achieve superior
performance
 The Results provide evidence that
a market orientation is related
positively to product advantage
and to the proficiency in market
testing, launch budgeting, launch
strategy, and launch tactics.
 Product advantage and the
proficiency in launch tactics are
related positively to new product
performance, which itself is
related positively to
 Market Orientation has no direct
relationship to new product
performance and to
3 Laith
Alrubaiee
(2013)
Investigate the Relationship
between New Service
Development, Market
 There is a Positive Relationship
between New Service
Development, Market Orientation

40
Orientation and Marketing
Performance.
and Marketing Performance.
4 Michael
K. Brady,
J. Joseph
Cronin,
Jr.(2009)
The main objective is
investigates the effect of
being customer oriented on
service performance
perceptions and outcome
behaviours.
 Finding was in service sector
customer orientation is a more
important and it highly influence
to Perceptions and outcome
behaviours.
5 Mohamme
d Abdulai
and
Mahmoud
(2011)
What is the relationship
between Market Orientation
and Business Performance
among SMEs in Ghana?
 They highlighted that the
development of market
orientation in this sector rests
more on the attitude of owners/
managers and, more importantly,
the repeatedly reported
performance implication of
market orientation does not elude
Ghanaian SMEs. More
specifically, market orientation.
6 Jin K Han,
Namwoon
Kin and
Rajendra
K
Srivastva.
(1996)
Main objective was to
Examine the role that
organizational innovations
play in the context of the
relationship between Market
orientation and
Organizational performance.
 Exhibited in conclusion there are
two components of Market
orientation are unimportant. And,
 Competitor orientation is very
important to the Organizational
performance.
7 Ronald E.
Michaels
and Ralph
L. Day
(2010)
Measuring Customer
Orientation of Salespeople:
A Replication With
Industrial Buyers.
 Tentatively conclude that the
SOCO scale works as well with
buyers as with salespeople. We
hope further testing of the SOCO
construct in the future will lead to
its refinement and that its use will
contribute to improvements in the
quality of research on

41
salesperson-buyer interactions.
8 Aaron J.
Johnson,
Clay C.
Dibrell,
and Eric
Hansen
( 2004)
Incorporates market
orientation theory
(competitor orientation,
customer orientation, and
inter functional
coordination) and firm
innovativeness to explain
differences in firm financial
performance.
 The more successful firms are
more internally focused (inter
functional coordination and
innovativeness) than externally
focused (competitor and customer
orientation).
9 Seigyoung
Auh1,
Bulent
Menguc
(2005)
Top management team
diversity and
innovativeness: The
moderating role of inter
functional coordination.
 Results generally supported
hypothesis in that the effect of
TMT diversity on
innovativeness was positive as
inter functional coordination
increased.
10 Thorsten
Hennig-
Thurau
(1999)
How does Customer
Orientation impact on
customer satisfaction,
commitment, and retention?
Considering as a whole, they
found that especially customer
oriented activities highly impact
to the customer satisfaction and
retention.
11 Anis Ben
Brik
Belaid
Rettab
Kamel
Mellahi
(2010)
How do Market Orientation
and CSR impact on
Business Performance
 CSR significantly moderates the
association between customer
orientation and financial
performance.
 All interactions are insignificant,
with the exception of the
relationship between customer
orientation and financial
performance.
 Customer orientation has a
significant negative moderating
effect on financial performance.

42
But, this association becomes
positive, albeit weak, at a high
level of CSR.
12 Mark
Schreiner
(2002)
A Framework for the
Discussion of the Social
Benefits of Microfinance
 They found in microfinance
social benefits are not important.
Because there is no any direct
impact of Social benefits to the
Micro finance industry.
13 Vasilis
Theoharak
is and
Graham
Hooley
(2009)
Examine the relationship
between Customer
orientation and
innovativeness: differing
roles in new And old
Europe.
 Customer orientation practices
are particularly effective in
enhancing firm-level
performance for firms from New
European transition economies.
 Core finding is that returns on
customer orientation and
organizational innovativeness
are different in Old and New
European countries.
14 Thorhallur
Gudlaugss
on and
Adrianus
Philip
Schalk
(2009)
Examine the Effects of
Market Orientation on
Business
Performance: Empirical
Evidence from Iceland
The bank has a strong external
focus combined with a focus on
stability. The “adaptability”
dimension (the measure of
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 a
moderately strong relation with
employee satisfaction.
The bank is very profit-oriented,
which might explain its low
score on some dimensions. The

43
results from this study are in line
with the results from other
Icelandic studies that have used
DOCS to measure the shape of
organizational culture.
15 Ken
Matsuno,
John C
Mentzer,
and
Aysegul
Ozsomer
(2002)
How do Entrepreneurial
Proclivity and Market
Orientation effect on
Business Performance?
 The results indicate that
Entrepreneurial Proclivity has
not only a positive and direct
relationship on market
orientation. But also indirect and
positive effect on Market
Orientation through the
reduction of
departmentalization.
 The results also suggested that
Entrepreneurial Proclivity’s
performance influence is
positive when mediated by
market orientation but negative
or non-significant when not
mediated by Market Orientation.
16 Deshpand
e´, R.and
Farley,
J.U.
(1996),
Organizational culture,
market orientation,
innovativeness, and firm
performance: an
international research
odyssey”.
 The results show that
Organizational culture, Market
orientation and innovativeness
are positively effect to the
success of the firm’s
performance.
 In addition to that there should
be a good innovativeness within
the organization.

44
17 Sin, L.Y.M.,
Tse, A.C.B.,
Yau,
O.H.M.,
Chow,
R.P.M. and
Lee, J.S.Y.
(2003)
Examine The relationship
between Market
orientation and business
performance: a
comparative study of firms
in mainland China and
Hong Kong.
 The scholars point of view they
found that both China and Hong
Kong Marked oriented activities
are highly effect to the Business
performance as well as specially
customer oriented marketing
strategies leads to success of the
business.
 Not only that when compare
with both countries they found
that those countries are used
different Market oriented
strategies in order to enhance the
performance of the companies.
18 O’Sullivan,
D. and
Abela, A.V.
(2007)
The main objective is to
Examine the Marketing
performance measurement
ability and firm
performance.
 According to the findings of this
research paper they have found
that Marketing performance can
be measured by using different
developed scales as well as they
have exhibited the firms
performance totally depends on
the Market oriented activities.
19 Albert
Maydeu-
Olivares,
Nora Lado (
2008)
“Market orientation and
business economic
performance”, Main
objective is to provide a
necessarily partial model
for how this impact takes
place using innovation
degree, innovation
performance and customer
loyalty as intermediate
variables.
 This study found that the effects
of market orientation on
economic performance are
completely channeled through
these variables, particularly
through innovation degree and
innovation performance. Based
on the results the paper provides
guidelines for improving the
market share, premium growth
and proﬁtability of European

45
Union insurance firms.
20 Fred
Langerak,
Erik Jan
Hultink, and
Henry S. J.
Robben
(2004)
The Impact of Market
Orientation, Product
Advantage, and Launch
Proficiency on New
Product Performance and
Organizational
Performance.
 The results provide evidence that
a market orientation is related
positively to product advantage
and to the proficiency in market
testing, launch budgeting, launch
strategy, and launch tactics.
 Product advantage and the
proficiency in launch tactics are
related positively to new product
performance, which itself is
related positively to
 Market orientation has no direct
relationship to new product
performance and to
21 Baker
Sinkula
(1999)
How do Synergistic Effect
of Market Orientation and
Learning Orientation on
Organizational
Performance?
 Market orientation has impact on
performance.
 Market orientation has more
impact on performance with the
mediation of learning
orientation.
 Market orientation has impact in
the increase of market share with
the mediation of learning
orientation.
 Market orientation and new
products’ performance decrease
with the mediation of learning
orientation.
22 Deshpande To examine the  Customer orientation has impact

46
25 Noble Market Orientation and  Competitor orientation is related
Farley
Webster
(1993)
relationship between
Corporate Culture,
Customer Orientation, and
Innovativeness in Japanese
Firms
on performance.
 Innovativeness has impact on
performance.
23 Matear
Osborne
Garrett Gray
(2002)
‘How Does Market
Orientation Contribute to
Service Firm Performance?
An Examination of
Alternative Mechanisms’,
 Market orientation has positive
and meaningful impact on
performance.
 When market orientation,
innovativeness and performance
are approached together, it is
observed that innovativeness
acts as a mediator between
market orientation and ﬁnancial
performance.
24 Adrianus
Philip
Schalk
(2009)
To measure the shape of
this bank´s organizational
culture; the level of its
market orientation; and to
test the relationships
between the cultural
dimensions defined in the
measurement instrument
which is the Denison
Model
Of Organizational Culture
Survey (DOCS) and
business performance?
 The results in this study show
that the independent variable,
market orientation, explains only
4% of the total variation in
business performance (r= 0.20),
(R²=0.40). This means that the
business performance of the
bank is for 96% influenced by
other explanatory variables than
market orientation

47
Sinha
Kumar
(2002)
Alternative Strategic
Orientations: A
Longitudinal Assessment of
Performance Implications’
to performance in any occasion.
 Customer orientation is not
related to performance.
 Impact of a mediator between
market orientation and
performance must be searched
for.
 There is a positive relation
between learning orientation and
performance; and learning
orientation acts as a mediator
between market orientation and
performance.
26 Pelham
(1997)
Firm effectiveness, sales
growth/ market share
 Firm effectiveness (+), Sales
growth/market share (0)
27 Krista R.
Muis · Lisa
D.
Bendixen ·
Florian C.
Haerle
(2006)
Epistemology Research:
Philosophical and
Empirical
Reflections in the
Development
of a Theoretical Framework
 Theoretical framework of personal
epistemology that incorporates
both positions and hypothesizes
how the belief systems might
interact in terms of the
development of personal
epistemology and relations to
various facets of cognition,
motivation, and achievement. The
article ends with a discussion of
educational implications.

48
2.5. Conceptual Framework
Conceptual framework developed based on the literature review and it has been
finalized according to the arguments in previous literature.
Market Orientation
𝐻1 : +
𝐻2 : +
𝐻3: +
𝐻4: +
Figure 2.3:-Conceptual Framework
Source: - Developed for the research study (2014)
Figure 2.3 shows the conceptual framework and further it represents the relationship
among Independent variables such as Customer Orientation, Competitor Orientation,
Inter functional Coordination, Social Benefit Orientation and the dependent variable
Customer Orientation
Competitor Orientation
Organizational
Performance
Inter functional
Coordination
Social benefit
Orientation

49
2.6. Hypotheses Development
There are four hypotheses have been developed in order to test through the research
study. Three hypotheses developed based on the previous research studies conducted
in different contexts related to the Market orientation and Organizational
Performance. One hypothesis is developed by considering the nature of the businesses
field and the importance of the variable for the manufacturing industry.
2.6.1. Customer Orientation and Organizational Performance
According to Slater and Narver (1994), Organizational performance refers to the
firm’s market and financial performance, which is positively related to the firm’s
customer orientation (Slater and Narver, 1994).
The view of Hunt and Morgon (1995), they have conducted a research and the results
were customer focused strategies in competitive organizations positively related with
their performance, because a market oriented culture has been represented as one of a
firm’s competitive capabilities and performance (Hunt and Morgan, 1995).
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 firm is more likely to achieve high levels of customer
satisfaction; to keep existing customers loyal; to attract new customers; and
subsequently to attain the desired level of growth, market share, and hence of
organizational performance (Homburg and P.flesser, 2000).
Another scholar called Deng and Dart in (1994) conducted a research study by putting
148 firms across industries as their sample and could be able to find that there is a
high influence of customer oriented activities on firm performance.
By considering previous research findings, the following hypothesis is proposed.
+𝑯 𝟏 : - There is a positive relationship between Customer Orientation and
Organizational performance

50
2.6.2. Competitor Orientation and Organizational Performance
Customer focus may play a key part in the strategy to create superior customer value,
but an effective strategy requires more than simply customer centered methods. A
complete reliance of customer orientation can often lead to incompleteness in
business strategy, which leaves an organization prone to a reactive posture in coping
with competitor’s strategies (Day and Wensley, 1988). Further, Day and Wensley
(1998) highlighted that competitor oriented strategies increase the performance of a
firm.
Griesinger and Livingston (1973) concluded from a review of experimental game
literature that the proportion of ”competitive” subjects varies depending on
personality, cultural factors, and situational factors, such as feedback and game
instructions. They also concluded that many subjects seemed eager to know what was
expected of them in order that they might adopt an appropriate orientation to the
game. For example, the results from laboratory studies by Deutsch (1958, 1960)
imply that explicit support for competitor oriented objectives has a strong effect on
In addition to that in 1993, Slater and Narver has conducted a research and found
there is a positive association among subjective evaluation of market performance,
sales growth and new product success, relative to competitors and in 1996 also they
have conducted a research again and they found that the competitor oriented activities
positively association with sales growth, and firms performance and but not profit.
Based on above mentioned research findings the researcher suppose the following
hypothesis for current study,
+𝑯 𝟐 : - There is a positive relationship between Competitor
Orientation and Organizational Performance

Market orientation and organizational performance

Market orientation and organizational performance

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (18)

Similar to Market orientation and organizational performance

Similar to Market orientation and organizational performance (20)

Recently uploaded

Recently uploaded (20)

Market orientation and organizational performance