Market Orientation And Service Firm Performance - A Research Agenda 9781845446208, 9780861767410

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European Journal of Marketing

ISSN 0309-0566 Volume 36 Number 9/10 2002

Market orientation and service firm performance – a research agenda Guest Editors Brendan J. Gray and Graham J. Hooley Paper format European Journal of Marketing includes 12 issues in traditional paper format. The contents of this issue are detailed below.

Internet Online Publishing with Archive, Active Reference Linking, Emerald WIRE, Key Readings, Research Register, Institution-wide Licence, E-mail Alerting Service and Usage Statistics. Access via the Emerald Web site: http://www.emeraldinsight.com/ft See p. 963 for full details of subscriber entitlements.

Access to European Journal of Marketing online _________________________________

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Editorial review board ____________________________

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Abstracts and keywords __________________________

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French abstracts__________________________________

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German abstracts _________________________________

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Spanish abstracts _________________________________

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Guest editorial ___________________________________

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List of reviewers _________________________________

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Market-oriented value creation in service firms Rod B. McNaughton, Phil Osborne and Brian C. Imrie ________________

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Market orientation in service: a review and analysis ´ gueda Esteban, A ´ ngel Milla´n, Arturo Molina and David Martı´n-Consuegra 1003 A

Market orientation and social services in private non-profit organisations ´ lvarez and Marı´a Leticia Santos ________ 1022 Rodolfo Va´zquez, Luis Ignacio A

Culture and leadership in market-oriented service organisations Hans Kasper __________________________________________________ 1047

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CONTENTS

CONTENTS continued

How does market orientation contribute to service firm performance? An examination of alternative mechanisms Sheelagh Matear, Phil Osborne, Tony Garrett and Brendan J. Gray______ 1058

Market-oriented behavior: comparing service with product exporters John W. Cadogan, Sanna Sundqvist, Risto T. Salminen and Kaisu Puumalainen ____________________________________________ 1076

Antecedents of international performance: a service firms’ perspective Muris Cicic, Paul Patterson and Aviv Shoham _______________________ 1103

Redefining market orientation from a relationship perspective: theoretical considerations and empirical results Gabriele Helfert, Thomas Ritter and Achim Walter ___________________ 1119

Market orientation and incumbent performance in dynamic markets Monica L. Perry and Alan T. Shao ________________________________ 1140

Market orientation and business performance: a framework for service organizations Chiquan Guo __________________________________________________ 1154

Book review______________________________________ 1164 About the authors ________________________________ 1167

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EDITORIAL REVIEW BOARD Dr Ali Bin Khalifa Al-Khalifa University of Bahrain, State of Bahrain Professor George J. Avlonitis Athens University of Economics & Business, Greece Professor Michael Baker Westburn Publishers Ltd, UK Professor John M.T. Balmer University of Bradford Management Centre, UK Professor Jim Bell University of Ulster, Magee College, Northern Ireland Professor Stephen Brown University of Ulster at Jordanstown, Northern Ireland Professor Douglas Brownlie University of Stirling, UK Professor Francis A. Buttle Manchester Business School, UK Professor S. Tamar Cavusgil Michigan State University, USA Professor Brett Collins Auckland University of Technology, New Zealand Dr Nicole Coviello University of Calgary, Canada Dr David W. Cravens Texas Christian University, USA Professor Anthony C. Cunningham University College, Dublin, Ireland Professor Tevfik Dalgic University of Texas at Dallas, USA Professor Adamantios Diamantopoulos Loughborough University, UK Professor Gordon R. Foxall Cardiff University, UK Professor Pervez N. Ghauri University of Groningen, The Netherlands Dr Christina Goulding University of Wolverhampton, UK Ken Grant Monash University, Australia Professor Gordon E. Greenley Aston Business School, UK Professor Kjell Grønhaug Norges Handelshoyskole, Norway Dr Phil Harris Manchester Metropolitan University, UK Professor Roy Hayhurst University of Limerick, Ireland Professor Graham J. Hooley Aston Business School, UK Professor Ga´bor Hova´nyi University of Pe´cs, Hungary Professor Claes Hultman ¨ rebro University, Sweden O Dr Mark Jenkins Cranfield University, UK Professor David Jobber University of Bradford, UK Dr Laszlo Karpati University of Debrecen, Hungary Professor Hans Kasper University of Maastricht, The Netherlands Professor Erdener Kaynak Pennsylvania State University, USA

Professor Raymond LaForge University of Louisville, USA Professor Uolevi Lehtinen University of Tampere, Finland Professor Barbara Lewis UMIST, UK Dr Veronica Liljander Swedish School of Economics and Business Administration, Finland Dr Andrew McAuley University of Stirling, UK Professor Jan Mattsson Roskilde University, Denmark Professor Bill Merrilees University of Newcastle, Australia Professor Morgan Miles Georgia Southern University, USA Professor Carla Millar TSM Business School, The Netherlands Professor Luiz Moutinho University of Glasgow Business School, UK Professor Patrick Murphy University of Notre Dame, USA Aidan O’Driscoll Dublin Institute of Technology, Ireland Professor Adrian Palmer Gloucestershire Business School, UK Dr Paul G. Patterson University of New South Wales, Sydney, Australia Professor Chad Perry University of Southern Queensland, Australia Professor Nigel F. Piercy University of Wales, Cardiff, UK Professor Michael Saren University of Strathclyde, UK Professor Susan Shaw University of Strathclyde, UK Professor David Shipley University of Dublin, Ireland Dr Wai-Sum Siu Hong Kong Baptist University, Hong Kong Professor Richard Speed Melbourne Business School, Australia Professor Bernd Stauss Catholic University of Eichstatt, Germany Dr Kate Stewart University of Ulster at Jordanstown, Northern Ireland Professor Len Tiu Wright De Montfort University, UK Professor Peter Turnbull University of Birmingham, UK Professor Caroline Tynan Nottingham Business School, UK Professor Eduard Urban University of Economics, Slovakia Professor Salvatore Vicari Bocconi University, Milan, Italy Dr Martin Wetzels University of Limburg, Maastricht, The Netherlands Dr Gordon Wills International Management Centres, UK

Market orientation and service firm performance – a research agenda Brendan J. Gray and Graham J. Hooley Keywords Market orientation, Service industries, Services marketing, Performance The service sector is an increasingly important source of job creation and economic wealth, and accounts for more than 75 per cent of the GDP of many developed economies. Yet there has been surprisingly little research into the relationship between market orientation and service firm performance. This editorial reviews the major research themes relating to market orientation and service firm performance and suggests an agenda for future research to improve understanding of this important marketing and management issue.

Market-oriented value creation in service firms Rod B. McNaughton, Phil Osborne and Brian C. Imrie Keywords Competitive advantage, Market orientation, Organizational performance, Value analysis A fundamental proposition in marketing strategy is that a market orientation is positively related to firm performance. However, the mechanisms of this relationship have yet to be explored in detail, especially in service industries where intangible assets are relatively more important. This paper addresses this issue by proposing a model that identifies important intermediate variables between a market orientation and increased firm value. The model posits that a market orientation guides investment in market-based assets and other asset types, that these assets may be levered to create a competitive advantage and value for customers, and that this results in loyalty and easier customer attraction. Quicker and more extensive market penetration, shorter sales cycles, and decreased marketing and sales costs enhance the cash flow of a marketoriented firm. This may be recognised in higher valuations, which ultimately translate into higher share prices and wealth creation for the owners of the firm.

Market orientation in service: a review and analysis ´ gueda Esteban, A ´ ngel Milla´n, Arturo Molina A and David Martı´n-Consuegra Keywords Market orientation, Service industries, Organizational performance, Marketing concept The association between economic development and growth of the service sector seems indisputable. Although it is necessary to highlight that services are of a different nature from that of products, nowadays the latter are more and more penetrated by complementary services, given the circumstance that services themselves also include, occasionally, the use and consumption of products. Market orientation had been developed mainly in association with tangible products; therefore it is necessary to carry out a study where the evolution of the market orientation is reflected in the service sector independently from industrial sectors. That is why a historical summary of the evolution of market orientation on the service sector has been performed. Market orientation and social services in private non-profit organisations ´ lvarez and Rodolfo Va´zquez, Luis Ignacio A Marı´a Leticia Santos Keywords Market orientation, Non-profit organizations, Social services Very little attention has been devoted so far to the study of the market orientation concept in private non-profit organisations. However, there is a general agreement concerning the positive effects that this concept’s adoption has on the non-profit services implementation as well as on these organisations’ long-term success. Thus this paper aims at obtaining further empirical evidence on this field of research using a private foundations sample. Nevertheless, it is considered that the distinctive and specific nature of private non-profit organisations’ activities deserves the development of a special instrument to evaluate their degree of market orientation. In this sense, one of this study’s main contributions is the development of a market orientation measurement scale which accounts for the peculiarities of private nonprofit organisation’s operations. Additionally, the study proves the positive effect of market

Abstracts and keywords

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orientation on the non-profit outcomes and on the fulfilment of these organisations’ missions. Culture and leadership in market-oriented service organisations Hans Kasper Keywords Market orientation, Services marketing, Leadership, Corporate culture, Learning organizations The fields of market orientation and services marketing are still rather new domains of scientific research. It appears that they have quite a few challenging topics in common. This paper combines some of those topics. It focuses on the culture of market-oriented services organisations and the leadership styles that may belong to such a culture. An open culture which is reflected in clarity in marketing goals and a strong drive to be the best (deliver superior value or quality) are the essential features of such a culture. This calls for achievement-oriented leaders who care about people. How does market orientation contribute to service firm performance? An examination of alternative mechanisms Sheelagh Matear, Phil Osborne, Tony Garrett and Brendan J. Gray Keywords Service operations, Company performance, Market orientation, Innovation This study utilises the inter-relationship between market orientation and innovation in order to examine alternative mechanisms through which market orientation contributes to service firm performance. Three mechanisms (direct, mediated and moderator) are examined using regression analysis and structural equation modelling in a sample of 231 firms which develop new services. Market orientation is found to contribute to performance through a dual mechanism in that it contributes both directly and through innovation, with innovation mediating the contribution. These results emphasise that researchers should consider the inter-relationships between multiple sources of advantage in seeking explanations of firm performance.

Market-oriented behavior: comparing service with product exporters John W. Cadogan, Sanna Sundqvist, Risto T. Salminen and Kaisu Puumalainen Keywords Export, Market orientation, Service operations, Product management, Company performance The activities of service and product firms are compared in terms of their market-oriented behavior in their export operations (i.e. their export market-oriented (EMO) behavior). Empirical analysis conducted on a sample of 783 Finnish exporters containing both service and product firms uncovered several interesting differences: service and product firms differed in their level of EMO behavior; the direct effects from EMO behavior to various dimensions of export success were invariant across the samples; however, the export environment moderated the link between EMO behavior and export profit performance in different ways across the samples. The results indicate that EMO behavior may be more appropriate under certain environmental conditions, and less appropriate under others. However, the nature of the relationship between EMO behavior and export success may also depend on whether the firm’s core export market offerings are services or physical products. Antecedents of international performance: a service firms’ perspective Muris Cicic, Paul Patterson and Aviv Shoham Keywords Service, International marketing, Export, Company performance, Market orientation Madsen synthesized international performance studies and identified 20 performance antecedents. Of these, 12 are unrelated to international performance or have conflicting relationships across the reviewed studies. We use his recommendations to i nc re ase the va lu e of inter n atio na l performance research. First, we include seven antecedents that cover the organizational, environmental, strategic, and performance domains of his model, including components of the market orientation model. Second, earlier studies involved mostly North American and European goods’ exporters. This study extends previous research to the

service sector in Australia. Based on responses from 181 exporters, the importance of managerial attitudes, perceived international barriers, and human resource efforts is shown to affect international performance. Redefining market orientation from a relationship perspective: theoretical considerations and empirical results Gabriele Helfert, Thomas Ritter and Achim Walter Keywords Market orientation, Relationship marketing, Alliances Many studies have shown that market orientation is important for firms because it has a positive impact on performance. However, several studies have indicated that the relation between a firm’s market orientation and its success is sometimes weak and that moderating variables need to be considered at least under certain circumstances. As such the overall message from the market orientation studies is not clear. The usefulness of the market orientation concept must be also questioned when looking at the realities of business markets. In most if not all cases the firms’ ‘‘surroundings’’ should be seen as a network of inter-organizational relationships rather than an anonymous market. Therefore, in this paper the notion of market orientation is explored with particular focus on interorganizational relationships. Hereby, it is argued that the relationships are important and that the overall market orientation of firms needs to be translated to a relationship level in order to be effective. It is further argued that market orientation on a relationship level can be interpreted in terms of a firm’s employed resources and executed activities dedicated to relational exchange processes. Market orientation and incumbent performance in dynamic markets Monica L. Perry and Alan T. Shao Keywords Internet, Advertising, Market orientation, Competitive strategy

The extant literature suggests that performance may be a function of the degree to which market information is systematically collected, disseminated and responded to (i.e. market orientation). However, the majority of empirical research on the market orientation to performance relationship has focused on manufacturers and has not distinguished between incumbents and new entrants. Our study of incumbent firms involves the market orientation to performance relationship in the context of services in the growing and competitive Internet industry. We found that market orientation did not directly affect performance, nor did the interaction of market orientation and perceptions of new competitors. However, perceptions of traditional competitors directly affected performance and interacted with market orientation to affect performance. Market orientation and business performance: a framework for service organizations Chiquan Guo Keywords Market orientation, Service operations, Quality, Performance Market orientation is one of the major research streams in strategic marketing developed during the past ten years. Since its inception in the early 1990s, the major thrust of research in market orientation has been to study the relationship between market orientation and business performance. Although it is acknowledged that market orientation and performance are likely correlated, this paper directs attention to what may lie beneath the relationship. From both conceptual and empirical perspectives, it is argued that future research should focus on the mechanisms by which market orientation contributes to performance. To this end, we draw on the gap analysis literature and develop a framework to link market orientation and performance for service organizations. This simple framework will help shape future agendas for service research.

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French abstracts Orientation du marche´ et performance d’une entreprise prestant un service un programme de recherche Brendan J. Gray et Graham J. Hooley Mots-cle´s Orientation du marche´, Secteur des services, Mercatique des services, Performance Le secteur des services est de plus en plus important en tant que source de cre´ation d’emplois et de richesse e´conomique; il repre´sente plus de 75 pour cent du PNB de nombreuses e´conomies de´veloppe´es. Il est cependant surprenant que peu de recherches aient e´te´ entreprises sur le rapport qui existe entre l’orientation du marche´ et la performance de l’entreprise du secteur tertiaire. L’e´ditorial que voici examine les the`mes de recherche principaux ayant trait a` l’orientation du marche´ et a` la performance de l’entreprise prestant un service; il propose un programme de recherche pour l’avenir, qui permette d’ame´liorer notre compre´hension de cette importante question de mercatique et de gestion.

Cre´ation d’une valeur oriente´e vers le marche´ dans les entreprises du secteur tertiaire Rod B. McNaughton, Phil Osborne et Brian C. Imrie Mots-cle´s Avantage compe´titif, Orientation vers le marche´, Performance de l’entreprise, Valeur L’une des propositions fondamentales de la strate´gie de mercatique est qu’une orientation vers le marche´ est en rapport positif avec la performance de l’entreprise. Cependant, les me´canismes de ce rapport restent a` explorer en de´tail, surtout dans les industries du secteur tertiaire, dans lesquelles un actif incorporel est relativement plus important. L’article que voici aborde la question en proposant un mode`le qui identifie des variables interme´diaires importantes entre une orientation vers le marche´ et une valeur organisationnelle accrue. Le mode`le postule qu’une orientation vers le marche´ permet d’orienter l’investissement dans un actif fonde´ sur le marche´ et d’autres types d’actif, que ces types d’actif peuvent eˆtre rehausse´s pour cre´er un avantage compe´titif et une valeur pour les consommateurs, et que cela entraıˆne la loyaute´ des clients et un attrait plus aise´ pour ceux-ci. Une pe´ne´tration du marche´ plus rapide et plus e´largie, des cycles de ventes plus courts et une re´duction des couˆts de mercatique et de ventes permettent de rehausser la tre´sorerie d’une firme oriente´e vers le marche´. Il est possible de reconnaıˆtre ce fait dans une augmentation des estimations, qui finit par se traduire en une hausse du cours des actions et une meilleure cre´ation de richesses pour le proprie´taire de la firme.

European Journal of Marketing, Vol. 36 No. 9/10, 2002, French abstracts. # MCB UP Limited, 0309-0566

Orientation vers le marche´ dans le secteur des services: un examen et une analyse ´ gueda Esteban, A ´ ngel Milla´n, Arturo Molina et David Martı´n-Consuegra A Mots-cle´s Oientation vers le marche´, Industries tertiaires, Performance organisationnelle, Notion de mercatique L’association entre le de´veloppement e´conomique et la croissance du secteur tertiaire semble indisputable. Bien qu’il soit ne´cessaire de souligner que les services ont une nature diffe´rente de celle des produits, de nos jours, les produits sont de plus en plus pe´ne´tre´s par des services comple´mentaires, e´tant donne´ que les services eux-meˆmes includent e´galement, de temps en temps, l’utilisation et la consommation de produits. L’orientation vers le marche´ a surtout e´te´ de´velope´e en association avec des produits tangibles; il est de`s lors ne´cessaire de proce´der a` une e´tude dans laquelle l’e´volution de l’orientation vers le marche´ est refle´te´e dans le secteur des services, inde´pendamment des secteurs industriels. C’est la raison pour laquelle nous avons entrepris un re´sume´ historique de l’e´volution de l’orientation vers le marche´ dans le secteur tertiaire.

Orientation vers le marche´ et services sociaux dans des organismes prive´s sans but lucratif ´ lvarez et Leticia Santos Rodolfo Va´zquez, Luis Ignacio et A ´ Mots-cles Orientation vers le marche´, Organismes sans but lucratif, Services sociaux L’e´tude de la notion d’orientation vers le marche´ dans des organismes prive´s sans but lucratif a, jusqu’a` pre´sent, rec¸u tre`s peu d’attention. Cependant, les effets positifs de l’adoption de cette notion sur la mise en oeuvre de services gratuits et sur le succe`s a` longue e´che´ance de ces organismes sont en ge´ne´ral reconnus. L’article que voici a donc pour but d’obtenir des preuves empiriques supple´mentaires dans ce domaine de recherche, en utilisant un e´chantillon de fondations prive´es. Nous conside´rons toutefois que la nature distincte et spe´cifique des organismes sans but lucratif me´rite de disposer d’un instrument spe´cial qui permette d’e´valuer leur degre´ d’orientation vers le marche´. Pour cette raison, l’une des contributions principales de l’e´tude est le de´veloppement d’une e´chelle de mesurage de l’orientation vers le marche´, qui tienne compte des particularite´s caracte´risant les ope´rations des organismes prive´s sans but lucratif. L’e´tude prouve e´galement l’effet positif de l’orientation vers le marche´ sur les re´sultats obtenus par les organismes sans but lucratif et sur l’accomplissement des missions remplies par ces organismes.

Culture et qualite´s de chef dans les organisations prestant des services, oriente´es vers le marche´ Hans Kasper Mots-cle´s Orientation vers le marche´, Mercatique des services, Fonctions de chef, Culture des socie´te´s, Organisation d’apprentissage Le domaine de l’orientation vers le marche´ et celui de la mercatique des services repre´sentent toujours des domaines de recherche scientifique plutoˆt re´cents. Il semble qu’ils aient en commun plusieurs questions stimulantes. L’article que voici combine certaines de ces questions. Il se concentre sur la culture des organisations tertiaires oriente´es vers le marche´ et sur les styles de direction qui appartiendraient a` ce genre de culture. Une culture ouverte, refle´te´e dans des objectifs de mercatique clairs et dans des efforts acharne´s pour surpasser les autres (pour fournir une valeur ou une qualite´ supe´rieure) constituent les caracte´ristiques essentielles de cette culture. Pour ce faire, il faut des chefs qui soient oriente´s vers la re´alisation des objectifs tout en e´tant soucieux des personnes.

Comment l’orientation vers le marche´ contribue-t-elle a` la performance d’une entreprise prestant des services? Un examen des autres me´canismes possibles Sheelagh Matear, Phil Osborne, Tony Garrett et Brendan J. Gray Mots-cle´s Ope´rations de service, Performance de l’entreprise, Orientation vers le marche´, Innovation L’e´tude que voici se sert de la corre´lation qui existe entre l’orientation vers le marche´ et l’innovation, pour examiner les autres me´canismes possibles par lesquels l’orientation vers le marche´ contribue a` la performance d’une entreprise prestant des services. Elle examine trois me´canismes (direct, par me´diation et mode´rateur) en se servant de l’analyse par re´gression et du mode`le de calcul de l’e´quation sur un e´chantillon de 231 firmes qui mettent au point de nouveaux services. Les auteurs ont trouve´ que l’orientation vers le marche´ contribue a` la performance par un me´canisme double: elle contribue directement et elle contribue aussi par l’innovation, celle-ci servant de me´diateur a` la contribution. Ces re´sultats renforcent le fait que les chercheurs devraient conside´rer les corre´lations qui existent entre les sources d’avantage multiples, lorsqu’ils recherchent des explications pour la performance d’une entreprise.

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European Journal of Marketing 36,9/10 970

Comportement oriente´ vers le marche´: une comparaison entre les exportateurs de services et les exportateurs de produits John W. Cadogan, Sanna Sundqvista, Risto T. Salminenb et Kaisu Puumalainenc Mots-cle´s Exportation, Orientation vers le marche´, Ope´rations de prestation de services, Organisation concentre´e sur le produit, Performance de l’entreprise Nous avons compare´ les activite´s de firmes prestant des services et de firmes fournissant des produits, en ce qui concerne leur comportement oriente´ vers le marche´ dans leurs ope´rations d’exportation (c.a`.d. leur comportement oriente´ vers le marche´ d’exportation – export marketoriented (EMO) behavior). L’analyse empirique mene´e sur un e´chantillon de 783 exportateurs finlandais, renfermant des socie´te´s prestant des services ainsi que des socie´te´s fournissant des produits, re´ve´la diverses diffe´rences inte´ressantes: les socie´te´s prestant des services diffe´raient des socie´te´s fournissant des produits dans leur niveau de comportement EMO; les effets directs du comportement EMO envers diverses dimensions du succe`s a` l’exportation e´taient constants dans l’ensemble des e´chantillons; cependant, l’environnement d’exportation mode´rait le rapport qui existe entre le comportement EMO et la performance du profit a` l’exportation, et cela de diverses manie`res sur l’ensemble des e´chantillons. Les re´sultats indiquent que le comportement EMO est peut-eˆtre mieux approprie´ dans certaines conditions pre´sentes dans l’environnement, et moins approprie´ dans d’autres. Cependant, la nature du rapport qui existe entre le comportement EMO et le succe`s a` l’exportation peut aussi diffe´rer si les offres principales faites par la firme sur le marche´ d’exportation sont des services ou des produits physiques. Les ante´ce´dents de la performance internationale: la perspective d’une firme prestant des services Muris Cicic, Paul Patterson et Aviv Shoham Mots-cle´s Service, Mercatique internationale, Exportation, Performance de la socie´te´, Oientation vers le marche´ Madsen a re´sume´ les e´tudes sur la performance internationale et a identifie´ 20 ante´ce´dents de la performance. Parmi ceux-ci, 12 n’ont aucun rapport avec la performance internationale ou ont des rapports contradictoires dans l’ensemble des e´tudes examine´es. Nous nous servons de ses recommandations pour augmenter la valeur des recherches mene´es sur la performance internationale. Premie`rement, nous incluons sept ante´ce´dents qui recouvrent le domaine organisationnel, le domaine de l’environnement, le domaine strate´gique et le domaine de la performance de son mode`le, ainsi que des composantes du mode`le de l’orientation vers le marche´. Deuxie`mement, les e´tudes pre´ce´dentes impliquaient surtout les exportateurs de marchandises d’Ame´rique du Nord et d’Europe. L’e´tude que voici e´largit les recherches pre´ce´dentes pour inclure le secteur tertiaire australien. Nous nous fondons sur les re´ponses obtenues de 181 exportateurs pour de´montrer que l’importance des attitudes de la direction, les obstacles internatiaux perc¸us et les efforts de´ploye´s par le personnel affectent la performance internationale. Rede´finir l’orientation vers le marche´ d’un point de vue des rapports: conside´rations the´oriques et re´sultats empiriques Gabriele Helfert, Thomas Ritter et Achim Walter Mots-cle´s Orientation vers le marche´, Mercatique des rapports, Alliances De nombreuses e´tudes ont de´montre´ que l’orientation vers le marche´ est importante pour les entreprises, car elle a un impact positif sur la performance. Cependant, plusieurs e´tudes ont indique´ que le rapport qui existe entre l’orientation vers le marche´ d’une entreprise et son succe`s est parfois faible et qu’il faut conside´rer les variables mode´ratrices, au moins dans certaines circonstances. Tel quel, le message ge´ne´ral retire´ des e´tudes sur l’orientation vers le marche´ n’est pas clair. L’utilite´ de la notion d’orientation vers le marche´ doit aussi eˆtre mise en question lorsque l’on conside`re les re´alite´s pre´sentes sur les marche´s e´conomiques. Dans la plupart des

cas, si pas dans tous les cas, ‘‘l’entourage’’ d’une entreprise devrait eˆtre conside´re´ comme un re´seau de rapports interorganisationnels, plutoˆt que comme un marche´ anonyme. L’article que voici explore donc la notion d’orientation vers le marche´ en se concentrant plus particulie`rement sur les rapports interorganisationnels. Nous postulons que les rapports sont importants et que l’orientation vers le marche´ des entreprises, dans son ensemble, doit eˆtre transpose´e a` un niveau de rapports pour pouvoir eˆtre efficace. Nous postulons de plus que l’orientation vers le marche´, a` un niveau de rapports, peut eˆtre interpre´te´e par rapport aux ressources employe´es et aux activite´s de´ploye´es par l’entreprise, qui sont consacre´es aux processus d’e´change relationnel. Orientation vers le marche´ et performance des titulaires dans les marche´s dynamiques Monica L. Perry et Alan T. Shao Mots-cle´s Internet, Publicite´, Orientation vers le marche´, Strate´gie compe´titive Les publications existantes sugge`rent que la performance peut eˆtre fonction de la mesure dans laquelle les informations sur le marche´ sont syste´matiquement recueillies, disse´mine´es et traite´es (c.a`.d. orientation vers le marche´). Cependant, la majorite´ des recherches empiriques portant sur le rapport qui existe entre l’orientation vers le marche´ et la performance s’est concentre´e sur les fabricants et n’a pas fait la diffe´rence entre les titulaires et les de´butants. Notre e´tude sur les entreprises titulaires implique le rapport qui existe entre l’orientation vers le marche´ et la performance, dans le contexte des services, dans l’industrie compe´titive et croissante qu’est l’Internet. Nous avons trouve´ que l’orientation vers le marche´ n’affectait pas directement la performance, et que ce n’e´tait pas non plus le cas pour l’interaction de l’orientation vers le marche´ et les perceptions de nouveaux compe´titeurs. Cependant, les perceptions des compe´titieurs traditionaux affectaient directement la performance et interagissaient avec l’orientation vers le marche´ pour affecter la performance. Orientation vers le marche´ et performance e´conomique: une structure pour les organisations du secteur tertiaire Chiquan Guo Mots-cle´s Orientation vers le marche´, Ope´rations de service, Qualite´, Performance L’orientation vers le marche´ est l’un des domaines de recherche principaux en mercatique strate´gique, de´veloppe´ au cours des dix dernie`res anne´es. Depuis son introduction au de´but des anne´es 1990, l’aspect principal des recherches sur l’orientation vers le marche´ fut d’e´tudier le rapport qui existe entre l’orientation vers le marche´ et la performance de l’entreprise. Bien que l’on reconnaisse que l’orientation vers le marche´ et la performance soient probablement en corre´lation, l’article que voici tire l’attention sur ce que ce rapport pourrait cacher. D’un point de vue conceptuel et d’un point de vue empirique, on postule que les recherches futures devraient se concentrer sur les me´canismes par lesquels l’orientation vers le marche´ contribue a` la performance. C’est a` cette fin que nous nous sommes fonde´s sur les publications analysant la lacune, pour mettre au point une structure permettant de relier l’orientation vers le marche´ et la performance pour les organisations du secteur des services. Cette structure simple permettra d’e´tablir le programme futur pour les recherches sur les services.

French abstracts

971

European Journal of Marketing 36,9/10 972

German abstracts Marktorientierung und Leistung von Dienstleistungsunternehmen Brendan J. Gray und Graham J. Hooley Stichworte Marktorientierung, Dienstleistungssektor, Servicemarketing, Leistung Der Dienstleistungssektor spielt eine zunehmend wichtigere Rolle als Arbeitgeber und bei der Schaffung von wirtschaftlichem Wohlstand und erwirtschaftet in vielen entwickelten La¨ndern u¨ber 75 Prozent des BIP. Trotzdem ist der Zusammenhang zwischen der Marktorientierung und der Leistung von Dienstleistungsunternehmen bisher erstaunlich wenig erforscht. Dieses ¨ berblick u¨ber die wichtigsten Forschungsthemen zur Marktorientierung Editorial gibt einen U und Leistung von Dienstleistungsunternehmen und schla¨gt einen Plan fu¨r zuku¨nftige Forschungsarbeiten vor, mit denen wir unser Versta¨ndnis fu¨r dieses wichtige Marketingund Managementthema verbessern ko¨nnen.

Marktorientierte Wertscho¨pfung in Dienstleistungsunternehmen Rod B. McNaughton, Phil Osborne und Brian C. Imrie Stichworte Wettbewerbsvorteil, Marktorientierung, Organisationsleistung, Wert Ein Grundsatz der Marketingstrategie lautet, dass die Marktorientierung eines Unternehmens positiv mit seiner Leistung korreliert ist. Die Mechanismen dieser Beziehung mu¨ssen jedoch erst noch na¨her erforscht werden, insbesondere in der Dienstleistungsbranche, wo immaterielle Werte eine vergleichsweise wichtige Rolle spielen. In diesem Artikel wird daher ein Modell vorgeschlagen, das wichtige intermedia¨re Variablen zwischen der Marktorientierung und der Steigerung des Unternehmenswerts identifiziert. Das Modell postuliert, dass eine Marktorientierung Investitionen in marktbasierte Werte und andere Wertarten lenkt und dass diese Werte genutzt werden ko¨nnen, um Wettbewerbsvorteile und Wert fu¨r die Kunden zu schaffen, was wiederum zu Kundentreue und zu einer einfacheren Gewinnung von Kunden fu¨hrt. Eine schnellere und breitere Marktdurchdringung, ku¨rzere Verkaufszyklen und niedrigere Marketing- und Verkaufskosten verbessern in marktorientierten Firmen den Cashflow. Dies kann zu einer ho¨ heren Bewertung des Unternehmens und dadurch letztendlich zu einer Steigerung des Aktienkurses und zur Wertschaffung (‘‘wealth creation’’) fu¨r die Inhaber des Unternehmens fu¨hren.

European Journal of Marketing, Vol. 36 No. 9/10, 2002, German abstracts. # MCB UP Limited, 0309-0566

¨ berblick und Analyse Marktorientierung im Dienstleistungsbereich: U ´ gueda Esteban, A ´ ngel Milla´n, Arturo Molina und David Martin-Consuegra A Stichworte Marktorientierung, Dienstleistungsindustrien, Organisationsleistung, Marketingkonzept Zwischen der allgemeinen wirtschaftlichen Entwicklung und dem Wachstum des Dienstleistungssektors scheint es eine klare Verbindung zu geben. Zwar besteht natu¨rlich ein grundsa¨ tzlicher Unterschied zwischen Dienstleistungen und Produkten, doch ist der Produktbereich heute zunehmend von komplementa¨ ren Dienstleistungen durchzogen, wa¨hrend andererseits auch im Dienstleistungsbereich gelegentlich Produkte genutzt und verbraucht werden. Die Marktorientierung wurde hauptsa¨chlich unter Bezug auf materielle Erzeugnisse entwickelt. Es muss daher im Rahmen einer Studie untersucht werden, wie sich die Marktorientierung im Dienstleistungssektor unabha¨ngig von den industriellen Sektoren ¨ berblick u¨ber die Entwicklung der entwickelt hat. Wir haben deshalb einen historischen U Marktorientierung im Dienstleistungssektor zusammengestellt.

Marktorientierung und Sozialfu¨rsorge in privaten Organisationen ohne Erwerbscharakter ´ lvarez und Marı´a Leticia Santos Rodolfo Va´zquez, Luis Ignacio A Stichworte Marktorientierung, Organisationen ohne Erwerbscharakter, Sozialfu¨rsorge Zum Konzept der Marktorientierung in privaten Organisationen ohne Erwerbscharakter liegen bisher sehr wenige Untersuchungen vor. Es wird jedoch allgemein anerkannt, dass sich ein Arbeiten nach diesem Konzept positiv auf die Einrichtung von Dienstleistungen ohne Gewinnzweck und auf den langfristigen Erfolg der betreffenden Organisationen auswirkt. Ziel des Artikels ist es daher, durch Untersuchung einer Reihe privater Stiftungen weitere empirische Beweise in diesem Forschungsbereich zu finden. Wegen des besonderen und spezifischen Charakters, den die Aktivita¨ ten von privaten Organisationen ohne Erwerbscharakter haben, wurde es als sinnvoll betrachtet, ein spezielles Instruments zur Beurteilung der Marktorientierung dieser Organisationen zu entwickeln. Eines der wichtigsten Ergebnisse dieser Studie ist daher die Entwicklung eines Maßstabs fu¨r die Marktorientierung, der die Besonderheiten privater Organisationen ohne Erwerbscharakter beru¨cksichtigt. Die Studie zeigt zudem, dass die Marktorientierung positiv zur Leistung dieser Organisationen und zur Erfu¨llung ihrer Zielsetzungen beitra¨gt.

Kultur und Fu¨hrung in marktorientierten Dienstleistungsorganisationen Hans Kasper Stichworte Marktorientierung, Servicemarketing, Fu¨hrung, Unternehmenskultur, lernende Organisation Marktorientierung und Servicemarketing sind noch relativ junge wissenschaftliche Forschungsbereiche. Beiden Gebieten sind offenbar verschiedene komplexe Themen gemein, von denen einige in diesem Artikel zusammengefasst werden. Der Artikel konzentriert sich auf die Kultur marktorientierter Dienstleistungsorganisationen sowie auf die Fu¨ hrungsstile, die in einer solchen Kultur zu finden sind. Die wesentlichen Merkmale einer solchen Kultur sind eine Offenheit, die sich in klaren Marketingzielen widerspiegelt, und ein starker Wille zu Bestleistungen (d.h. zu erstklassigem Wert oder u¨ berlegener Qualita¨t). Dies erfordert leistungsorientierte Fu¨ hrungsperso¨ nlichkeiten, denen das Wohl der Mitarbeiter am Herzen liegt.

Wie tra¨gt die Marktorientierung zur Leistung von Dienstleistungsunternehmen bei? Eine Untersuchung alternativer Mechanismen Sheelagh Matear, Phil Osborne, Tony Garrett und Brendan J. Gray Stichworte Dienstleistungsbetriebe, Unternehmensleistung, Marktorientierung, Innovation Die Studie untersucht anhand der Wechselbeziehung von Marktorientierung und Innovation verschiedene alternative Mechanismen, durch die die Marktorientierung zur Leistung von Dienstleistungsunternehmen beitra¨gt. Drei verschiedene Mechanismen (direkt, vermittelt und moderierend) werden am Beispiel von 231 Firmen, die neue Dienstleistungen entwickelt, mittels Regressionsanalyse und Strukturgleichungsmodellierung untersucht. Es stellt sich heraus, dass die Marktorientierung durch zweierlei Mechanismen zur Leistung beitra¨gt: direkt und durch Innovation (d.h. die Innovation wirkt vermittelnd). Die Ergebnisse verdeutlichen, dass bei der Untersuchung der Gru¨nde fu¨r die Unternehmensleistung die Wechselbeziehungen zwischen verschiedenen begu¨nstigenden Faktoren beru¨cksichtigt werden sollten.

German abstracts

973

European Journal of Marketing 36,9/10 974

Marktorientiertes Verhalten: Vergleich von Dienstleistungs- und Produktexporteuren John W. Cadogan, Sanna Sundqvist, Risto T. Salminen und Kaisu Puumalainen Stichworte Export, Marktorientierung, Dienstleistungsbetriebe, produktfokussierte Organisation, Unternehmensleistung Wir haben Dienstleistungs- und Produktunternehmen in Bezug auf die Marktorientierung ihrer Exportaktivita¨ten (ihr ‘‘exportmarktorientiertes (EMO)-Verhalten’’) verglichen. Empirische Analysen mit 783 finnischen Exporteuren (Dienstleistungs- und Produktunternehmen) zeigten verschiedene interessante Unterschiede auf: Dienstleistungs- und Produktunternehmen legten ein unterschiedlich ausgepra¨gtes EMO-Verhalten an den Tag. Die direkten Auswirkungen des EMO-Verhaltens auf die Dimensionen des Exporterfolgs waren in den verschiedenen Unternehmen gleich. Das Exportumfeld moderierte jedoch in den verschiedenen Unternehmen den Zusammenhang zwischen EMO-Verhalten und Exportgewinn. Die Ergebnisse zeigen, dass ein EMO-Verhalten unter bestimmten Umfeldbedingungen geeigneter sein kann als unter anderen. Der Zusammenhang zwischen EMO-Verhalten und Exporterfolg kann aber auch davon abha¨ngen, ob die Firma hauptsa¨chlich Dienstleistungen oder greifbare Produkte exportiert. Antezedenzien der internationalen Leistung: Perspektive eines Dienstleistungsunternehmens Muris Cicic, Paul Patterson und Aviv Shoham Stichworte Dienstleistung, internationales Marketing, Export, Unternehmensleistung, Marktorientierung Madsen fasste verschiedene internationale Leistungsstudien zusammen und ermittelte daraus 20 Antezedenzien der Leistung. Zwo¨lf dieser Antezedenzien sind nicht mit der internationalen Leistung korreliert bzw. ihr Zusammenhang mit der Leistung ist in den untersuchten Studien widerspru¨chlich. Wir haben Madsens Empfehlungen dazu verwendet, die Aussagekraft der internationalen Leistungsforschung zu verbessern. Wir haben zum Ersten sieben Antezedenzien einbezogen, die die Organisations-, Umfeld-, Strategie- und Leistungsdoma¨nen des Modells (einschließlich Teile des Marktorientierungsmodells) einschließen. Des Weiteren dehnt die Studie die Untersuchung auf den Dienstleistungssektor in Australien aus, wa¨hrend sich fru¨here Studien weitgehend auf nordamerikanische und europa¨ische Warenexporteure beschra¨nkten. Aus den Antworten von 181 Exporteuren geht hervor, dass die Einstellung des Managements, die wahrgenommenen internationalen Hindernisse und die Anstrengungen der Mitarbeiter Einfluss auf die internationale Leistung haben. Neudefinition der Marktorientierung aus der Beziehungsperspektive: theoretische ¨ berlegungen und empirische Ergebnisse U Gabriele Helfert, Thomas Ritter und Achim Walter Stichworte Marktorientierung, Beziehungsmarketing, Allianzen Zahlreiche Studien haben gezeigt, dass die Marktorientierung wegen ihres positiven Effekts auf die Leistung wichtig fu¨r Unternehmen ist. Mehrere Studien haben jedoch verdeutlicht, dass manchmal nur ein schwacher Zusammenhang zwischen der Marktorientierung und dem Erfolg von Unternehmen besteht und dass zumindest in bestimmten Fa¨llen moderierende Variablen einbezogen werden mu¨ssen. Aus den Marktorientierungsstudien la¨sst sich daher keine eindeutige Botschaft ableiten. Die Frage nach dem Nutzen des Marktorientierungskonzepts stellt sich auch, wenn man die Realita¨ten des Business-Markts betrachtet. In den meisten, wenn nicht sogar allen Fa¨ llen muss das Umfeld eines Unternehmens als Geflecht von interorganisatorischen Beziehungen, nicht als anonymer Markt gesehen werden. Der Artikel untersucht daher das Konzept der Marktorientierung unter besonderer Beru¨cksichtigung der interorganisatorischen Beziehungen. Es wird argumentiert, dass diese Beziehungen wichtig

sind und dass die allgemeine Marktorientierung von Unternehmen auch auf die Beziehungsebene u¨bertragen werden muss, um wirksam zu sein. Zudem wird argumentiert, dass die Marktorientierung eines Unternehmens auf Beziehungsebene daran abzulesen ist, in welchem Umfang Mitarbeiterressourcen und Aktivita¨ten dem Austauschprozess zwischen den Beziehungspartnern gewidmet sind. Marktorientierung und Leistung von etablierten Unternehmen auf dynamischen Ma¨rkten Monica L. Perry und Alan T. Shao Stichworte Internet, Werbung, Marktorientierung, Wettbewerbsstrategie Aus der vero¨ffentlichten Fachliteratur geht hervor, dass die Unternehmensleistung abha¨ngig davon ist, wie systematisch ein Unternehmen Marktinformationen sammelt und verbreitet und wie es auf derartige Informationen reagiert (d.h. seine Marktorientierung). Die meisten empirischen Untersuchungen, die sich mit dem Zusammenhang zwischen Marktorientierung und Leistung befassen, konzentrieren sich jedoch auf Fertigungsbetriebe und unterscheiden nicht zwischen etablierten und neuen Marktteilnehmern. Unsere Studie befasst sich mit etablierten Unternehmen und untersucht den Zusammenhang zwischen Marktorientierung und Leistung im Servicebereich der wachsenden, wettbewerbsorientierten Internetindustrie. Es stellte sich heraus, dass weder die Marktorientierung noch die Wechselbeziehung zwischen der Marktorientierung und der Perzeption neuer Konkurrenten einer direkten Einfluss auf die Leistung hatte. Die Perzeption traditioneller Konkurrenten hingegen hatte zusammen mit der Marktorientierung einen direkten Einfluss auf die Leistung. Marktorientierung und Unternehmensleistung: ein Rahmen fu¨r Serviceorganisationen Chiquan Guo Stichworte Marktorientierung, Dienstleistungsbetriebe, Qualita¨t, Leistung Die Marktorientierung ist eines der wichtigsten Forschungsthemen, die sich in den letzten zehn Jahren im strategischen Marketing herauskristallisiert haben. Seit die Marktorientierung Anfang der 1990er Jahre erstmals zum Thema geworden ist, haben sich die Untersuchungen hauptsa¨ chlich mit dem Zusammenhang zwischen der Marktorientierung und der Unternehmensleistung befasst. Es wird eingera¨umt, dass zwischen der Marktorientierung und der Unternehmensleistung vermutlich ein Zusammenhang besteht, der Artikel befasst sich jedoch hauptsa¨chlich mit der Frage, worauf diese Beziehung basiert. Es wird vom konzeptionellen wie empirischen Standpunkt aus argumentiert, dass sich zuku¨ nftige Forschungsarbeiten auf die Mechanismen konzentrieren sollten, durch die die Marktorientierung zur Unternehmensleistung beitra¨ gt. Unter Einbeziehung der Lu¨ckenanalyse-Literatur entwickeln wir einen Rahmen, der die Marktorientierung und Leistung von Serviceorganisationen zueinander in Bezug setzt. Dieser einfache Rahmen wird bei der Konzeption zuku¨nftiger Forschungsprogramme im Servicebereich nu¨tzlich sein.

German abstracts

975

European Journal of Marketing 36,9 976

Spanish abstracts Orientacio´n de mercado y rendimiento de las empresas de servicios una agenda de investigacio´n Brendan J. Gray y Graham J. Hooley Palabras clave Orientacio´n de mercado, Sector de servicios, Marketing de servicios, Rendimiento El sector de servicios es una fuente cada vez ma´s importante de creacio´n de trabajo y de riqueza econo´mica, y es responsable de ma´s de un 75 por ciento del PIB de muchas economı´as desarrolladas. Sin embargo, sorprendentemente, se ha realizado poca investigacio´n sobre la relacio´n entre la orientacio´n de mercado y el rendimiento de las empresas de servicios. Este editorial revisa los principales temas de investigacio´n relacionados con la orientacio´n de mercado y el rendimiento de las empresas de servicios, y sugiere una agenda para investigacio´n futura con el fin de mejorar nuestro entendimiento de esta importante cuestio´n de marketing y gestio´n.

Creacio´n de valor orientada hacia el mercado en empresas de servicios Rod B. McNaughton, Phil Osborne y Brian C. Imrie Palabras clave Ventaja competitiva, Orientacio´n de mercado, Rendimiento organizacional, Valor Una proposicio´n fundamental en la estrategia de marketing es que la orientacio´n de mercado se relaciona positivamente con el rendimiento de la empresa. No obstante, los mecanismos de esta relacio´n au´n no se han explorado en detalle, especialmente en industrias de servicios donde los activos intangibles son relativamente ma´s importantes. Este trabajo trata esta cuestio´n proponiendo un modelo que identifica variables intermedias importantes entre una orientacio´n de mercado y un aumento del valor de la empresa. El modelo plantea que la orientacio´n de mercado guı´a la inversio´n en activos basados en el mercado y en otros tipos de activos; que estos activos pueden apalancarse para crear una ventaja competitiva y valor para los clientes; y, que esto resulta en lealtad y facilidad para atraer clientela. Una penetracio´n en el mercado ma´s ra´pida y ma´s extensiva, ciclos de ventas ma´s cortos y reduccio´n de los costes de marketing y ventas mejoran el flujo de caja de una empresa orientada hacia el mercado. Ello puede reconocerse en valoraciones ma´s altas, que ulteriormente se traducen en precios de acciones ma´s altos y en creacio´n de riqueza para los propietarios de la empresa.

European Journal of Marketing, Vol. 36 No. 9, 2002, Spanish abstracts. # MCB UP Limited, 0309-0566

Orientacio´n de mercado en servicios: una revisio´n y ana´lisis ´ gueda Esteban, A ´ ngel Milla´n, Arturo Molina y David Martı´n Consuegra A Palabras clave Orientacio´n de mercado, Industrias de servicios, Rendimiento organizacional, Concepto de marketing La asociacio´n entre el desarrollo econo´mico y el crecimiento del sector de servicios parece indiscutible. Aunque resulta necesario destacar que los servicios son de un cara´cter diferente al de los producto, en la actualidad, estos u´ltimos esta´n siendo penetrados cada vez ma´s por servicios complementarios, ya que los servicios mismos tambie´n incluyen, en ocasiones, el uso y consumo de productos. La orientacio´n de mercado se habı´a desarrollado principalmente en asociacio´n con productos tangibles, por lo tanto, resulta necesario realizar un estudio donde se refleje la evolucio´n de la orientacio´n de mercado en el sector de servicios, independientemente de los sectores industriales. E´se es el motivo por el que hemos realizado un resumen histo´rico de la evolucio´n de la orientacio´n de mercado en el sector de servicios.

Orientacio´n de mercado y servicios sociales en organizaciones privadas no lucrativas ´ lvarez y Leticia Santos Rodolfo Va´zquez, Luis Ignacio A Palabras clave Orientacio´n de mercado, Organizaciones no lucrativas, Servicios sociales Hasta la fecha se ha prestado muy poca atencio´n al estudio del concepto de la orientacio´n de mercado en organizaciones privadas no lucrativas. No obstante, existe un acuerdo general con respecto a los efectos positivos que la adopcio´n de este concepto tiene sobre la implementacio´n de servicios no lucrativos, ası´ como sobre el e´xito a largo plazo de estas organizaciones. Por lo tanto, este trabajo tiene como objetivo obtener ma´s evidencia empı´rica sobre este campo de investigacio´n utilizando una muestra de fundaciones privadas. No obstante, se considera que la distintiva y especı´fica naturaleza de las actividades de las organizaciones no lucrativas se merece el desarrollo de un instrumento especial para evaluar su grado de orientacio´n de mercado. En este sentido, una de las principales contribuciones de este estudio es el desarrollo de una escala de medicio´n de la orientacio´n de mercado, que representa las peculiaridades de las operaciones de las organizaciones privadas no lucrativas. Asimismo, el estudio comprueba el efecto positivo de la orientacio´n de mercado sobre los resultados no lucrativos y sobre el cumplimiento de las misiones de dichas organizaciones.

Cultura y liderazgo en las organizaciones de servicios orientadas hacia el mercado Hans Kasper Palabras clave Orientacio´n de mercado, Marketing de servicios, Liderazgo, Cultura corporativa, Organizacio´n de aprendizaje Los campos de la orientacio´n de mercado y el marketing de servicios au´n son dominios bastante nuevos de la investigacio´n cientı´fica. Parecen tener numerosos temas desafiantes en comu´n. Este trabajo combina varios de dichos temas. Se enfoca en la cultura de organizaciones de servicios orientadas hacia el mercado y los estilos de liderazgo que podrı´an pertenecer a dicha cultura. Una cultura abierta que se refleje en la existencia de unos objetivos de marketing claros y una actitud fuerte para ser los mejores (entregar un valor o calidad superior) son las caracterı´sticas esenciales de una cultura de este tipo. Esto exige lı´deres orientados hacia el logro que se preocupen por la gente.

¿Co´mo contribuye la orientacio´n de mercado al rendimiento de las empresas de servicios? Un examen de mecanismos alternativos Sheelagh Matear, Phil Osborne, Tony Garrett y Brendan J. Gray Palabras clave Operaciones de servicio, Rendimiento de la empresa, Orientacio´n de mercado, Innovacio´n Este estudio emplea la interrelacio´n entre la orientacio´n de mercado y la innovacio´n para examinar mecanismos alternativos, a trave´s de los cuales la orientacio´n de mercado contribuye al rendimiento de las empresas de servicios. Se examinan tres mecanismos (directo, mediado y moderador) utilizando ana´lisis de regresio´n y modelacio´n de ecuacio´n estructural en una muestra de 231 empresas que desarrollan servicios nuevos. Se descubre que la orientacio´n de mercado contribuye al rendimiento a trave´s de un mecanismo dual, en el sentido de que contribuye tanto directamente como a trave´s de la innovacio´n, con la innovacio´n mediando la contribucio´n. Estos resultados enfatizan que los investigadores deberı´an considerar la interrelacio´n entre fuentes mu´ltiples de ventaja en la bu´squeda de explicaciones del rendimiento de la empresa.

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Comportamiento orientado hacia el mercado: comparacio´n de exportadores de productos con los de servicios John W. Cadogan, Sanna Sundqvista, Risto T. Salminenb y Kaisu Puumalainenc Palabras clave Exportacio´n, Orientacio´n de mercado, Operaciones de servicios, Organizacio´n enfocada en productos, Rendimiento de la empresa Comparamos las actividades de empresas de servicios y productos en cuanto a su comportamiento orientado hacia el mercado en sus operaciones de exportacio´n (es decir, su comportamiento orientado hacia el mercado de exportacio´n (COM)). Un ana´lisis empı´rico realizado en una muestra de 783 exportadores finlandeses que incluı´a tanto empresas de servicios como de productos revelo´ varias diferencias interesantes: las empresas de productos y de servicios difieren en su nivel de comportamiento COM; los efectos directos del comportamiento COM sobre varias dimensiones del e´xito exportador fueron invariables a trave´s de las muestras; no obstante, el a´mbito de exportacio´n moderaba el vı´nculo entre el comportamiento COM y el rendimiento rentable de la exportacio´n de diversas maneras a trave´s de las muestras. Los resultados indican que el comportamiento COM puede resultar ma´s apropiado bajo ciertas condiciones ambientales, y menos apropiado bajo otras. Sin embargo, la naturaleza de la relacio´n entre el comportamiento COM y el e´xito exportador tambie´n puede depender de si las ofertas ba´sicas de las empresas al mercado de exportacio´n son servicios o productos fı´sicos. Antecedentes del rendimiento internacional: una perspectiva de empresas de servicios Muris Cicic, Paul Patterson y Aviv Shoham Palabras clave Servicio, Marketing internacional, Exportacio´n, Rendimiento de la empresa, Orientacio´n de mercado Madsen sintetizo´ estudios de rendimiento internacionales e identifico´ 20 antecedentes del rendimiento. De e´stos, 12 no se relacionan con el rendimiento internacional o muestran relaciones conflictivas a trave´s de los estudios revisados. Utilizamos sus recomendaciones para incrementar el valor de la investigacio´n del rendimiento internacional. Primeramente, incluimos siete antecedentes que cubren los dominios organizacional, medioambiental, estrate´gico y de rendimiento de su modelo, incluyendo componentes del modelo de orientacio´n de mercado. En segundo lugar, estudios previos se relacionaron mayormente con exportadores de mercancı´as norteamericanos y europeos; este estudio extiende investigacio´n previa al sector de servicios en Australia. Basa´ndose en las respuestas de 181 exportadores, se muestra que la importancia de las actitudes gestoras, las barreras internacionales percibidas y los esfuerzos de recursos humanos, influyen sobre el rendimiento internacional. Redefinicio´n de la orientacio´n de mercado a partir de una perspectiva de relaciones: consideraciones teo´ricas y resultados empı´ricos Gabriele Helfert, Thomas Ritter y Achim Walter Palabras clave Orientacio´n de mercado, Marketing de relaciones, Alianzas Muchos estudios han mostrado que la orientacio´n de mercado es importante para las empresas porque tiene un impacto positivo sobre el rendimiento. No obstante, varios estudios han indicado que la relacio´n entre la orientacio´n de mercado de una empresa y su e´xito es a veces de´bil y que las variables moderadoras necesitan considerarse, al menos bajo ciertas circunstancias. Como tal, el mensaje global procedente de los estudios sobre la orientacio´n de mercado no es claro. Tambie´n debe ponerse en tela de juicio la utilidad del concepto de la orientacio´n de mercado al observar las realidades de los mercados comerciales. En la mayorı´a, si no en todos los casos, los ‘‘entornos’’ de las empresas deberı´an percibirse como una red de relaciones interorganizacionales, ma´s que como un mercado ano´nimo. Por lo tanto, en este trabajo se explora la nocio´n de la orientacio´n de mercado con un enfoque particular en las

relaciones interorganizacionales. Por el presente, se arguye que las relaciones son importantes y que la orientacio´n global de mercado de las empresas necesita traducirse en un nivel de relacio´n para poder ser eficaz. Asimismo, se discute que la orientacio´n de mercado a nivel de relacio´n puede interpretarse en te´rminos de los recursos empleados de una firma y de las actividades ejecutadas dedicadas a los procesos de intercambio relacional. Orientacio´n de mercado y rendimiento titular en mercados dina´micos Monica L. Perry y Alan T. Shao Palabras clave Internet, Publicidad, Orientacio´n de mercado, Estrategia competitiva La bibliografı´a existente sugiere que el rendimiento podrı´a ser una funcio´n del grado hasta el que la informacio´n de mercado se recopila, disemina y contesta sistema´ticamente (es decir, la orientacio´n de mercado). No obstante, la mayorı´a de la investigacio´n empı´rica sobre la relacio´n de la orientacio´n de mercado y el rendimiento se ha enfocado en los fabricantes y no ha distinguido entre titulares y nuevas adiciones. Nuestro estudio de empresas titulares involucra la relacio´n entre la orientacio´n de mercado y el rendimiento en el contexto de los servicios, dentro de la creciente y competitiva industria Internet. Descubrimos que la orientacio´n de mercado no afectaba directamente el rendimiento, ni tampoco la interaccio´n entre la orientacio´n de mercado y las percepciones de nuevos competidores. Sin embargo, las percepciones de competidores tradicionales afectaban directamente el rendimiento e interactuaban con la orientacio´n de mercado para influir sobre el rendimiento. Orientacio´n de mercado y rendimiento comercial: un marco para organizaciones de servicios Chiquan Guo Palabras clave Orientacio´n de mercado, Operaciones de servicio, Calidad, Rendimiento La orientacio´n de mercado es una de las principales ramas de investigacio´n en el marketing estrate´gico desarrollado durante los u´ltimos diez an˜os. Desde su comienzo a principios de la de´cada de los 90, el impulso principal de investigacio´n sobre orientacio´n de mercado ha sido estudiar la relacio´n entre la orientacio´n de mercado y el rendimiento comercial. Aunque se reconoce que la orientacio´n de mercado y el rendimiento esta´n probablemente correlacionados, este trabajo dirige su atencio´n hacia lo que podrı´a yacer por debajo de la relacio´n. Desde las perspectivas tanto conceptual como empı´rica, se arguye que la investigacio´n futura deberı´a enfocarse en los mecanismos por los que la orientacio´n de mercado contribuye al rendimiento. Con este fin, utilizamos la bibliografı´a sobre el ana´lisis del desfase y desarrollamos un marco para enlazar la orientacio´n de mercado y el rendimiento para las organizaciones de servicio. Este sencillo marco ayudara´ a dar forma a las agendas futuras para la investigacio´n de servicios.

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Guest editorial Market orientation and service firm performance – a research agenda Brendan J. Gray Department of Marketing, School of Business, University of Otago, Dunedin, New Zealand, and

Graham J. Hooley Aston Business School, Aston University, Birmingham, UK Keywords Market orientation, Service industries, Services marketing, Performance Abstract The service sector is an increasingly important source of job creation and economic wealth, and accounts for more than 75 per cent of the GDP of many developed economies. Yet there has been surprisingly little research into the relationship between market orientation and service firm performance. This editorial reviews the major research themes relating to market orientation and service firm performance and suggests an agenda for future research to improve understanding of this important marketing and management issue.

European Journal of Marketing, Vol. 36 No. 9/10, 2002, pp. 980-988. # MCB UP Limited, 0309-0566 DOI 10.1108/03090560210437280

Introduction Market orientation is a corner-stone of marketing and management strategy. However, relatively little research has been conducted into the relationship between market orientation and performance in the context of services firms. This is surprising, given the rapid growth of the services sector in the past 30 years, and its importance as a source of job creation and wealth. This paper reviews the major research themes relating to market orientation and service firm performance and suggests an agenda for future research to improve our understanding of this important marketing and management issue. Although the roots of market orientation stretch back 45 years or more to the development of the marketing concept, intense research into this area has only occurred in the past 12 years. Renewed interest was sparked by two seminal articles published by Narver and Slater (1990) and Kohli and Jaworski (1990). These authors produced complementary models of market orientation and tested the links between orientation and performance. In turn, their findings created a flurry of interest from researchers interested in exploring the links between marketing and business strategy, market-oriented behaviours and various aspects of firm performance. Since then, there have been numerous articles exploring the nature of market orientation, its links to performance and whether these links are mediated or moderated by firm or market variables. A problematical issue has been the lack of consensus over how to define and measure market orientation. Is it a corporate culture or guiding philosophy which reflects the marketing or customer orientation concepts? In other words, does it promote the primacy of the customer, satisfying customer needs at a profit – thus creating value for both sellers and consumers – and diffusing

customer-oriented attitudes and marketing practices throughout the organisation? Is it merely the management or marketing behaviours associated with implementing the marketing concept? Or is it a slightly broader philosophy which focuses on customers and competitors? Is it a more strategic marketing/management approach with prescribed behaviours such as scanning the market for information on customer needs and competitor actions and responding to market changes in a rapid and (hopefully) profitable manner? Although Narver and Slater (1990) conceptualised market orientation as a culture, they tended to measure its implementation, using both attitudinal and behavioural scales. However, one of their major contributions was to broaden the original marketing concept to include both customer needs and competitor actions as well as a strategic focus. Hooley et al. (1990) also saw market orientation as the implementation of the marketing concept, but limited their investigation to differences between companies with dominant marketing, sales or production orientations. Kohli and Jaworski (1990) considered market orientation in terms of market scanning, information sharing and response activities. Desphande´ et al. (1993) considered it to be a culture, but three competing scales were reduced down to a common customer orientation dimension (Deshpande´ and Farley, 1996). Gray et al. (1998) performed a similar intersectional analysis on the Narver and Slater (1990), Jaworski and Kohli (1993) and Deng and Dart (1994) scales, resulting in a 20-item scale with five dimensions (customer orientation, competitor orientation, interfunctional co-ordination, responsiveness, and profit emphasis). This has been validated in the New Zealand context, but needs to be tested in other countries to establish its generalisability. It draws most heavily on the Narver and Slater scale, which has tended to dominate MO studies in most countries. Although much of the research into marketing orientation has been synonymous with that concerned with examining the marketing concept (a corporate culture or philosophy) and much of the market orientation research has been concerned with implementing the marketing concept and/or measuring marketing strategy behaviours, the terms marketing and market orientation have often been used interchangeably. The editors of this special issue of the European Journal of Marketing would like to offer a more inclusive definition which bridges both philosophy and behaviour and allows investigation of mediating and moderating variables, as well as antecedents and consequences: Market orientation is the implementation of a corporate culture or philosophy which encourages behaviours aimed at gathering, disseminating and responding to information on customers, competitors and the wider environment in ways that add value for shareholders, customers and other stakeholders.

Major research themes More research is required to establish whether a uniform definition of ‘‘market orientation’’ is possible or even desirable. Allied to this is the need to establish

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whether reliable, valid and generalisable cross-cultural (e.g. developed versus developing economies), cross-industry (e.g. services versus manufacturing, profit versus not-for-profit sectors) and multi-contextual (e.g. internal versus external customers) measurement instruments can be developed. To date, most assessments in the services sector, at least, have tended to be quantitative rather than qualitative, with a fairly even split between measuring behavioural and cultural elements over the last 30 years (see the review by Esteban et al. in this special issue of the European Journal of Marketing). Relatively little research has been conducted into the antecedents of a market orientation (e.g. what conditions are needed to inculcate and nurture a market orientation), with a pioneering study by Jaworski and Kohli (1993) being one of the few. However, this was a deductive, cross-sectional study, which provided limited insights. In order to understand the adoption processes, influences and barriers, more in-depth qualitative (and preferably longitudinal) research is needed. Similarly, qualitative research may provide richer information on the links between market-oriented behaviour and other marketing and management strategies and various performance outcomes. Many researchers have sought to understand the linkages between marketoriented behaviours and firm performance. However, the evidence, particularly in the services sector, remains equivocal. One possible answer may have been revealed by the relatively small number of market orientation studies which have investigated whether the relationship is moderated by the domestic environment (see the summary tables in Greenley (1995) and Gray et al. (1999)) or export market conditions (e.g. the Cadogan et al. article in this special issue of the European Journal of Marketing). Is it worth the expense of devising or revising corporate mission statements, developing strategies and practices, and training staff to acquire the requisite skills and attitudes to become more customer and competitor focused? The evidence suggests that in certain conditions, for example, when market growth is high, demand exceeds supply and customer choice is limited, then market orientation may not pay, particularly if the desired outcome is short-term profitability. Some research suggests that more market-oriented firms may actually seek out and thrive in more turbulent conditions (Gray et al., 1999), when customer needs and behaviours and industry technology are changing quickly, and/or when markets are growing rapidly and competition is intense. These firms appear to be more successful because they understand their customers better and are more aware of the choices which competitors are offering them. As a result, market-oriented firms may be able to position new products and services more effectively, and be able to charge higher prices for added customer value, or increase value for customers by reducing customer-perceived sacrifice (Ravald and Gro¨nroos, 1996). Value, though, is a problematical concept in this area of research (Ponsonby, 2001), and we will return to it later in this editorial. Nevertheless, there is increasing evidence of links between market orientation and innovation, which suggests that effective market scanning and response, rather than the type of new product or new service development

process adopted, may be a better predictor of innovation success in the services sector (Gray et al., 2001). However, there is some debate as to whether market orientation is an antecedent to innovation and innovation performance (Atuahene-Gima, 1996; Gatignon and Xuereb, 1997; Lukas and Ferrell, 2000), whether innovation mediates the relationship between market orientation and firm performance (Han et al., 1998), and/or whether it acts as a moderator (see the article by Matear et al. in this special issue of the European Journal of Marketing). There are two other emerging themes in the market orientation and innovation literature. The first is the need for an internal marketing orientation (Conduit, 2000) to ensure that staff buy into and articulate the desired marketing and/or innovation cultures which the organisation is trying to develop. This appears to be particularly important for service providers, given that their businesses are dependent on satisfactory personal interactions. There is limited evidence that one consequence of market orientation may be an improvement in employee morale and dedication (Jaworski and Kholi, 1993). However, the need for good interfunctional co-ordination (Narver and Slater, 1990) to disseminate market information internally (Kohli and Jaworski, 1990; Jaworski and Kohli, 1993) is reflected in many market orientation scales. The second emerging theme is the importance of organisational learning to ensure that market and product knowledge is retained and that firms learn from their innovation and/or marketing strategy failures as well as their successes (Hurley and Hult, 1998; Slater and Narver, 1995). A note of caution needs to be sounded here, though. Marketing researchers who focus on internal marketing issues, including the recruitment, training, motivation, rewarding and retention of customer-friendly managers and frontline staff, are straying into areas of management in which they may have little experience or expertise. It would be fruitful, particularly in the area of market orientation and service firm performance research, for marketing researchers to forge links with human resource management experts. Those interested in exploring organisational learning issues would be advised to team up with experts in psychology and education. This interdisciplinary research should come as no surprise, though, given that much of the market orientation literature is implicitly or explicitly rooted in other theories, such as the resource-based view of the firm (Day, 1998; Fahy and Smithee, 1999; Fahy et al., 2000) and competitive strategy (Day and Wensley, 1988). This suggests that intangible resources such as branding and innovation, as well as superior service skills and market-oriented cultures and behaviours, are likely to give firms competitive advantages (Gray et al., 2001). If researchers and managers become more interested in how to implement a market orientation, then the inclusion of human resource management concepts would obviously be fruitful. Inconsistent MO-performance findings also suggest that a market-oriented culture alone may not be an important predictor of sustainable competitive advantage or long-term market success. Balanced cultures, which encourage

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innovative behaviours, efficient processes and procedures, constant learning, which gather, disseminate and respond quickly to market information, develop strong brands and good corporate reputations, forge profitable customer relationships, and develop happy, motivated and satisfied staff, are likely to be more successful (Gray et al., 2001). Certainly, there is a need for more research into what constitutes a successful commercial culture. The role of leaders in helping to shape and instil a market-oriented culture and links between different leadership styles and cultural manifestations are also areas worthy of further study (see the article by Kasper in this special issue of the European Journal of Marketing). One of the cornerstones of the marketing concept is that both providers and buyers of products or services gain some additional value from their transactions (Kotler, 1991). While it is relatively easy to measure the value that a firm can derive from a commercial exchange, it is more difficult to assess the value that a consumer might derive (Naumann, 1995) beyond economic considerations such as price and quality (Rust and Oliver, 1994). Increasing customer satisfaction should in theory lead to greater loyalty, positive word-ofmouth, improved cash flows, reduced marketing and servicing costs, and (eventually) increased profitability and shareholder value (see the article by McNaughton et al. in this special issue of the European Journal of Marketing). However, these links are equivocal. Much of the market orientation literature posits that implementing the concept should enable the firm to create superior customer value to competitors. Marketing and consumer behaviour literature often emphasises links between the positive confirmation of expectations of value and/or service quality, customer satisfaction and customer retention or brand loyalty (Parasuraman et al., 1985; Aaker, 1991; Anderson and Fornell, 1994; Zeithaml, 1988, 2000; Oliver, 1997; Parasuraman, 1997; Woodruff, 1997). However, the links between customer satisfaction, customer value and firm performance are less well understood. Some consumer behaviour research has focused on understanding the role of value in choice decisions (for example, Sheth et al., 1991); however, the types of consumer value derived through actual consumption of offerings are poorly understood (Holbrook, 1994, 1999; Ponsonby, 2001). For example, little is known about how the value created during the consumption experience may be related to customer satisfaction and subsequent intentions to repurchase products or services. Yet, this has important implications for customer retention and long-term profit maximization. An assumption of many market orientation researchers appears to be that customer value is predominantly economic and involves a trade-off between perceived benefits and costs or sacrifices. Customer value has also tended to be conceptualised and rationalised from a managerial perspective, for example, providing extra quality, benefits, competitive prices, product choice, variety, enhanced relationship quality and trust, reduced search costs, greater convenience and other temporal benefits, and/or psychosocial benefits associated with the

consumption of superior (usually higher priced) products and brands. Firms which provide customers with added value should in theory also add to their bottom lines, thus keeping at least two groups of stakeholders – customers and shareholders – happy. However, there is little evidence in the market orientation or resource-based view of the firm literatures that customers have been asked to express their views of what constitutes value. There are indications from the emerging experiential marketing (Schmitt, 1999) and extant consumer research literatures (Holbrook and Hirschman, 1982; Holbrook, 1994, 1999) that customers may be more interested in buying pleasurable experiences (Pine and Gilmore, 1998, 1999) than gaining more tangible rewards. Although marketers concerned with one-to-one exchanges and relationship marketing (e.g. Berry, 1983; Gummesson, 1997) have attempted to create more personalised forms of value for their customers, greater insights need to be gained into the value created in service encounters. Market orientation researchers, who want to understand how consumers evaluate competing service offerings, would benefit from the richness of the consumer research literature, despite claims by some authors that its intent is not to provide findings with managerial relevance (Holbrook, 1995). Two counterpoints to the relationship marketing (Berry, 1983; Gummesson, 1997) and market orientation concepts are also emerging. The first is whether the success of low-cost service providers such as airlines and retailers may be attributed to firms eschewing added consumer value through features and benefits or personalised offerings, in favour of mass-marketing, low price positioning and high-frequency transactions (Palmer and Ponsonby, 2001). The second counterpoint is whether a broader range of firms are dropping marketdriven strategies in favour of market-driving activities (Jaworski et al., 2000) where product and service providers attempt to manipulate markets and/or engage in ‘‘retro marketing’’ activities to actively manipulate customers and create needs and desires (Brown, 2001). Both these developments pose profound threats to the posited desirability and generalisability of the market orientation concept and require further investigation. Contributors to the special issue This brings us to some fundamental questions about why the European Journal of Marketing should devote a special issue to ‘‘market orientation and performance in service’’ organisations. The service sector is an increasingly important source of job creation and economic wealth, and accounts for more than 75 per cent of the GDP of many developed economies. Yet there has been surprisingly little research into the relationship between market orientation and service firm performance. The articles in this special issue explore a number of matters related to market orientation and links with firm performance, and raise a number of important questions. Not least among these is the context specific role of the market environment – customers, competitors and technology – and internal

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sources of competitive advantage, and how these factors may impact on the market orientation and performance relationship. In theory, one would have accepted service firms, with their dependence on person-to-person interactions and relationships, to be more market-oriented than product firms and the relationship with performance to be stronger. However, the evidence is still equivocal, and raises issues about how service firms manage their external and internal environments. Our thanks to the contributors and reviewers of articles in this issue. A number of promising papers had to be rejected because they did not adequately address the central themes of this issue. We hope the reviews were useful, though, in helping these authors target other publications or other issues of the European Journal of Marketing. Special thanks are also due to Sharon Ponsonby of the School of International Business, University of Ulster, Londonderry, for her insights into the relationship between market orientation and consumer value, and to Karen Knightbridge of the Department of Marketing at the University of Otago, who was the primary contact for many reviewers and authors and helped to collate the articles contained in this special issue. References Aaker, D. (1991), Managing Brand Equity, The Free Press, New York, NY. Anderson, E. and Fornell, C. (1994), ‘‘Customer satisfaction, market share, and profitability: findings from Sweden’’, Journal of Marketing, Vol. 58 No. 3, pp. 53-66. Atuahene-Gima, K. (1996), ‘‘Market orientation and innovation’’, Journal of Business Research, Vol. 35, pp. 93-103. Berry, L. (1983), ‘‘Relationship marketing’’, in Berry, L.L., Shostack, G.L. and Upah, G.D (Eds), Emerging Perspectives on Services Marketing, American Marketing Association, Chicago, IL, pp. 25-8. Brown, S. (2001), ‘‘Torment your customers (they’ll love it)’’, Harvard Business Review, Vol. 79, pp. 82-8. Conduit, J. (2000), ‘‘Internal customer orientation: what it is, and what it is not’’, Proceedings of the AMA International Marketing Educators Conference, Buenos Aires, p. 446. Day, G.S. (1998), ‘‘What does it mean to be market-driven?’’, Business Strategy Review, Vol. 9 No. 1, pp. 1-14. Day, G. and Wensley, R. (1988), ‘‘Assessing advantage: a framework for diagnosing competitive superiority,’’ Journal of Marketing, Vol. 52, pp. 1-20. Deng, S. and Dart, J. (1994), ‘‘Measuring market orientation: a multi-factor, multi-item approach’’, Journal of Marketing Management, Vol. 10, pp. 725-42. Deshpande´, R. and Farley, J. (1996), ‘‘Understanding market orientation: a prospectively designed meta-analysis of three market orientation scales’’, Working Paper Series, Report 96-125, Marketing Science Institute, Cambridge, MA. Deshpande´, R., Farley, J.U. and Webster, J. (1993), ‘‘Corporate culture, customer orientation and innovativeness in Japanese firms: a quadrad analysis’’, Journal of Marketing, Vol. 57 No. 1, pp. 22-7. Fahy, J. and Smithee, A. (1999), ‘‘Strategic marketing and the resource-based view of the firm’’, Academy of Marketing Science Review, available at: www.amsreview.org/amsrev/theory/ fahy10-99.html

Fahy, J., Hooley, G., Cox, T., Beracs, J., Fonfar, K. and Snoj, B. (2000), ‘‘The development and impact of marketing capabilities in Central Europe’’, Journal of International Business Studies, Vol. 31 No. 1, pp. 63-81. Gatignon, H. and Xuereb, J.-M. (1997) ‘‘Strategic orientation of the firm and new product performance’’, Journal of Marketing Research, Vol. 34 No. 1, pp. 77-90. Gray, B.J. et al. (2001), ‘‘Best practices in services marketing and management’’, Marketing Performance Centre, University of Otago, Dunedin. Gray, B.J., Greenley, G.E., Matear, S.M. and Matheson, P.K. (1999), ‘‘Thriving on turbulence’’, Journal of Market-Focused Management, Vol. 4, pp. 231-57. Gray, B.J., Matear, S., Boshoff, C. and Matheson, P. (1998), ‘‘Developing a better measure of market orientation’’, European Journal of Marketing, Vol. 32 No. 9/10, pp. 884-903. Greenley, G.E. (1995), ‘‘Market orientation and company performance: empirical evidence from UK companies’’, British Journal of Management, Vol. 6, pp. 1-13. Gummesson, E. (1997), ‘‘Relationship marketing as a paradigm shift: some conclusions from the 30R approach’’, Management Decision, Vol. 35 Nos 3-4, pp. 267-73. Han, J.K., Kim, N. and Srivastava, R.K. (1998), ‘‘Market orientation and organisational performance: is innovation a missing link?’’, Journal of Marketing, Vol. 62 No. 4, pp. 30-5. Holbrook, M. (1994), ‘‘The nature of customer value: an axiology of services in the consumption experience’’, in Rust, R. and Oliver, R. (Eds), Service Quality: New Directions in Theory and Practice, Sage Publications, Thousand Oaks, CA, pp. 21-71. Holbrook, M. (1995), Consumer Research: Introspective Essays on the Study of Consumption, Sage Publications, Thousand Oaks, CA. Holbrook, M. (1999), Consumer Value. A Framework for Analysis and Research, Routledge, London. Holbrook, M. and Hirschman E. (1982), ‘‘The experiential aspects of consumption: consumer fantasies, feelings and fun’’, Journal of Consumer Research, Vol. 9, pp. 132-40. Hooley, G.J., Lynch, J.E. and Shepherd, J. (1990), ‘‘The marketing concept: putting the theory into practice’’, European Journal of Marketing, Vol. 24 No. 9, pp. 7-24. Hurley, R.F. and Hult, T.M. (1998), ‘‘Innovation, market orientation, and organizational learning: an integration and empirical examination’’, Journal of Marketing, Vol. 62, pp. 42-54. Jaworski, B.J. and Kohli, A.K. (1993) ‘‘Market orientation: antecedents and consequences’’, Journal of Marketing, Vol. 57 No. 3, pp. 53-70. Jaworski, B.J., Kohli, A.K. and Sahay, A. (2000), ‘‘Market-driven versus driving markets’’, Journal of the Academy of Marketing Science, Vol. 28 No. 1, pp. 45-54. Kohli, A. and Jaworksi, B.J. (1990) ‘‘Market orientation: the construct, research propositions, and managerial implications’’, Journal of Marketing, Vol. 54 No. 2, pp. 1-18. Kotler, P (1991), Marketing Management, 7th ed., Prentice-Hall, Englewood Cliffs, NJ. Lukas, B.A. and Ferrell, O.C. (2000), ‘‘The effect of market orientation on product innovation’’, Journal of the Academy of Marketing Science, Vol. 28 No. 2, pp. 239-47. Narver, J.C. and Slater, S.F. (1990) ‘‘The effect of a market orientation on business profitability’’, Journal of Marketing, Vol. 54 No. 4, pp. 20-35. Naumann, E. (1995), Creating Customer Value. The Path to Sustainable Competitive Advantage, Thomson Executive Press, Cincinnati, OH. Oliver, R. L. (1997), Satisfaction: A Behavioral Perspective on the Consumer, McGraw-Hill, New York, NY. Palmer, A. and Ponsonby, S. (2001), ‘‘The social construction of new marketing paradigms – the influence of personal perspective’’, Journal of Marketing Management, Vol. 17.

Guest editorial

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Parasuraman, A. (1997), ‘‘Reflections on gaining competitive advantage through customer value’’, Journal of the Academy of Marketing Science, Vol. 25 No. 1, pp. 154-61. Parasuraman, A., Zeithaml, V.A. and Berry L.L. (1985), ‘‘A conceptual model of service quality and its implications for future research’’, Journal of Marketing, Vol. 49, pp. 41-50. Pine, B. and Gilmore, J. H. (1998), ‘‘Welcome to the experience economy’’, Harvard Business Review, July/August, pp. 97-105. Pine, B. and Gilmore, J. (1999), The Experience Economy: Work is Theatre and Every Business a Stage, Harvard Business School Press, Boston, MA. Ponsonby, S. (2001), ‘‘Consolidating the marketing concept, marketing management and consumer research – conceptualising consumer value’’, paper presented at the Irish Academy of Management Conference, September, University of Ulster, Northern Ireland. Ravald, A. and Gro¨nroos, C. (1996), ‘‘The value concept and relationship marketing’’, European Journal of Marketing, Vol. 30 No. 2, pp. 19-30. Rust, R. and Oliver, R. (1994), Service Quality. New Directions in Theory and Practice, Sage Publications, London. Schmitt, B. (1999), Experiential Marketing: How to Get Customers to Sense, Feel, Think, Act, and Relate to your Company and Brands, Free Press, New York, NY. Sheth, J.N, Newman, B. and Gross, B.L. (1991), ‘‘Why we buy what we buy: a theory of consumption values’’, Journal of Business Research, Vol. 22, pp. 159-70. Slater, S.F. and Narver, J.C. (1995) ‘‘Market orientation and the learning organisation’’, Journal of Marketing, Vol. 59, pp. 63-74. Woodruff, R.B. (1997), ‘‘Customer value: the next source of competitive advantage’’, Journal of the Academy of Marketing Science, Vol. 25 No. 2, pp. 139-53. Zeithaml, V.A. (1988), ‘‘Consumer perceptions of price, quality, and value: a means-end model of synthesis of evidence’’, Journal of Marketing, Vol. 52, pp. 2-22. Zeithaml, V.A. (2000), ‘‘Service quality, profitability, and the economic worth of customers: what we know and what we need to learn’’, Journal of Academy of Marketing Science, Vol. 28 No. 1, pp. 67-85.

List of reviewers Dr Gunther Botschen, Aston Business School, Aston University Professor Roderick Brodie, University of Auckland Dr Mark Colgate, University of Auckland Dr Jodie Conduit, Monash University Professor Susan Douglas, Stern School, New York University Professor John Fahy, University of Limerick Associate Professor Mark Farrell, Charles Sturt University Professor Mark Gabbott, Monash University Professor Gordon Greenley, Aston Business School, Aston University Professor Susan Hart, Department of Marketing, Strathclyde University Professor Hans Jørn Juhl, Aarhus School of Business Professor Dale Littler, UMIST Dr Violi Llanes, University of Otago Associate Professor Janet McColl-Kennedy, University of Queensland Professor Rod McNaughton, University of Waterloo Associate Professor Sheelagh Matear, University of Otago Associate Professor Felix Mavondo, Monash University Professor Robert Morgan, University of Wales, Aberystwyth Professor Paul Patterson, University of New South Wales Dr Alfred Pelham, College of New Jersey Professor Nigel Piercy, Cranfield School of Management Professor Leyland Pitt, Curtin University Professor Robin Shaw, Deakin University Professor Geoff Soutar, University of Western Australia Professor Mark Uncles, University of New South Wales Professor David Wilson, Penn State University

List of reviewers

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Market-oriented value creation in service firms

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Department of Management Sciences, University of Waterloo, Waterloo, Ontario, Canada, and

Received December 2000 Revised November 2001

Rod B. McNaughton Phil Osborne and Brian C. Imrie Department of Marketing, School of Business, University of Otago, Dunedin, New Zealand Keywords Competitive advantage, Market orientation, Organizational performance, Value analysis Abstract A fundamental proposition in marketing strategy is that a market orientation is positively related to firm performance. However, the mechanisms of this relationship have yet to be explored in detail, especially in service industries where intangible assets are relatively more important. This paper addresses this issue by proposing a model that identifies important intermediate variables between a market orientation and increased firm value. The model posits that a market orientation guides investment in market-based assets and other asset types, that these assets may be levered to create a competitive advantage and value for customers, and that this results in loyalty and easier customer attraction. Quicker and more extensive market penetration, shorter sales cycles, and decreased marketing and sales costs enhance the cash flow of a marketoriented firm. This may be recognised in higher valuations, which ultimately translate into higher share prices and wealth creation for the owners of the firm.

European Journal of Marketing, Vol. 36 No. 9/10, 2002, pp. 990-1002. # MCB UP Limited, 0309-0566 DOI 10.1108/03090560210437299

Introduction A key objective of research into marketing strategy is to uncover how firms develop and sustain a competitive advantage, and how an advantage translates into superior performance. Market orientation – a business culture focused on the continuous creation of customer value (Slater and Narver, 1994) – is one intangible that is posited to be a source of competitive advantage that positively influences business performance (Narver and Slater, 1990; Jaworski and Kohli, 1993; Deshpande´ et al., 1993). A substantial number of studies are reported in the literature that test hypotheses relating a market orientation to firm performance as measured by financial measures such as profit, relative profit, return on investment or assets, and non-financial measures such as new product success and innovation. Empirical results generally confirm a positive relationship with measures of performance, though the strength of the association is often weak (e.g. Ruekert, 1992; Deshpande´ et al., 1993; Jaworski and Kohli, 1993; Slater and Narver, 1994; Pelham and Wilson, 1996). Most empirical studies of the market orientation-performance link are set in the context of traditional manufacturing sectors. However, there is evidence of a market orientation-performance link in the context of service industries (e.g. Van Egeren and O’Connor, 1998; Chang and Chen, 1998; Kumar et al., 1998; Pitt et al., 1996; Han et al., 1998; Voss and Voss, 2000). The often cited service characteristics of intangibility, heterogeneity, inseparability and perishability

(Sasser et al., 1978) highlight both the reduced emphasis on tangibles and the increased role that a consumer plays within the service process. Within the service industries, competitive advantage is less likely to come from tangible factors, and is more likely to be derived from intangibles that contribute to unique capabilities. Intangible assets are also important because they are increasingly considered in determining the market value of companies (Kaplan and Norton, 2001). The integral involvement of the consumer within the service process suggests the need to develop close and trusting relationships to increase customer perceived value, and such relationships are logically fostered by a market orientation. As an active participant in the service ‘‘performance’’ the consumer interacts with personnel, the service script and supporting tangibles in a manner that does not occur in a product marketing context. The consequent transparency of the service encounter enables an impression to be formed of the firm’s commitment to creating customer value. Equally the interaction that occurs with service personnel enables enhanced market sensing by the firm, a capability of a market-oriented company (Day, 1994). As a result it is possible that a market orientation is even more central to the performance of services firms. The papers in this special issue are important as they reveal more detail about the relationships between the dimensions of a market orientation, the creation of value for buyers of services, and the performance implications for the producers and sellers of those services. The extant body of marketing orientation theory, no matter the sector in which it is applied, focuses on the processes whereby market orientation creates customer value. For example, see Figure 2 in Slater and Narver (1994). But the bulk of empirical studies make a substantial leap in positing a relationship between a measure of market orientation and improved financial performance. The processes that underlie the links between market orientation, customer value, and financial performance are largely treated as a ‘‘black box’’. This paper develops a conceptual model that makes explicit the processes, whereby a market orientation and emphasis on customer value can enhance financial performance and ultimately create wealth for the owners of a firm. It builds on and refines our model of market-based value creation, which we recently used to characterise the restructuring of British Telecom PLC’s marketing activities (McNaughton et al., 2001). In particular, by drawing on the services literature relating to quality, satisfaction and loyalty, we are able to be more specific about the interface between customer value and firm performance. Our model postulates an explanation of the process, whereby a market orientation is transformed into customer value and how this in turn creates value for the owners of the firm. It also contributes to management practice by providing a logical rationale for investments in market-based assets, justification for efforts to develop a market-oriented organisation, and framework that can be used to both guide and analyse the strategies of marketoriented firms.

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Market orientation and service firm performance Despite continuous debate over the specific dimensions of the market orientation construct (for an excellent review, see Lafferty and Hult, 2001), the link to organisational performance is almost universally accepted (Sheth and Sisoda, 1999). However, empirical tests of the robustness of the relationship to the unique characteristics of the services environment are a relatively recent addition to the market orientation literature. Early considerations of a market orientation in the services industries include Greenley and Matcham (1986) and Qureshi (1993). Bharadwaj et al. (1993) included elements of market-oriented behaviour in their conceptual model of the drivers of sustainable competitive advantage in service industries. A number of empirical tests of the market orientation-performance relationship appeared in the literature in the late 1990s. Table I highlights a sample of these investigations. Most of these studies support the market orientation-performance link, but there is enough contrary evidence to suggest that the relationship is not as straightforward as is often perceived (Au and Tse, 1995; Caruana et al., 1999; Sargeant and Mohamad, 1999). While these negative results are usually accompanied by study-specific reasons for the ‘‘anomalous’’ findings (e.g. Caruana et al., 1999), even supportive findings explain little of the variation in firm performance, with coefficients of determination typically being less than 0.10.

Author

Sample

Country (usable responses)

70, diverse, large, individual (non-SBU), SIC code 5000, 7000, 8000 Mid-west USA (70) Kumar et al. (1998) Health care USA (159) Pitt et al. (1996) Diverse, large UK (161) and Malta (193) Caruana et al. (1998) Universities NZ and Australia Chang and Chen (1998) Retail stockbroking Taiwan (116) Au and Tse (1995) Hotels Hong Kong (41) and NZ (148) Lado et al. (1998) Insurance Belgium (34) and Spain (32) Han et al. (1998) Banks Mid-west USA (134) Sargeant and Mohamad (1999) Hotels UK (200) Caruana et al. (1999)a Diverse, large UK (161)

Performance relationship Direct Mediated None

Van Egeren and O’Connor (1998)

3 3 3 3 3 3 3 3 3 3

Notes: Table I. a The research reported in this paper appears to use the same data reported in Pitt et al. A sample of market orientation-performance (1996). However, a contrary result is presented and discussed. The authors suggest problems with the conceptualisation of market orientation used, though no such qualms relationship were expressed in the earlier paper. Further, the later paper explores a more complex model investigations in that may have confounded the identification of the earlier ‘‘direct’’ relationship service industries

Our conclusion from the extant literature is that understanding of how a market orientation influences performance is still nascent and requires development (McNaughton et al., 2001), a view that has also been expressed by Uncles (2000) and Deshpande´ (1999). This is especially the case in the context of the services industries where a high degree of intangibility may confound the relationship (Sin and Tse, 2000), and intermediate variables such as service quality are also likely to significantly impact firm performance (Chang and Chen, 1998). The role of intermediate variables is key. The processes that underlie the market orientation-performance relationship are poorly identified in most empirical studies, though the improbability of a direct causal link (e.g. as postulated by Narver and Slater, 1990; Ruekert, 1992) is acknowledged by exploration of potential moderators (e.g. Day and Wensley, 1988; Diamantopoulos and Hart, 1993; Greenley, 1995; Jaworski and Kohli, 1993). The established logic is that a market orientation provides the basis for devising a strategy that creates value for customers, and that such a strategy provides the foundation for a sustainable competitive advantage that contributes to financial performance. For example, see the hypotheses related to business performance developed by Jaworski and Kohli (1993) or by Deshpande´ et al. (1993). However, this line of reasoning does not in itself explain why a firm can realise value for its shareholders by pursuing a strategy of creating customer value. Nor is an explanation readily apparent in the market orientation literature. Kohli and Jaworski (1990) and Kohli et al. (1993), for example, found that an emphasis on profitability was ‘‘conspicuously absent’’ as a component of a customer value-based business strategy. Chang and Chen (1998) make an important contribution to identifying the steps that fall between a market-oriented business culture and performance outcomes. These authors developed a conceptual model that postulates both a direct effect for market orientation on business performance, and an indirect effect through helping to improve service quality (see Figure 2 in Chang and Chen, 1998). The model is tested with a sample of retail stockbrokers in Taiwan. The results support the hypothesis that a market orientation can assist firms to achieve a higher quality level, and that quality has a positive relationship with profitability. Quality is found to explain more of the variation in profitability than does market orientation. The model including service quality (and a number of covariates) explains 38 per cent of the variation in profitability between firms, and the addition of market orientation to the model only increases this to 45 per cent. Chang and Chen (1998, p. 257) conclude: Given that there are other potential intermediate variables unaccounted for, the pure direct effect of market orientation on profitability may be even smaller. This illustrates the importance of the identification of intermediate variables.

A model of market-oriented value creation in service firms Figure 1 presents a model that maps a path from market orientation to changes in cash flow that can influence firm value. The model identifies a number of the

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European Journal of Marketing 36,9/10 994 Figure 1. A model of market-oriented value creation

intermediate variables, or steps, that fall between a market orientation and eventual performance outcomes. The performance outcome in our model is changes in the cash position of the firm rather than profitability per se. The rationale is that cash flow ultimately determines the value of the firm, and there are several mechanisms for this – of which profitability is one. Increased earnings, accelerated cash cycling, increased residual value of cash, and decreased volatility of cash flow all influence firm value (Srivastava et al., 1998). Further, an emphasis on cash flow recognises the time lag between implementation of market orientation, which can have costs, and realisation of benefits in later periods (Gauzente, 2001). The model begins with the market orientation of a firm, which we link to the creation of market-based assets, and other asset types. Market-based assets are largely intangible, and consist of intellectual assets (knowledge about the market), relational assets (outcomes of relationships with stakeholders including channel members, customers, and other players), and the interaction between these asset forms (Srivastava et al., 1998). Market-based assets accumulate by developing knowledge, skills and resources that are unique and difficult to imitate (Barney, 1991; Hunt and Morgan, 1995). They can be built or acquired through various forms of investment, including staff time spent in relationship building, databases, advertising and promotion, and sponsorship. Market-based assets can create value for a firm by building strong barriers to entry that divert competitors to higher cost or less effective strategies (Grant, 1991, 1996), leveraging the asset (Srivastava et al., 1998), and deploying the asset to create customer value (Slater, 1997). The deployment of the asset to create customer value is of most interest to us as this is the method by which a market orientation influences the way in which a firm interacts with its customers. There is also a relationship between market-based assets and other asset types. First, a market-oriented firm may uncover through its intelligence about customers or a competitor that investment is required in a non-market asset to achieve or maintain their competitive position. This might, for example, be a new store location or technology. Second, there is potential synergy between market-based assets

and other asset types. A hotel, for example, has greater potential value when branded and managed with an international hotelier’s business systems, than does if operated by a local property developer. The unique assets of a firm, both market-based and of other forms, create the competitive advantage of a firm. This in turn can be used to create value for customers. Value is judged as part of an equation in which customers compare perceived benefits and the perceived total costs (or sacrifice) of ownership (Monroe, 1991). Market-based assets can create value for customers through a positive quality perception (Chang and Chen, 1998), lowering search costs, matching performance requirements and price (Day, 1994), improving service and trust, risk reduction, and by generating innovative new offerings (Slater and Narver, 1994). Customer perceived value is also influenced by comparisons made with offerings by competitors. Thus, the competitor intelligence gathered by a market-oriented firm can be used to improve the positioning of the offering (or the firm itself). Market orientation thus influences both the numerator and the denominator of this equation. To construct a positive value equation, a firm must define, deliver and communicate a proposition that is recognised by the target market as better than that delivered by the competition (Christopher, 1996). A positive value equation attracts customers and, if their expectations are met, they become part of a growing pool of satisfied customers. The literature postulates that firms providing customer value have more satisfied customers who demonstrate stronger brand loyalty (Aaker, 1991; Oliver, 1997). Satisfied customers also generate positive word-of-mouth, which helps to recruit new customers (Swan and Oliver, 1989; Singh and Pandya, 1991). There is a substantial body of literature that addresses these relationships in general, and in the specific context of service industries. Interestingly, attempts to relate measures of quality or satisfaction at the firm level to profitability (or firm value) have met the same result as those testing the market orientationperformance link; generally the relationship is positive but the effect is weak. Examples of this research include Yeung and Ennew (2000), Aaker and Jacobsen (1994) and Anderson and Fornell (1994). These studies show a much weaker quality-performance relationship than was originally suggested by the PIMS data (Buzzell and Gale, 1987). Research into the behavioural aspects of these relationships has met with more success, by investigating the relationships between variables that are intermediate between quality and performance outcomes. Namely: qualitysatisfaction, satisfaction-loyalty, satisfaction-positive word-of-mouth, loyaltycustomer retention, and customer retention-performance. Examples of this literature in the context of the service industries are described in Table II. One reason why the evidence for these individual links is stronger than that for quality-performance is the difficulty of linking micro- and macro-constructs (Yeung and Ennew, 2000). Concepts like satisfaction or loyalty are attitudes and behaviours of individuals, often associated with particular service experiences, while performance is an aggregate characteristic of an

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Table II. Research linking satisfaction, loyalty and performance

Topic

Author(s)

Service quality and performance

Aaker and Jacobsen (1994)

Research finding

In an analysis of 34 major US brands (both services and products) a positive relationship was established between the stock price index and quality perceptions Rust et al. (1995) A framework is developed for determining the impact that service quality has upon profitability. A simulation is then used to illustrate the impact of service quality on profitability Service qualityBrady and In a cross-national study it is found that service satisfactionRobertson (2001) quality’s impact on loyalty and behavioural intentions loyalty-behaviour is mediated by a consumer’s level of satisfaction and that this relationship is consistent across cultures Satisfaction and Singh and The authors model the key mechanisms that shape loyalty Sirdeshmukh satisfaction in an individual encounter, and loyalty (2000) across ongoing exchanges. Central to the model is the way in which agency theory interacts with trust to affect satisfaction in an individual encounter and loyalty in the long term Jones et al. (2000) The results of this study indicate that the influences of service satisfaction on repurchase intentions decreases, where high switching barriers exist Loyalty and Reichheld and Within a services context four mediating variables performance Sasser (1990) (cost, increased purchases, price premiums, word of mouth) are introduced as increasing with retention and subsequently positively impacting firm performance. Evidence is presented from a cross-section of industries to illustrate this contention Anderson (1993) A model is developed to link explicitly the antecedents and consequences of customer satisfaction in a utilityoriented framework. It is found that a positive relationship exists between customer retention and profitability Heskett et al. It is demonstrated that customer retention has a (1997) greater impact on service firm performance than economies of scale, market share and other factors Satisfaction and Anderson and Using a sample of 77 prominent Swedish firms, the performance Fornell (1994) authors found a significant relationship between satisfaction and return on assets (ROA) Satisfaction, Heskett et al. The service-profit chain is introduced. The links in the loyalty and firm (1994) chain are as follows: profit and growth are stimulated performance primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Satisfied, loyal, and productive employees create value Fornell (1992) Utilising the Swedish customer satisfaction barometer (CSB), a national economic indicator of customer satisfaction, the authors find a significant relationship between satisfaction, loyalty, price elasticities and firm profitability (continued)

Topic

Market-oriented value creation

Author(s)

Research finding

Hallowell (1996)

The service profit chain was tested in a retail bank setting. The relationship of satisfaction, loyalty and firm profitability is supported This paper finds that the satisfaction-loyaltyperformance logic has a greater positive impact on services than products. It is reasoned that service firms must earn loyalty but product firms can lower prices to aid retention. The results suggest, however, that satisfaction is only one determinant of loyalty for services. It is also noted that service revenue growth is driven primarily by personal referrals and word-ofmouth

Bo (2000)

997

Table II.

organisation. In our model we illustrate this problem by embedding customer value (the shaded box) within the broader construct of firm value. The variables which fall outside the customer value box, loyalty and word-ofmouth, are associated with the behaviours of individuals, but have conceptual equivalents at the level of the organisation – retention and referrals. Both retention and referrals have the potential to increase incoming cash and decrease outgoing cash, and thus to influence the value of a firm (Table III). For example, loyal customers are less likely to switch and require less ongoing marketing effort to retain (Reichheld and Sasser, 1990). The literature on both brand equity and customer satisfaction suggests that loyal or satisfied customers will pay price premiums, adopt line extensions more readily (Keller, 1993), try and refer products more frequently, and have lower sales and service costs (Reichheld and Sasser, 1990). The overall effect of these processes is to speed receipt of cash, widen the gap between incoming and outgoing cash (for marketing-related expenditures), and reduce working capital and fixed capital requirements. All else being the same, this should help to create higher Loyalty – customer retention

Word-of-mouth – customer attraction

Increase incoming cash

Price premiums Adoption of line extensions Increased purchase frequency Increased purchase volume (easier to cross-sell, companion-sell and up-sell) Reduced switching

Faster trial, adoption and diffusion of products Increased market share

Decrease outgoing cash

Lower cost of recruiting customers Decreased customer-servicing costs Lower selling costs

Shortened sales cycle Reduced inventory levels Lower selling costs Lower innovation costs and fewer new product failures

Table III. Possible impacts on cash flow of customer loyalty and positive word-of-mouth

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earnings, reduce the volatility of cash flow, and increase the residual value of cash flow (Srivastava et al., 1998); effects which have the potential to increase firm value (Day and Fahey, 1988). The owners and managers of a firm also have to decide how to allocate the retained earnings associated with this higher net marketing contribution. The resulting cost advantage could be used to increase customer perceived value through price reductions, possibly stimulating demand, or it could be reinvested in the creation of further marketbased or other assets. Finally, while the construct ‘‘service quality’’ does not explicitly appear, it has an important role in our model. Chang and Chen (1998) identified quality as an outcome of managerial action, which is in turn motivated by a market orientation. However, we perceive service quality to be a ubiquitous influence. When a firm’s personnel (at all levels) are market-oriented, activity focuses on the creation of quality service through deployment of both intellectual and relational market-based assets. The gap model (Parasuraman et al., 1985) inventories the activities (gaps 1-4) by both managerial and front line personnel that are required to create a consumer perception of service quality (gap 5). Service quality is considered an outcome of the successful application of market assets while also adding value to the firm and taking its place among the stock of market-based assets (Zeithaml, 2000). Finally, the value that service quality creates for all stakeholders establishes it as an effective competitive advantage. The service quality construct is embedded within our model as a market-based asset, competitive advantage and influencer of customer perceived value. Conclusions Our model traces the theoretical effects of market orientation on firm value. The model furthers understanding of the market orientation-performance relationship by making explicit the mechanisms, whereby creating value for customers can also improve the financial position of a firm. This addresses a gap in the stream of research that seeks to demonstrate a positive empirical relationship between market orientation and measures of financial performance (e.g. Narver and Slater, 1990; Ruekert, 1992; Day and Wensley, 1988; Diamantopoulos and Hart, 1993; Greenley, 1995; Jaworski and Kohli, 1993). The model postulates that a market orientation helps a firm to both create market-based assets and guide investment in other types of assets. These become the basis of a competitive advantage that can be deployed to create customer value. Increased customer perceived value attracts customers, and results in satisfied customers who are more loyal and act as marketing agents by spreading positive word-of-mouth (Reichheld and Sasser, 1990). A growing pool of retained customers helps to accelerate net cash flow, increase the residual value of cash, and decrease the volatility of cash flow. The model also acknowledges that a market orientation may improve the performance of service firms by contributing to service quality.

This model emphasises cash flow, which has three clear benefits. First, it provides the ability to communicate the benefits of a market-oriented culture across functional areas within a firm. The language of cash flow is universal. Second, it emphasises that market-based assets are an important investment type. Valuation measures could be applied to market-based assets, providing a common framework for firms to compare the benefits of a market orientation with alternative internally focused strategies (or, indeed, the complementary effect of a market orientation on other asset forms). Finally, an emphasis on cash flow impacts also clarifies that the benefits of a market orientation are not realised in the same period as the investment. This is a problem for empirical studies that seek to correlate a market orientation with traditional measures of financial performance, particularly profit. The implementation of our model as a strategic framework would require an accounting method that is able to relate changes in cash position to specific marketing activities. Goebel et al. (1998) recently addressed this issue by describing how activity-based costing can assist analysis of the costs and benefits of a market orientation. The cost-per-customer and revenue-percustomer metrics that are being used to both value and track the performance of Internet-based firms are also relevant. These metrics make a direct link between the costs of marketing activities and the benefits derived in terms of customer retention, and the frequency and quality of sales (Whyman, 1999). References Aaker, D.A. (1991), Managing Brand Equity: Capitalising on the Value of a Brand Name, The Free Press, New York, NY. Aaker, D.A. and Jacobsen, R. (1994), ‘‘The financial information content of perceived quality’’, Journal of Marketing Research, Vol. 31 No. 2, pp. 191-201. Anderson, E. (1993), ‘‘The antecedents and consequences of customer satisfaction for firms’’, Marketing Science, Vol. 12 No. 2, pp. 125-44. Anderson, E.W. and Fornell, C. (1994), ‘‘Customer satisfaction, market share, and profitability: findings from Sweden’’, Journal of Marketing, Vol. 58 No. 3, pp. 53-66. Au, A.K.M. and Tse, A.C.B. (1995), ‘‘The effect of marketing orientation on company performance in the service sector: a comparative study of the hotel industry in Hong Kong and New Zealand’’, Journal of International Consumer Marketing, Vol. 8 No. 2, pp. 77-87. Barney, J.B. (1991), ‘‘Firm resources and sustained competitive advantage’’, Journal of Management, Vol. 17, pp. 99-120. Bharadwaj, S.G., Varadarajan, P.R. and Fahy, J. (1993), ‘‘Sustainable competitive advantage in service industries: a conceptual model and research propositions’’, Journal of Marketing, Vol. 57, October, pp. 83-99. Bo, E. (2000), ‘‘The effects of satisfaction and loyalty on profits and growth: products versus services’’, Total Quality Management, Vol. 11 No. 7, pp. 917-27. Brady, M.K. and Robertson, C.J. (2001), ‘‘Searching for a consensus on the antecedent role of service quality and satisfaction: an exploratory cross-national study’’, Journal of Business Research, Vol. 51 No. 1, pp. 53-60. Buzzell, R.D. and Gale, B.T. (1987), The PIMS Principles: Linking Strategy to Performance, Prentice-Hall, Englewood Cliffs, NJ.

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Caruana, A., Pitt, L. and Berthon, P. (1999), ‘‘Excellence-market orientation link: some consequences for service firms’’, Journal of Business Research, Vol. 44, pp. 5-15. Caruana, A., Ramaseshan, B. and Ewing, M.T. (1998), ‘‘Do universities that are more marketoriented perform better?’’, International Journal of Public Sector Management, Vol. 11 No. 1, pp. 246-64. Chang, T.Z. and Chen, S.J. (1998), ‘‘Market orientation, service quality and business profitability: a conceptual model and empirical evidence’’, Journal of Services Marketing, Vol. 12 No. 4, pp. 246-64. Christopher, M. (1996), ‘‘From brand values to customer value’’, Journal of Marketing Practice: Applied Marketing Science, Vol. 2 No. 1, pp. 55-66. Day, G.S. (1994), ‘‘The capabilities of market-driven organizations’’, Journal of Marketing, Vol. 58, pp. 37-52. Day, G.S. and Fahey, L. (1988), ‘‘Valuing market strategies’’, Journal of Marketing, Vol. 52, pp. 45-57. Day, G.S. and Wensley, R. (1988), ‘‘Assessing advantage: a framework for diagnosing competitive superiority’’, Journal of Marketing, Vol. 52, pp. 1-20. Deshpande´, R. (Ed.) (1999), Developing a Market Orientation, Sage Publications, Thousand Oaks, CA. Deshpande´, R., Farley, J.U. and Webster, F.E. Jr (1993), ‘‘Corporate culture, customer orientation, and innovativeness in Japanese firms: a quadrad analysis’’, Journal of Marketing, Vol. 57, pp. 23-7. Diamantopoulos, A. and Hart, S. (1993), ‘‘Linking market orientation and company performance: preliminary evidence on Kohli and Jaworski’s framework’’, Journal of Strategic Marketing, Vol. 1, pp. 93-121. Fornell, C. (1992), ‘‘A national customer satisfaction barometer: the Swedish experience’’, Journal of Marketing, Vol. 56 No. 1, pp. 6-21. Gauzente, C. (2001), ‘‘Why should time be considered in market orientation research?’’, Academy of Marketing Science Review, Vol. 1 No. 1, available at: www.amsreview.org/amsrev/ forum/gauzente01-01.html Goebel, D., Marchall, G.W. and Locander, W.B. (1998), ‘‘Activity-based costing: accounting for a market orientation’’, Industrial Marketing Management, Vol. 27, pp. 497-510. Grant, R.M. (1991), ‘‘The resource-based theory of competitive advantage: implications for strategy formulation’’, California Management Review, Spring, pp. 114-35. Grant, R.M. (1996), ‘‘Prospering in dynamically-competitive environments: organisational capability as knowledge integration’’, Organizational Science, Vol. 7, pp. 375-87. Greenley, G.E. (1995), ‘‘Market orientation and company performance: empirical evidence from UK companies’’, British Journal of Management, Vol. 6, pp. 1-13. Greenley, G.E. and Matcham, A.S. (1986), ‘‘Marketing orientation in the service of incoming tourism’’, European Journal of Marketing, Vol. 20 No. 7, pp. 64-73. Hallowell, R. (1996), ‘‘The relationships of customer satisfaction, customer loyalty, and profitability: an empirical study’’, International Journal of Service Industry Management, Vol. 7 No. 4, pp. 27-42. Han, J.K., Kim, N. and Srivastava, R. (1998), ‘‘Market orientation and organisational performance: is innovation a missing link?’’ Journal of Marketing, Vol. 62 No. 4, pp. 30-5. Heskett, J.L., Sasser, W.E. Jr and Schlesinger, L. (1997), The Service Profit Chain, Free Press, New York, NY. Heskett, J.L., Jones, T.O., Loveman, G.W., Sasser, W.E. Jr and Schlesinger, L. (1994), ‘‘Putting the service-profit chain to work’’, Harvard Business Review, Vol. 72 No. 2, pp. 105-11.

Hunt, S.D. and Morgan, R.M. (1995), ‘‘The comparative advantage theory of competition’’, Journal of Marketing, Vol. 59, pp. 1-15. Jaworski, B.J. and Kohli, A.K. (1993), ‘‘Market orientation: antecedents and consequences’’, Journal of Marketing, Vol. 57, pp. 53-70. Jones, M.A., Mothersbaugh, D.L. and Beatty, S.E. (2000), ‘‘Switching barriers and repurchase intentions in services’’, Journal of Retailing, Vol. 76 No. 2, p. 259. Kaplan, R.S. and Norton, D. (2001), The Strategy-Focused Organisation: How Balanced Scorecard Companies Thrive in the New Business Environment, Harvard Business School Press, Boston, MA. Keller, K.L. (1993), ‘‘Conceptualizing, measuring, and managing customer-based brand equity’’, Journal of Marketing, Vol. 57, pp. 1-22. Kohli, A.K. and Jaworski, B.J. (1990), ‘‘Market orientation: the construct, research propositions and managerial implications’’, Journal of Marketing, Vol. 54, pp. 1-18. Kohli, A.K., Jaworski, B.J. and Kumar, A. (1993), ‘‘MARKOR: a measure of market orientation’’, Journal of Marketing Research, Vol. 30, pp. 467-77. Kumar, K., Subramanian, R. and Yauger, C. (1998), ‘‘Examining the market orientationperformance relationship: a context-specific study’’, Journal of Management, Vol. 24 No. 2, pp. 201-34. Lado, N., Maydeu-Olivares, A. and Rivera, J. (1998), ‘‘Measuring market orientation in several populations a structural equations model’’, European Journal of Marketing, Vol. 32 No. 1/2, pp. 23-39. Lafferty, B.A. and Hult, G.T.M. (2001), ‘‘A synthesis of contemporary market orientation perspectives’’, European Journal of Marketing, Vol. 35 No. 1/2, pp. 92-109. McNaughton, R.B., Osborne, P., Morgan, R.E. and Kutwaroo, G. (2001), ‘‘Market orientation and firm value’’, Journal of Marketing Management, Vol. 17 No. 5-6, pp. 521-42. Monroe, K.B. (1991), Pricing: Making Profitable Decisions, McGraw-Hill, New York, NY. Narver, J.C. and Slater, S.F. (1990), ‘‘The effect of a market orientation on business profitability’’, Journal of Marketing, Vol. 54, pp. 20-35. Oliver, R.L. (1997), Satisfaction: A Behavioral Perspective of the Consumer, McGraw-Hill, New York, NY. Parasuraman, A., Zeithaml, V.A. and Berry, L.L. (1985), ‘‘A conceptual model of service quality and its implications for future research’’, Journal of Marketing, Vol. 49, pp. 41-50. Pelham, A.M. and Wilson, D.T. (1996), ‘‘A longitudinal study of the impact of market structure, firm structure, strategy and market orientation culture on dimensions of small-firm performance’’, Journal of the Academy of Marketing Science, Vol. 24, pp. 27-43. Pitt, L., Caruana, A. and Berthon, P. (1996), ‘‘Market orientation and business performance: some European evidence’’, International Marketing Review, Vol. 13 No. 1, pp. 5-18. Qureshi, S. (1993), ‘‘Market-driven public institutions attract resources’’, Journal of Professional Services Marketing, Vol. 9 No. 2, pp. 83-92. Reichheld, F.F. and Sasser, E.W. Jr (1990), ‘‘Zero defections: quality comes to services’’, Harvard Business Review, Vol. 68, September-October, pp. 105-11. Ruekert, R.W. (1992), ‘‘Developing a market orientation: an organizational strategy perspective’’, International Journal of Research in Marketing, Vol. 9, pp. 225-45. Rust, R.T., Zahorik, A.J and Keiningham, T.L. (1995), ‘‘Return on quality (ROQ): making service quality financially accountable’’, Journal of Marketing, Vol. 59 No. 2, pp. 58-70. Sargeant, A. and Mohamad, M. (1999), ‘‘Business performance in the UK hotel sector – does it pay to be market-oriented?’’, The Services Industries Journal, Vol. 19 No. 3, pp. 42-59.

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Sasser, W.E. Jr, Olsen, P. and Wyckoff, D.D. (1978), Management of Service Operations: Text, Cases and Readings, Allyn & Bacon, Boston. MA. Sheth, J.N. and Sisoda, R.S. (1999), ‘‘Revisiting marketing’s law-like generalizations’’, Journal of the Academy of Marketing Science, Vol. 27 No. 1, pp. 71-87. Sin, L.Y.M. and Tse, A.C.B. (2000), ‘‘How does marketing effectiveness mediate the effect of organisational culture on business performance? The case of service firms’’, Journal of Services Marketing, Vol. 14 No. 4, pp. 295-309. Singh, J.E. and Pandya, S. (1991), ‘‘Exploring the effects of complaint behaviours’’, European Journal of Marketing, Vol. 25 No. 9, pp. 7-21. Singh, J. and Sirdeshmukh, D. (2000), ‘‘Agency and trust mechanisms in consumer satisfaction and loyalty judgements’’, Journal of the Academy of Marketing Science, Vol. 28 No. 1, pp. 150-67. Slater, S.F. (1997) ‘‘Developing a customer value-based theory of the firm’’, Journal of the Academy of Marketing Science, Vol. 25 No. 2, pp. 162-76. Slater, S.F. and Narver, J.C. (1994), ‘‘Does competitive environment moderate the market orientation-performance relationship?’’, Journal of Marketing, Vol. 58, pp. 46-55. Srivastava, R.K., Shervani, T.A. and Fahey, L. (1998), ‘‘Market-based assets and shareholder value: a framework for analysis’’, Journal of Marketing, Vol. 62, pp. 2-18. Swan, J.E. and Oliver, R.L. (1989), ‘‘Post-purchase communications by consumers’’, Journal of Retailing, Vol. 98, pp. 516-33. Uncles, M. (2000), ‘‘Market orientation’’, Australian Journal of Management, Vol. 25 No. 2, pp. i-ix. Van Egeren, M. and O’Connor, S. (1998), ‘‘Drivers of market orientation and performance in service firms’’, The Journal of Services Marketing, Vol. 12 No. 1, pp. 39-58. Voss, G.B. and Voss, Z.G. (2000), ‘‘Strategic orientation and firm performance in an artistic environment’’, Journal of Marketing, Vol. 64, January, pp. 67-83. Whyman, B. (1999), ‘‘Net businesses need new valuation metrics’’, The Industry Standard, 14 June. Yeung, M.C.H. and Ennew, C.T. (2000), ‘‘From customer satisfaction to profitability’’, Journal of Strategic Marketing, Vol. 8, pp. 313-26. Zeithaml, V.A. (2000), ‘‘Service quality, profitability, and the economic worth of customers: what we know and what we need to learn’’, Journal of Academy of Marketing Science, Vol. 28 No. 1, pp. 67-85. Further reading Slater, S.F. and Narver, J.C. (1995), ‘‘Market orientation and the learning organisation’’, Journal of Marketing, Vol. 59, pp. 63-74.

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Market orientation in service A review and analysis ´ gueda Esteban, A ´ ngel Milla´n, Arturo Molina and A David Martı´n-Consuegra University of Castilla-La Mancha, Toledo/Ciudad Real, Spain Keywords Market orientation, Service industries, Organizational performance, Marketing concept

Market orientation in service 1003 Received March 2001 Revised November 2001

Abstract The association between economic development and growth of the service sector seems indisputable. Although it is necessary to highlight that services are of a different nature from that of products, nowadays the latter are more and more penetrated by complementary services, given the circumstance that services themselves also include, occasionally, the use and consumption of products. Market orientation had been developed mainly in association with tangible products; therefore it is necessary to carry out a study where the evolution of the market orientation is reflected in the service sector independently from industrial sectors. That is why a historical summary of the evolution of market orientation on the service sector has been performed.

Introduction In recent years, the service sector in developed countries has gained a greater economic importance and a more significant presence in the enterprise landscape. The number of activities has widened: financial, travelling, personal, professional and health-care activities have all become part of this group. This diversity has favoured a growth in the consumption of these services which, in its turn, has been modified according to environmental elements and consumers’ preferences. During the last 50 years interest in marketing theory and practice has been steadily increasing. This interest has deepened because of the popularisation of the term ‘‘marketing’’ and greater expansion and sophistication in its practical use. Consumers’ choices have become a major concern for business organisations and meeting consumers’ needs is now considered the main objective of enterprises. The realisation of the importance of consumers’ dictates has eased the path towards the marketing concept and market orientation. Most studies in this field have centred on the definition and delimitation of the marketing concept and market orientation. During the last three decades, the definition of market orientation has changed often but has nevertheless kept a central position inside the theory and practice of marketing strategies. Only recently has a theory comprising antecedents, limits and consequences of marketing orientation been worked out, together with a set of measurements for this construct which allow testing its effects on the enterprise profitability: for instance, MARKOR (Kohli et al., 1993) and MKTOR (Narver and Slater, 1990). A further distinction has recently been introduced between two complementary approaches to market orientation: to be market driven and

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driving markets. Both of them are focused on consumers, competitors and market conditions. Nevertheless, market driven means understanding and reacting accordingly to the preferences and behaviour of those involved in a given market structure, whereas driving markets implies influencing market structure and/or the behaviour of its participants, so that companies may obtain a competitive position. However, the majority of the studies carried out up till now have concerned themselves only with the first definition. This disproportion has led us to consider the main aim of this study to analyse the empirical research carried out from the 1950s onwards on the topic of market orientation and its application to the service sector. We will look into the evolution of this research, its methodology and its main conclusions in this field. To define a conceptual framework, and to help guide research in this area, we review the recent research on market orientation in the service sector. In this context, this research’s aim is to explain the current situation and, with this knowledge as a starting point, to provide advice for the formulation of new scales which will promote the theoretical and practical evolution of market orientation. Antecedents and theoretical outlook of market orientation The delimitation of the object of this study makes it necessary to define the concept as a first step, due to the diversity of denominations which can be found in marketing literature. In this review, it is possible to find terms such as ‘‘Integrated marketing’’ (Felton, 1959), ‘‘Customer orientation’’ (Kelley, 1990), ‘‘marketing orientation’’ (Payne, 1988; Gummesson, 1991), ‘‘marketing community’’ (Messikomer, 1987), ‘‘market orientation’’ (Kohli and Jaworski, 1990; Narver and Slater, 1990; Ruekert, 1992) ‘‘integral orientation’’ (Esteban et al., 1997). Shapiro (1988), when discussing this topic, suggests that the terms market orientation, marketing orientation, customer orientation, ‘‘to be close to the customer’’, etc. are so similar that a distinction among them can hardly be established. However, not only is it necessary to explain the concept from a linguistic perspective, but also to delimit its content, because ‘‘to be market-oriented’’ did not mean the same in the late 1990s as in the past. But, due to the great quantity of the literature on this topic, only those approaches which greatly contributed to the concept of market orientation will be considered. The marketing concept The application of marketing to business activities begins its development in the 1950s and 1960s, dates of the appearance of some publications which use a business perspective of marketing. Some works need to be highlighted: Alderson (1957), Howard (1957), McCarthy (1960), Davis (1961) and Kotler (1967). From then on, marketing became widely accepted as a function inside enterprises, while emphasis was laid on planning and development. The

structuring of the concept of marketing in the late 1950s raised marketing to the top function of enterprises, because the main target of any company was to satisfy consumers (Borch, 1957; McKitterick, 1957; Levitt, 1960). A profound review of the literature reveals varied definitions of the marketing concept. Felton (1959) defines the marketing concept as a mental state consisting of the integration and coordination of all the marketing functions, which intermingle with the rest of corporate functions in order to maximise profits in the long run. In contrast with this definition, McNamara (1972) opts for a wider framework and defines the concept as a philosophy based on the whole company accepting customer orientation, profit orientation and the realisation of the important role played by marketing when attempting to translate market necessities to the rest of the enterprise departments. Assuming the marketing concept means that the marketing department has to play a leading role so that the enterprise operations in its environment are successful, this orientation implies that special emphasis should be laid on the following items, according to Hise (1965), even though variations of this concept can be found in Levitt (1960), Bell and Emory (1971) and Stampfl (1978): . Customer orientation. It is the knowledge of what is wanted or needed before the marketing process begins. . Profitability of marketing operations through satisfying customers’ needs. . An organisational structure in which all marketing activities have been developed by the marketing department, whose director has the same position in the structure as production and financing directors. Marketing orientation Whereas the concept of marketing is considered as a philosophy in itself, included in the organisation structure, marketing orientation is understood as the acceptance of the marketing concept. In this sense, the marketing concept constitutes a separate way of thinking about the organisation, its products and its customers. In short, a set of attitudes towards the market. Marketing orientation, on the contrary, dedicates itself to providing the steps needed to develop this philosophy in a company. Market orientation As opposed to the marketing concept and its implantation as marketing orientation, market orientation does not only makes reference to actual but also to potential customers. At the same time, it takes into account the influence of competitors and incorporates interfunctional coordination. In this way, marketing ceases to be a function to become a way of doing business. There seems to be total agreement, when defining market orientation according to these five dimensions: (1) Consumer orientation. (2) Competitor orientation.

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(3) Supplier-dealer orientation. (4) Environment orientation. (5) Interfunctional coordination. Nevertheless, it still needs to be clarified whether market orientation implies a specific kind of behaviour or attitude. Some authors deal with this problem: Deshpande´ and Webster (1989), Day (1994) and Deshpande´ et al. (1993). They describe market orientation as a type of business culture. Following their ideas, Narver and Slater (1990) and Slater and Narver (1995) define market orientation as an organisational culture which effectively and efficiently creates all the necessary conditions for generating superior value to customers. On the contrary, Kohli and Jaworski (1990) argue that the marketing concept is mainly a philosophy of the enterprise, an ideal or a policy base. The influence of this philosophy can be traced back to the activities and behaviour of an organisation. Then, the term ‘‘market orientation’’ means the implantation of the concept of marketing. In other words, a market-oriented enterprise is one whose actions are based on the marketing concept. The two major versions of market orientation inside the enterprise have only been differently described (but never opposed) as the information process and the organisational culture. Both contributions are based on studies on this topic. Kohli and Jaworski (1990) consider an operative model of market orientation, described as the interaction among these three kinds of activities: (1) All enterprises must generate a system of market information that facilitates knowing actual and future customer needs. (2) Diffusion of this market knowledge to all enterprise departments. (3) Enterprises need to be receptive to this knowledge, its influence showing in the enterprise actions. Narver and Slater (1990) argue that market orientation consists of three behaviour components: customer orientation, competitor orientation, and interfunctional coordination, plus two decision-making criteria: the long term and profitability. Slater and Narver (1995) define market orientation as a culture that: . attributes priority to profits and to keeping superior value for customers, considering at the same time the interest of the enterprise; . sets the norms for the development of the organisation action lines and of market information. Cadogan and Diamantopoulos (1995), in their turn, put together the two previous versions, considering the interfunctional and intrafunctional organisation elements in relation to the market. That is to say, the components defined in the first model are combined with the competitive value of the second.

Market orientation has currently motivated some reflections on the research in the field, which can be summarized from four main perspectives (Tuominen and Mo¨ller, 1996): (1) Enterprise philosophy. (2) Market information process. (3) Coordination of market information. (4) Learning source of the organisation. Tuominen and Mo¨ller (1996) propose a new integrating model which combines a cognitive and behaviour perspective. The concept of organisational learning constitutes this model’s core, being a means of improving enterprise actions through understanding and knowledge. The conceptual reference framework for this model is based on capacity comprehension and the integration of enterprise results. To sum up, the concepts of marketing and market orientation are essentially the same, but both have evolved through time. Jaworski et al. (2000) have recently suggested that there exist two complementary approaches to market orientation: the first, traditional approach is known as ‘‘to be market driven’’ and the new approach, called ‘‘driving markets’’. Despite the importance of this concept, it is remarkable that little research has centred on it. There exists only a small group of studies offering advice in order to accept one market orientation (Felton, 1959; Stampfl, 1978; Webster, 1988; Harris, 1999). The few existing empirical studies, however, focus on determining what kind of organisations have adopted the concept of marketing, rather than on investigating the antecedents and/or consequences of adopting one specific kind of market orientation (Hise, 1965; Barksdale and Darden, 1971; McNamara, 1972; Lusch et al., 1976). The research on these antecedents and consequences is scanty (Jaworski and Kohli, 1993). The main objective of the previous account of the major theoretical contributions to marketing orientation and market orientation has not been a critical analysis leading to new or revised definitions of the term. On the contrary, our intention has been to provide academics and practitioners in this area with a general overview and theoretical framework of the research studies on the service sector. With this historical overview in hand, the next chapter will consist of an extensive review of the main empirical contributions to market orientation in the service sector. Main empirical contributions on the service sector Most aspects of the marketing concept and marketing or market orientation have been developed in the last 35 years. In order to analyse its evolution, we have prepared Table I, which includes many of the international publications in this field, all of them applying to the service sector during this period. This selection includes only those research works published in prestigious

Market orientation in service 1007

Likert

Likert

Saxe and Weitz Customer (1982) orientation

Whyte (1985)

Thrustone NA based on Kotler

Means Percentage

Nominal

Naidu et al. (1992)

Marketing orientation

Categorical Chi-square Thrustone based on Kotler

Naidu and Marketing Narayana (1991) orientation

Marketing orientation

McCullough et al. (1986)

Frequency Percentage

Categorical

NA

Factor Correlation

Percentages

Technique of analysis

Greenley and Marketing Matcham (1986) orientation

Marketing orientation

Likert

Table I. Research on market orientation in the service sector

Marketing concept

Scale

Environment

USA

USA

NA

UK

USA

Pure service USA and and low outside interaction Services with NA goods included and high interaction

Services dimensions

Services with goods included and high interaction 28 travel agents Services with goods included and high interaction Banks Services with goods included and low interaction Hospitals Services with goods included and high interaction 176 hospitals Services with goods included and high interaction

Community health centres

385 executives marketing teachers 286 salespeople of industrial services

Sample

(continued)

Marketing orientation is effective in health services

Greater satisfaction in consumers whose banks have high level of marketing orientation Marketing orientation has a strong relationship with occupancy rate

Low level of marketing orientation

High conviction on the concept but low implantation Development of a scale in order to measure the relationship between orientation and ability to satisfy needs on the part of sellers Marketing orientation for directors

Findings

1008

Barksdale and Darden (1971)

Concept used

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Market orientation

Market orientation

Marketing orientation

Bhuian (1997)

Bhuian and Abdul-Gader (1997)

Loubeau and Jantzen (1998)

Regression

NA

Factor Regression

Means Correlations

Factor Correlation Means Deviation Thrustone Correlation based on Kotler Means Percentage

Likert

Likert

Thrustone

Market orientation

Wrenn (1996)

Thrustone

Likert

Marketing orientation

Wrenn et al. (1994)

Technique of analysis

Thrustone NA based on Kotler

Scale

Atuahene-Gima Market (1996) orientation

Marketing orientation

Qureshi (1993)

Concept used

Services dimensions

Pure service and low interaction Services with goods included and high interaction 158 industrials, Services with 117 service goods included enterprises and low interaction Non-profit Services with hospitals goods included and high interaction 92 bank Services with branches goods included and low interaction 237 hospitals Services with goods included and high interaction 235 hospitals Services with goods included and high interaction

Public and private university 61 hospitals

Sample

USA

USA

Saudi Arabia

USA

Australia

NA

USA

Environment

The larger the enterprise, the greater the orientation. There exist no big differences between public and private sector (continued)

Colleges which are market-oriented get more funding Managers and marketing directors do not agree on their degree of market orientation Market orientation greatly contributes to the development of new products and services The customer philosophy is the most important feature of market orientation There is no significant relationship between results and market orientation Development of a orientation scale of measurement for hospitals

Findings

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Table I.

Likert

Likert

Likert

Likert

Likert

Lado and Rivera Market (1998) orientation

Avlonitis and Marketing Gounaris (1999) orientation

Market orientation

Caruana et al. (1999)

Sargeant and Market Mohamad (1999) orientation

Kumar and Subramanian (2000)

Market orientation

Likert

Market orientation

Lado et al. (1998)

Table I. Likert

Scale

MANOVA

Frequency means Cluster

Confirmatory factor

Factor Cluster correlation

Factor Cluster

Second order factor Regression

Factor Regression

Technique of analysis

159 hospitals

86 hotels

272 service companies

444 service companies

113 insurance companies

66 insurance companies

134 banks

Sample

Environment

Spain and Belgium

Services with goods included and high interaction Services with goods included and high interaction Services with goods included and high interaction

USA

UK

South Africa and UK

Services with Greece goods included and low interaction

Pure service and low interaction

Services with USA goods included and low interaction Pure service Spain and and low Belgium interaction

Services dimensions

Most hospitals have adopted a strategy centred on competitors together with orientation (continued)

UK hotels show an average level of orientation

Market orientation facilitates enterprise innovation and better results Market orientation consists of two dimensions: orientation and country There are differences between enterprises according to orientation, but not to composition In dynamic environments market orientation is advisable, whereas stable environments require production orientation There exists some relationship between results and orientation

Findings

1010

Han et al. (1998) Market orientation

Concept used

European Journal of Marketing 36,9/10

Market orientation

Wood et al. (2000)

Note: NA = Not applicable

Market orientation

Webb et al. (2000)

Concept used

Likert

Likert

Scale

Sample

Regression

237 hospitals

Confirmatory 77 banks factor analysis

Technique of analysis Environment

Services with NA goods included and low interaction Services with USA goods included and high interaction

Services dimensions

Relationship between consumer satisfaction, quality and market orientation established It is determined that there is a positive relationship between orientation and result

Findings

Market orientation in service 1011

Table I.

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international journals and proceedings, as well as only those dealing with market orientation in service enterprises. Table I is structured as follows: . In the first column, we can find the name of the research author, together with the publication year, ordered chronologically. . The second column is entitled ‘‘concept used’’, and refers to the denomination the researcher applied to the topic of his study. . The column ‘‘measurement scale’’ indicates the scale type used by the author in order to collect the necessary data. There are four different types: categorical, Likert, Thrustone, and Thrustone based on Kotler (1977). Reliability and validity measurements of scales and results have not been included, for they are dealt with only in a reduced number of studies. This may be a handicap because most studies deal only with the application of previously developed scales, like MARKOR (Kohli et al., 1993) and MKTOR (Narver and Slater, 1990), which were hardly modified when adapted to this scope of study. . In the division called ‘‘technique of analysis’’, the different analysis techniques used by the author are analysed. . In the column entitled ‘‘sample’’, we have put down the range of samples under analysis. . The column with the tile ‘‘service dimensions’’ makes reference to the Vandermerwe and Chadwick (1991) classifications. These authors classify services according to the implication of goods and to the degree or interaction between service consumers and providers. . The column ‘‘environment’’ indicates the geographic region where the research was carried out. . In the last column, the findings of the research are briefly described. Table I includes the results and characteristics of the different research studies, in chronological order from 1971 to 2000. Historical analysis of research on market orientation Table I follows a historical summary of the evolution of market orientation. A close look at this Table enables us to deduce that the interest on market orientation in the service sector has appeared mainly in the 1990s, a consequence of which has been the publication of a volume on the topic. This situation is very different from the evolution of the concept and the number of research studies carried out in other fields that have developed since the 1950s. After analysing the literature and previous reviews on the topic (Wrenn, 1997; Esteban et al., 2000), the evolution of market orientation, mainly in the service sector, can be structured according to the following: . Concept used. . Scales. . Technique of analysis.

1950s and first part of the 1960s During this period, the existing literature centred on the meaning, implications and application of market orientation (then termed marketing concept) (Levitt, 1960; Felton, 1959; McKitterick, 1957). No contributions or research were made on the degree to which enterprises were adapted to this philosophy, because the main contributions of this period were mainly theoretical. The service sector had not yet drawn the researchers’ attention. There existed no scale applicable to the measurement and evaluation of market orientation. From the mid-1960s until the early 1980s During this period, the term used to denominate the construct was the marketing concept. When, at the beginning of the 1980s, the term marketing orientation was introduced, attention was focused on its problems and limits and how to overcome them. This is why the scope of research was reduced to industrial enterprises and to the executives of large companies, in order to measure mainly the attitudes towards the adoption of the concept by enterprises. The measurement scales, like the analysis techniques, are not very complex. Categorical scales predominate at the beginning of the period, whereas the Likert types tend to predominate at the end. The analysis techniques used are principally univariate. Results state that enterprises have already accepted the concept (Hise, 1965) or showed interest and were willing to adopt it in the future. There are also studies which reached contradictory conclusions as to what kind of enterprise would be better adopting the concept (McNamara, 1972; Parasuraman, 1983). Throughout this period, the development of a scale was attempted only once (McNamara, 1972) and only one study, whose results were similar to those reached when analysing industrial enterprises, made reference to services (Barksdale and Darden, 1971). No measurement of reliability and validation of scales was used during this period due to the simplicity of the techniques and scales. The main contribution was the first definition of market orientation. Nevertheless, these first results need to be handled with care, for they can only be used at a theoretical level. From the early 1980s to the early 1990s During this period, enterprises showed an increasing approximation towards marketing orientation, which resulted in the concept used by most studies being marketing orientation. This term was more difinitive and clarifying than the previous one. The concept of marketing had already been adopted by organisations. At this stage, the main target is to analyse how this concept has been implanted in organisations. The scope of study in this period (same as the previous one) is mainly industrial enterprises (Lusch et at., 1976; Morris and Paul, 1987; Norburn et al., 1990; Hooley et al., 1990; Miles and Arnold, 1991; Meziou, 1991), but application to services is beginning. Other services, such as health centres and hospitals

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(Whyte, 1985; Naidu and Narayana, 1991), banks (McCullough et al., 1986), and travel agents (Greenley and Matcham, 1986), are studied. One new important feature is introduced: a growing interest in measuring whether orientation in small and middle-sized businesses is similar to that adopted by large corporations (Dunn et al., 1986; Peterson 1989; Meziou, 1991). The scope of research reaches other English-speaking countries outside the USA. The scales used to collect information in this period are mainly Likert, while the Thrustone scale is beginning to be used. In analysis techniques we are witnesses to the introduction of the regression, factor and cluster analysis, which provide the enterprise with a more reliable statistics-collecting method. In this period, the creation of two measurement scales for industrial enterprises is attempted (Lusch et al., 1976; Narver and Slater, 1990). Narver and Slater’s (1990) proposal will prevail in the future. Results show that those enterprises with higher marketing orientation will be much more competitive than the rest of the companies in their environment. At the same time, the enterprises possessing better management will enhance the differences among enterprises and sectors. Other authors, on their part, have proved that to be market-oriented increases the global results of the company (Narver and Slater, 1990; Naidu and Narayana, 1991). Some other studies intend to mark a distinction between marketing/market orientation and other orientations (Lusch and Laczniak, 1987; Morris and Paul, 1987; Miles and Arnold, 1991). They set up a measurement scale in order to measure the consumer orientation of scales, using as part of the sample service enterprise dealers (Saxe and Weitz, 1982). The reliability of this scale can be checked using the Cronbach alpha. In this case, it reaches a value of 0.83, quite similar to that obtained by Narver and Slater (1990), 0.88, which is considered high. The studies carried out during this period begin to apply more complex techniques but only in a limited scope. Moreover, they do not pay attention to the antecedents that facilitate maorket orientation. From the early 1990s until now During this period, the term market orientation is established, its definition coinciding with the one given in this review. In this type of research, the main target is to measure the conduct of enterprises which have adopted orientation. Many measurement scales have been attempted throughout this period (Kohli et al., 1993; Wrenn et al., 1994; Liu, 1995; Wrenn, 1996; Bhuian, 1997). Among these, the most prominent for the significance of their contributions and their complete diffusion have been by Kohli et al. (1993) and by Narver and Slater (1990). These proposals have laid down the guidelines for later studies on market orientation. Other remarkable scales are set specifically for services, with special attention to health care (Wrenn et al., 1994; Wrenn, 1996; Bhuian, 1997). The analysis techniques used in this period range from univariate and bivariate to multivariate techniques. The most common measurement scale is the Likert type, followed by Thrustone and Categorical. The scope of research

follows the guidelines set in the previous period, that is to say, large production enterprises (Jaworski and Kohli, 1993; Deshpande´ et al., 1993; Day and Nedugandi, 1994; Tse, 1998; Steinman et al., 2000). Nevertheless, new groups have been incorporated: comparisons between small and middle-sized businesses (Sashittal and Wilemon, 1996; Pelham and Wilson, 1996; Pelham, 1997; Appiah-Adu, 1997; Horng and Cheng-Hsui, 1998), public administration (Hurley and Hult, 1998), and the great quantity of research focusing on services such as hospitals (Wrenn et al., 1994; Wrenn, 1997; Bhuian and Abdul-Gader, 1997), banks (Bhuian, 1997; Han et al., 1998), insurance companies (Lado and Rivera, 1998), hotels (Sargeant and Mohamad, 1999) and education (Qureshi, 1993). The geographic scope has widened to other countries like Japan, Taiwan, Australia, some European countries and Hong Kong. The results obtained agree with previous guidelines of the period. They mark the importance of being market-oriented and expose the enhanced profits this orientation achieves, in sales, innovation and results. A group of studies tried to find out the relationship between market orientation and results (Ruekert, 1992; Qureshi, 1993; Wong and Saunders, 1993; Day and Nedungadi, 1994; Pelham and Wilson, 1996; Pitt et al., 1996; Bhuian, 1997). Following this line, there is only one study whose conclusions are opposing (Bhuian, 1997): there appears to be no significant relationship between market orientation and enterprise results, although this outcome may be attributed to the scope of research being used. The scope of research widens continually, for instance, Deshpande´ et al. (1993); Siguaw et al. (1998); Steinman et al. (2000). These studies analyse not only the enterprise self-conception according to its market orientation, but also the conception used by its related business participants (like dealers and customers). The results of specific research in the service sector agree chiefly with those in other sectors. During this period, the main line of research has been the analysis of causal relations between market orientation and outcomes. The antecedents remain obscure except in the studies carried out by Jaworski and Kohli (1993) and Avlonitis and Gounaris (1999). The techniques are more complex and new models of structural equations have been introduced to verify and validate scales. There has also been new research using scales and techniques far too simple for the degree of development achieved by the work on market orientation. These research studies have not been included in Table I due to their limited scientific contribution. Conclusions, limitations and future research After this analysis of the research carried out up to now, we can draw the following general conclusions on the benefits of adopting market orientation. The most significant conclusion reads that the marketing concept (Hise, 1965; Barksdale and Darden, 1971; Lawton and Parasuraman, 1980), marketing orientation (Parasuraman, 1983; Greenley and Matchman, 1986; Morris and Paul, 1987; Qureshi, 1993), and market orientation (Narver and Slater, 1990;

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Ruekert, 1992; Jaworski and Kohli, 1993; Pelham, 1997; Steinman et al., 2000) have evolved from the same reality, although changed through time. Research on the service field has been incorporated only lately mainly because service activities have grown steeply in the late years, becoming a complex sector when attempting to measure its actions. The most evident conclusion is that to be market-oriented improves the results of service enterprises. This argument can be clearly stated for service companies (Naidu and Narayana, 1991; Caruana et al., 1999; Wood et al., 2000), as well as for the remaining sectors or industries. It is applicable to large companies (Jaworski and Kohli, 1993; Day and Nedungadi, 1994), small enterprises (Pelham and Wilson, 1996), producing enterprises (Narver and Slater, 1990), lucrative (Slater and Narver, 1994) and non-lucrative businesses (Wrenn et al., 1994). Marketing orientation has a positive relationship with consumers’ satisfaction (Saxe and Weitz, 1982; McCullough et al., 1986). Services enterprises adopting market orientation obtain important advantages in internal organisation as well, apart from the external market profits that can be put down to orientation. Siguaw et al. (1994) discovered that, if there is a strong market orientation in an enterprise, the sales will help a greater customer orientation. This will reduce uncertainty in work: the work carried out will be more satisfactory, which in its turn will provide a greater satisfaction of consumer needs. Siguaw et al. (1998) also see a positive relationship between market orientation and its relationship with the distribution channel. Jaworski and Kohli (1993) discovered as well a positive relationship between market orientation in an enterprise and employees’ dedication. No significant relations have been found between the dimensions of classification of services and those of variables. This may mean that techniques, scales and results are independent of the type of service analysed. Other conclusions deal with the methodology used in research. The most common scales of market orientation are those by Kohli et al. (1993) and Narver and Slater (1990). Nevertheless, these scales have not escaped criticism, like that posed by Oczkowski and Farrel (1998) who conclude, after careful mathematical and statistical analysis, that Narver and Slater’s (1990) scale is superior in many ways to Kohli et al.’s (1993) proposal. This conclusion needs to be carefully considered, because each proposition was the result of research in different industries and using different principles. It would thus be advisable to compare both scales in other sectors and industries in order to reach a conclusion as to which is most valid and reliable (Greenley, 1995; Pelham and Wilson, 1996; Siguaw et al., 1998). The differences between the Likert and Thrustone scales when measuring market orientation are negligible. If what is needed is a scale that measures market orientation, the results will vary according to the survey responder, which makes the Thrustone scale preferable. Nevertheless, if what is intended is to compare the measurements of the market orientation construct with

measurements coming from other constructs in order to prove a hypothesis, or, if the target is to establish standards where individual scores can be compared, then the Likert scale will be the best choice, or even the categorical scales, although their strength is limited. The main limitations of the reviewed proposals on market orientation include, on the one hand, the lack of attention to the conditions of the social environment and, on the other, the absence of consideration in the marketing channel. The lines for further research which derive from these conclusions should concentrate on adapting or creating scales according to the characteristics of different countries and sectors, with special attention to services because of their particular features. Following this, there should be a unification of scales, validated for the whole European region. At the same time, research work should be intensified in this region. It is also intended to analyse the diverse inner benefits a company may obtain if market-oriented, such as the possible relationship between orientation and higher quality. Another future step should be to determine whether the increase in consumer satisfaction caused by market orientation is applicable to all kinds of industries and sectors, as well as to check whether the same results are obtained for lucrative and non-lucrative organisations. Finally, it is extremely important to continue the development of scales appropriate for each industry and service activity. These scales should be capable of representing the characteristics of different activities, but starting from a general measurement applicable to all of them so that a greater insight and better practical application of the concept of market orientation can be achieved. Further lines of research should concentrate on testing the relations between market orientation and other marketing concepts. For instance, the relationship between marketing, loyalty and customer satisfaction. Valuable results could also be obtained by evaluating market orientation from the consumers perspective and by comparing the estimations of supply and demand. References Alderson, W. (1957), Marketing Behavior and Executive Action, Richard D. Irwin, Homewood, IL. Appiah-Adu, K. (1997), ‘‘Market orientation and performance: do the findings established in large firms hold in the small business sector?’’, Journal of Euro-Marketing, Vol. 6 No. 3, pp. 1-26. Atuahene-Gima, K. (1996), ‘‘Market orientation and innovation’’, Journal of Business Research, Vol. 35, pp. 93-103. Avlonitis, G.J. and Gounaris, S.P. (1999), ‘‘Marketing orientation and its determinants: an empirical analysis’’, European Journal of Marketing, Vol. 33 No. 11/12, pp. 1003-37. Barksdale, H.C. and Darden, B. (1971), ‘‘Marketers’ attitudes toward the marketing concept’’, Journal of Marketing, Vol. 35, October, pp. 29-36. Bell, M.L. and Emory, C.W. (1971), ‘‘The faltering marketing concept’’, Journal of Marketing, Vol. 35, October, pp. 37-42. Bhuian, S.N. (1997), ‘‘Exploring market orientation in banks: an empirical examination in Saudi Arabia’’, The Journal of Services Marketing, Vol. 11 No. 5, pp. 317-28.

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European Journal of Marketing 36,9/10 1022 Received March 2001 Revised November 2001

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Market orientation and social services in private non-profit organisations ´ lvarez and Rodolfo Va´zquez, Luis Ignacio A Marı´a Leticia Santos University of Oviedo, Asturias, Spain Keywords Market orientation, Non-profit organizations, Social services Abstract Very little attention has been devoted so far to the study of the market orientation concept in private non-profit organisations. However, there is a general agreement concerning the positive effects that this concept’s adoption has on the non-profit services implementation as well as on these organisations’ long-term success. Thus this paper aims at obtaining further empirical evidence on this field of research using a private foundations sample. Nevertheless, it is considered that the distinctive and specific nature of private non-profit organisations’ activities deserves the development of a special instrument to evaluate their degree of market orientation. In this sense, one of this study’s main contributions is the development of a market orientation measurement scale which accounts for the peculiarities of private non-profit organisations’ operations. Additionally, the study proves the positive effect of market orientation on the nonprofit outcomes and on the fulfilment of these organisations’ missions.

European Journal of Marketing, Vol. 36 No. 9/10, 2002, pp. 1022-1046. # MCB UP Limited, 0309-0566 DOI 10.1108/03090560210437316

Introduction Market orientation emphasises the attainment of competitive advantages based on the correct identification of customer needs. It also enhances their satisfaction through the development of a commercial offer providing a higher added value to the market than the competition. This management orientation enables the firm to obtain better results (Slater and Narver, 1994a), it acts as an element of cohesion in organisational performance (Kohli and Jaworski, 1990), and it is also the most effective cultural form when creating the necessary organisational behaviour to provide greater value to customers (Narver and Slater, 1990; Pelham and Wilson, 1996). The majority of the empirical studies published on this matter have demonstrated the beneficial effects of market orientation on organisational results (Narver and Slater, 1990; Ruekert, 1992; Jaworski and Kohli, 1993; Slater and Narver, 1994b; Pelham and Wilson, 1996; Avlonitis and Gounaris, 1999). Most of the evidence in this regard has been gathered from profit-making markets. Notwithstanding, the specialised literature on the management of private non-profit organisations appears to concur that market orientation should increase and improve this type of organisation’s results (Lovelock and Weinberg, 1984; Fine, 1990; Raju and Lonial, 1995; Kotler and Andreasen, 1996; Rados, 1996; Balabanis et al., 1997). Despite this general agreement, the empirical evidence to this effect is practically non-existent. Consequently, the aim of this work is to analyse the effects of market orientation on the results of the services rendered by private non-profit organisations.

When referring to the nature of the product offered by non-profit organisations, we use the term ‘‘service’’ due to the fact that the non-profit offer is fundamentally intangible, mainly social and/or psychological (Kotler and Andreasen, 1996), though it may also take the form of material goods on occasion (Lovelock and Weinberg, 1984). In fact, the majority of private nonprofit organisations offer services rather than material goods. When the social product is a tangible object, it must be taken into account that the main offer is not the tangible product in itself, but rather that it is a tool provided to attain a given social practice (Kotler and Roberto, 1999). Moreover, many of these organisations do not generate services in the sense that these would be understood in the profit-making domain. Such organisations exist simply to attempt to modify certain types of social behaviour that is deeply rooted in certain elements of society[1]. This raises certain difficulties. On the one hand, the service’s specific nature conditions the implementation of the organisation’s activity. On the other hand, intended consumers may be indifferent to the offer, fail to perceive it or even reject it (Kotler and Andreasen, 1996)[2]. This underlines the fact that the non-profit offer presents such particular features that it makes the design, programming and execution of the ‘‘service’’ policies extremely difficult. Moreover, it is taken into account that nonprofit organisations’ pattern of behaviour is not determined by the market, that is to say, the benefit criteria are not prevalent in the organisations’ strategy design. Additionally, there exist five other characteristics of private non-profit organisations which also contribute to the specific nature of their operations and will influence the way in which market orientation and its effects on the organisational outcomes are measured (Lovelock and Weinberg, 1984): (1) the need to attract resources to attain their objectives; (2) the existence of multiple relevant publics; (3) the potential conflict existing between the organisational mission and the consumer satisfaction; (4) the existence of pressure from outside the market – legal regulation; and (5) the frequent existence of several groups involved in the organisations’ management. The paper is structured as follows. It begins with a section dedicated to a review of the literature, in which the market orientation concept is defined within the context of private non-profit organisations. Afterwards, a series of hypotheses is put forward relating to the consequences of this orientation’s adoption in the organisations under study. Next, the study’s results and methodology are stated with the two following objectives: (1) to develop a useful measurement scale for the non-profit domain; and (2) to analyse the consequences of this concept’s adoption. Finally, a discussion section is presented dealing with the obtained outcomes of this study, in which the most relevant conclusions and limitations are included.

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Market orientation in the private non-profit context Most of the literature referring to the adoption of the market orientation concept concerns the profit-making sectors. However, there is a broad consensus on this concept’s applicability to the private non-profit context (Drucker, 1990; Hannagan, 1992; McLeish, 1995; Kotler and Andreasen, 1996; Rados, 1996; Brinckerhoff, 1997; Kinnell and MacDougall, 1997; Blois, 1999; Sargeant, 1999). Non-profit sectors are characterised by an increasing demand for the services offered, a reduction in the traditional governmental financial support and the growing number of participants who fiercely compete to raise funds (Balabanis et al., 1997). Moreover, continuous change and the need to constantly offer a higher quality of service are two additional features of non-profit environments (McLeish, 1995). These circumstances require the implementation of an integrated management style aimed at the development of a sensitive attitude in all organisational levels towards the different publics with which the organisation wishes to establish valuable, satisfactory relationships (Laing and Galbraith, 1997). Thus market orientation in non-profit organisations requires the adoption of a particular manner of conceiving the exchange relationships focused on satisfying the real needs of the target public to a higher degree than the existing alternatives. These relationships’ temporal horizon must be in line with the organisational mission. The mission’s strategic nature, or in other words its long-term commitment to the development of non-profit activities, should not necessarily be identified with a constant link to the same beneficiary. In fact, in the majority of organisations, the activities in favour of each group of beneficiaries may be more or less prolonged but, once the need justifying these activities is removed, they need not be continued[3]. A fundamental question in non-profit sectors is the specification of what is to be understood by target public. In fact, one of the main differences between non-profit and profit organisations is that normally the non-profit ones maintain a higher number of relationships which can be considered vitally important (Drucker, 1990). In this sense, they have to consider the existing relationship not only with their ‘‘clients’’ or beneficiaries, but also with their donors of funds. Thus, Gallagher and Weinberg (1991) state that, in the non-profit sector, the users pay for only a part of service costs – the donors cover the rest. In this sense, Garland and Westbrook (1989) or Martinsons and Hosley (1993) also stress the need for non-profit organisations to assess the existence of a dual target public in order to be externally oriented: the beneficiaries of their services and the donors of resources to be contributed. These two publics need not necessarily co-exist in the same person (Brinckerhoff, 1997; Lindsay and Murphy, 1996). Thus, a profit-making organisation employs the marketing function to promote the direct exchange between the firm and its customers. This makes it easier to simultaneously assign and attract resources. However, in non-profit organisations, the attraction and assignment of resources are two separate tasks involving different target publics with different needs (Shapiro, 1973). .

With respect to orientation towards the beneficiary it should be pointed out that, as the customer becomes the firm’s focal point of strategic behaviour, in the private non-profit organisation this central role should be assumed by the beneficiary (Bruce, 1995). The beneficiary must be defined and assessed as broadly as possible, taking present and future needs, perceptions and expectations into account (Klayton, 1993). Furthermore, this orientation towards the beneficiary should not only include the final users of non-profit services, but also all entities more or less close to them that may influence the final perception of the benefits received (Hayden, 1993; Klayton, 1993; Raju and Lonial, 1995; Pyne and Robertson, 1997). Resource donors are necessary for the non-profit activity’s fulfilment. Thus, the organisation’s orientation towards them must also play a fundamental role in its management. Orientation towards the donor must be viewed as a means to fulfil the organisation’s mission, although not as an end in itself (Brannen, 1996; Mullin, 1996). The organisations must develop a valuable offer from the donor’s viewpoint in order to guarantee their contributions to the accomplishment of the organisation’s mission. It is desirable for this offer to be more attractive than that provided by any other non-profit alternative (Gallagher and Weinberg, 1991). The analogy with beneficiary orientation makes it necessary to point out the need to focus not only on present but also on potential donors, valuing them as much for their non-monetary resources as for their financial contributions (Dabbs, 1991). However, a non-profit organisation’s capacity to develop and maintain successful relationships with its target public may be conditioned by a series of factors and forces, to which it must also be oriented (Gwin, 1990). The most compelling of them all, in theory, would be any group or organisation that attempts to capture the attention and loyalty of the resource donors and/or lend basic services to the organisation’s beneficiaries (McLeish, 1995). With respect to the beneficiaries, such alternatives are not traditionally seen as a threat, but rather as a source of collaboration (Rothschild, 1999). According to Huxham and Vangen (1996), they serve as a manner of complementing the organisation’s own resources and capacities to provide social benefits for their beneficiaries, and in general, for society. With respect to the donors, the use of the term ‘‘competition’’ does appear to be more widespread – above all, if the contribution is monetary – when denominating the other organisations that aspire to possess the common pool of limited resources (Greenberg, 1982). Therefore, the organisational orientation towards the beneficiary and the donor must be complemented, first of all, with a simultaneous orientation towards the collaborator and/or competitor. This entails, as in the profitmaking domain, that the organisations must be aware of and assess their collaborations’ and/or competitors’ strong and weak points, as well as the opportunities and threats derived from their activity (Narver and Slater, 1990). Profiling the strengths and weaknesses of present and potential collaborators and/or competitors enables the organisation to identify the aspects of its non-profit results in which it lags behind. Nevertheless, it also reveals the areas

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in which it outperforms or has superior capacities to the existing alternatives (Sargeant, 1999). Finally, it must be taken into account that the knowledge of the present and future needs of the target public implies the study of any environmental forces which may affect its system of preferences or expectations (Kohli and Jaworski, 1990; Ruekert, 1992; Biemans and Harmsen, 1995; Jaworski and Kohli, 1996). Therefore the organisation should develop an environment monitoring system to help the anticipation of any change or to facilitate and accelerate the adoption of corrective actions (Lambin, 1996). This argument makes it clear that it is essential to limit the study of market orientation to the classic model of the customer and the competition, incorporating the environmental agents (Greenley and Foxall, 1998). In the private non-profit sector, orientation towards the environment implies focusing attention in a proactive rather than a reactive manner on phenomena, tendencies and facts over which the organisation exercises limited control at best, and that may represent a threat to or opportunity for it (Blois, 1999). Consequences of market orientation in the private non-profit context The literature on the management of private non-profit organisations puts emphasis on how the adoption of marketing, and its consequent orientation to the market, improves their results (Lovelock and Weinberg, 1984; Fine, 1990; Raju and Lonial, 1995; Kotler and Andreasen, 1996; Rados, 1996; Balabanis et al., 1997). The evaluation of the non-profit organisations’ performance involves knowing, in the first place, the outcome of their activities, to estimate subsequently the degree of achievement of the organisation’s mission. However, the determination of the non-profit organisations’ performance is still an unresolved question for many reasons. One explanation for this lies in the vagueness that frequently surrounds the mission’s definition and its organisational goals (McGill and Wooten, 1975; Rados, 1996; Blois, 1999). In order to identify the most appropriate outcome, variables to evaluate the achievement of a non-profit organisation’s mission are necessary to: . clearly define the organisational mission (Motwani et al., 1996); . eliminate conflicts of interest among the entity’s participants (Blois, 1999); . achieve an actual commitment to the mission; and . comprehend the existing relationship between results and goals (Buckmaster, 1999). The complexity, uncertainty and difficulties existing in various non-profit sectors to identify the activities’ outcomes (Caruana et al., 1998) are fundamentally due to the intangible nature of the non-profit offer (Stewart and Walsh, 1994) and the extreme dependence on a highly changeable environment,

particularly with respect to legislation, to which these organisations are committed (Blois, 1999). In this sense, Blois (1999) and Buckmaster (1999) contend that the nature of the beneficiaries themselves and the needs that motivate the non-profit intervention also make the non-profit organisation performance difficult to evaluate[4]. Nevertheless, despite the difficulties, there is no doubt as to the need of any private non-profit organisation to possess direct assessment mechanisms for the results of its activities. Buckmaster (1999) proposes that the consequences of a non-profit organisation’s actions may be defined in terms of: . the benefits or changes generated in favour of individuals or communities on participating in the organisation’s programmes; or . the evaluation of the results in relation to the desired goals. Moreover, the term ‘‘result’’ is considered a synonym of the capacity to ensure the organisation’s survival, which implies the generation of sufficient resources to cover expenses and/or satisfy the different target markets in the long term (Kotler and Andreasen, 1996). Thus, the term ‘‘results’’ in this context implies the need for private non-profit organisations to orient themselves not only towards the beneficiaries of their action, but also towards the resource donors (Lovelock and Weinberg, 1984; Brinckerhoff, 1997; Lindsay and Murphy, 1996). We have defined the market orientation of private organisations in terms of adopting a sensitive attitude towards their beneficiaries’ and donors’ real and latent needs and expectations. This attitude must be complemented by a willingness to develop a series of activities contributing to the satisfaction of their beneficiaries’ needs, and to the recruitment of donors attracted by the nonprofit services offered by the organisation. To sum up, it is worth considering that market orientation in non-profit organisations positively stimulates the offer of valuable social services to the beneficiaries, as well as the procurement of contributions from donors. The following hypothesis is consequently set forth: H1. The market orientation of a private non-profit organisation positively stimulates the results of activities addressed to the beneficiaries and donors. In the strictly profit-making domain, income and/or profits are used as an estimator of business success. However, in the non-profit realm, to compare income with expenses enables a private non-profit organisation to determine whether its non-profit products and services comply with the organisational structure, and are viable in the competitive environment (McLeish, 1995). However, it would be mistaken to believe that this monetary relationship constitutes an effective indicator for any well-performed task (Gallagher and Weinberg, 1991). In this context, an organisation’s success requires the effective accomplishment of its mission which, in any case, will be defined in profit-making or monetary terms.

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The organisational mission entails the fundamental definition of the organisation, and its role in society (Lovelock and Weinberg, 1984); the essence and sine qua non of organisational activity (McLeish, 1995). It is the true reflection of an organisation’s purpose, the social justification of its existence. Knowing its definition, any person from within or outside the organisation should be able to answer the question ‘‘What is the organisation’s final goal?’’, and other specific questions such as ‘‘What is the organisation?’’; ‘‘What does it do?’’; ‘‘Whom does it serve?’’; in order to determine what type of business we are and where we wish to be (Hannagan, 1992; Migliore et al., 1995; Rados, 1996; Abzug and Phelps, 1998; Sargeant, 1999). Declarations such as ‘‘providing services to improve the quality of life of senior citizens’’, or ‘‘teaching participation and social commitment to the neighbourhood youth’’ are, among others, examples which highlight the most philosophical aspect of the mission, enabling the organisation to function as an entity. Once the need to link private non-profit organisations’ success with the accomplishment of their mission has been assumed, it is worth considering the relationship that exists between the degree of market orientation of these organisations and the fulfilment of their mission. In theory, it is held that a positive indirect relationship may exist. If, as posed in the first hypothesis of the study, market orientation fosters the fulfilment of improved results with respect to beneficiaries and donors, this will have positive repercussions on the degree of achievement of the organisation’s mission. Furthermore, the positive influence of market orientation on the fulfilment of the mission can be expected to exert itself in a direct manner. That is, if a non-profit organisation effectively orients itself to the market, it will be guided by the aim of generating exchanges of value that will meet the needs of its beneficiaries, as well as the donors’ expectations relative to their contributions. This will ultimately contribute to the accomplishment of the mission, justifying the organisation’s constitution. The synthesis of this exposition may be expressed in the following terms: H2. The market orientation of a private non-profit organisation positively stimulates, both directly and indirectly, the fulfilment of the mission that justified its creation and guides its operation. Research methodology Sample The empirical study was performed on a sample of private non-profit Spanish organisations: specifically, the private foundations that lend their services to the different Spanish regions. This sector fulfils the basic characteristics of a private non-profit organisation as defined by Bon and Louppe (1980). The scope of the study was limited to 779 foundations, for which there is full proof of activity in recent years. In the population under study, different types of foundations are represented such as: health care, cultural, environmental, educational, etc.

The questionnaire used as a means of data collection was sent by post in successive stages between May and October 1999[5], after having been pre-tested (Va´zquez et al., 1999) on a group within the population to reinforce the questionnaire validity of content. A total of 191 foundations responded to the survey, representing a response average of 24.52 per cent. In the questionnaire’s letter of presentation, it was explicitly indicated that the survey was intended to be completed by an individual with full knowledge of the foundation’s internal operation, as well as its sector of activity. This methodology, the usage of a single interviewee, has been utilised since the earliest studies on market orientation (Narver and Slater, 1990), having proved the reliability of the data obtained in this manner. Variable measurement Market orientation. To evaluate the market orientation of private non-profit organizations, a specific measurement scale was developed. The main purpose for the development of this scale was to guarantee its usefulness and general applicability in the non-profit context. Thus, the scale has been submitted to a process of sequential evaluation, elaborated from the original proposals of Churchill (1979), Gerbing and Anderson (1988) and Deng and Dart (1994). This process involves the study of the reliability, validity and unidimensionality of the scale in question, although at this time we limit ourselves to a commentary om the stages that were completed to justify the content’s validity. These stages can be grouped as follows: . the specification of the concept’s domain, and the identification of its critical dimensions; . the selection of the representative variables of the concept’s domain within each critical dimension identified; and . a pre-test of the developed scales. Domain specification and critical dimension selection. The approach to the market orientation concept from a behavioural viewpoint requires the identification of the activities that must be performed within the organisation. The organisations willing to orient themselves towards the market will have to carry out a series of activities in their relevant market, which, as put forward by Kohli and Jaworski (1990), put the theory into practice. In agreement with the arguments of Narver and Slater, these actions must be linked with information acquisition on the needs of the target public, and on the competition’s capabilities. This information should be disseminated throughout the organisation, establishing a harmonised coordination with all its resources, in order to produce an offer representing greater value for the target public. Accordingly, the operative perspective of a non-profit organisation’s market orientation is structured into three critical dimensions: the generation of market intelligence, its internal dissemination, and the initiation of response action

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directed towards the satisfaction of its beneficiaries and donors. As may be observed, we assume the dimensional structure formulated by Kohli and Jaworski (1990) and accepted in subsequent studies to be of the greatest relevance in market orientation (Ruekert, 1992; Diamantopoulos and Hart, 1993; Pitt et al., 1996; Avlonitis and Gounaris, 1999; Bhuian, 1998; Vorhies et al., 1999). However, we wish to point out that, by the term ‘‘market intelligence generation’’, we refer to the need for obtaining information not only on beneficiaries and donors, but also on other competitive alternatives and/or collaborators (Lambin, 1996; Pelham and Wilson, 1996), as stated by Narver and Slater (1990). We also include the environmental forces that affect or will affect its system of preferences (Kohli and Jaworski, 1990; Greenley and Foxall, 1998). Additionally, the dimension of intelligence implies that the precise, relevant information should be transmitted, received and shared internally among all the collaborators within the organisation. Finally, this intelligence should serve as a database for the development and initiation of a response that entails the beneficiaries and donors’ satisfaction. Selection of the representative variable for domain, and each critical variable. The two market orientation scales that have attained the widest diffusion are those of Narver and Slater (1990) and Kohli et al. (1993). These instruments have been employed in various studies, and have also been contrasted and inter-meshed. However, such contributions cannot be considered to be absolutely definitive on the study of market orientation, given that the literature is still giving rise to the publication of new scales. Therefore, in this study we have disregarded using any one of the published scales exclusively, opting to generate a new one based on a detailed analysis of various existing ones. The first step entailed the selection of the scales considered to be the most relevant in the bibliography of the last decade. In particular, the degree of acceptance of each one was taken into account and, in the majority of cases, their duplication in subsequent works. The selected scales were produced by the following authors: Narver and Slater (1990); Hooley et al. (1990); Ruekert (1992); Diamantopoulos and Hart (1993); Deshpande´ et al. (1993); Kohli et al. (1993); Pelham (1993); Deng and Dart (1994); Deshpande´ and Farley (1998); Gray et al. (1998). Once the reference scales were established, the items of a fundamentally operative nature within these scales were selected. They were classified in accordance with the following criteria: first, the object of interest on which these variables are centred: customers, competitors or the remaining environmental factors; second, their belonging in each case to the critical dimensions underlying the market orientation concept. Next, we assessed the items assigned to each critical dimension, eliminating the redundant ones, and completing the aspects whose measurement had been taken insufficiently. The resulting scale in this process respected the initial definition of the items taken from the different sources. Their adaptation to the non-profit domain was achieved taking into account the works of Raju and Lonial (1995), Bhuian and Abdul-Gader (1997), Balabanis et al. (1997) and Caruana et al. (1998). These

studies analyse the adoption of the marketing concept on the part of both public and private non-profit organisations. The adaptation of the process to the non-profit domain was strengthened by the results of a previous quantitative study (Va´zquez et al., 1999). This underlines the theoretical arguments previously defended: the need to obtain information on all the non-profit market participants, to disseminate it internally and develop a response initiative exclusively directed at the dual target market. The scale was laid out in neutral terms with the aim of not causing any bias, and the interviewee was required to evaluate his/her degree of agreement with each one of the statements presented in a Likert-type scale ranging from (1) total disagreement to (7) total agreement. Pre-test of the developed scales. To this end, a series of personal interviews was carried out, comprising specialist professors and professionals in Spanish foundations. As a result of these interviews, we proceeded to eliminate certain items from the scale due to the lack of conceptual and lexical adaptation to the non-profit world of private foundations. We also adapted slight modifications in the wording of others on identifying problems of interpretation. The result of this process was the proposed market orientation scale for this study on the private domain of foundations, composed of 31 items reproduced in Table I, and classified by critical dimensions of the concept. Non-profit results. For the evaluation of organisational activity outcomes referring to beneficiaries and contributors, effectiveness and efficiency measurements were taken, following the recommendations of Lamb and Crompton (1990). The effectiveness measurements are intended to enable us to assess organisational behaviour in vital areas; that is, to evaluate the direct outcomes of programme activities (Buckmaster, 1999) on their distinct target public. Efficiency measurements are those which characterise the relationship between inputs and outputs (Lamb and Crompton, 1990). Regarding the first, effectiveness measurements, data were obtained on the number of non-profit activities addressed to the beneficiaries, and on the volume of obtained income from the donors, in accordance with McLeish (1995). With regard to efficiency measurements, it employed a ratio that measures the extent of the donors’ contribution to the non-profit expenditure, in agreement in this case with Balabanis et al. (1997). This ratio is the result of relating the non-profit behaviour expenditures with the quantity of monetary contributions received. It is denominated ‘‘percentage of income destined for activities’’. These measures of results were estimated in a subjective manner by means of a seven-point Likert scale and in relation to the average outcomes of other foundations which provide similar services. We have disregarded the use of goal indicators, when faced with the foundations’ opposition to supplying results of this type, particularly with respect to the volume and percentage of income, and given the appropriateness of using subjective measurements in inter- and intra-sectorial studies (Dawes, 1999) such as this. For the estimation of the degree of fulfilment of the foundation’s mission, a single question was introduced into the questionnaire, using a seven-point

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Intelligence generation IG1 We constantly analyze our level of commitment to serve the needs of the beneficiaries and expectations of the donors IG2 We measure the beneficiaries’ and donors’ satisfaction frequently and systematically IG3 We know the foundations in our sector of activity IG4 Our directors maintain regular contact with the present and potential donors and/or with the beneficiaries IG5 We obtain ideas from our beneficiaries and donors to improve our activities IG6 Frequent investigations of our beneficiaries and donors are carried out to be aware of the activities each will value in the future IG7 We frequently gather data from our sector for use in the developmental plans for our activities IG8 We periodically contact our beneficiaries and donors to learn about the quality of our services IG9 Systems are developed within the foundation to detect basic changes in our sector of activity IG10 We are able to detect changes in our beneficiaries’ and donors’ preferences rapidly IG11 We encourage our beneficiaries and donors to make comments and even complaints about our foundation, as this will help us to accomplish our labour better IG12 We regularly analyse the activity programmes of other foundations IG13 The probable effect of environmental changes on our beneficiaries and donors is often examined Intelligence dissemination ID1 Periodic meetings between the foundation’s members or departments are held to discuss the tendencies and developments of our activity sector ID2 When something important happens to our beneficiaries or donors, the entire foundation becomes aware of this situation within a brief period of time ID3 Reports are frequently distributed to the different departments on the environment’s future tendencies ID4 When one member or department detects important changes in other foundations, the others are rapidly alerted ID5 The management team regularly discusses the strengths, weaknesses and strategies of other foundations ID6 Information on our beneficiaries and donors, as well as on the successes and failures of our activities, is distributed to all areas or elements of the foundation ID7 There is a rapid exchange of opinions among the foundation’s departments to decide how to respond to other foundations’ strategies ID8 Our beneficiaries’ and donors’ degree of satisfaction is made known to all departments of the foundation

Table I. Market orientation scale

Responsiveness RESP1 We use the information obtained from our beneficiaries and donors to increase the quality of our performance RESP2 We use the data obtained in investigations or studies on the sector for the management of our activity development RESP3 We define the quality of our activities in terms of our beneficiaries’ and donors’ satisfaction (continued)

RESP4 RESP5 RESP6 RESP7 RESP8 RESP9 RESP10

In the planning and development of new activities, we focus on what is of value to our beneficiaries and donors We keep the promises we make to beneficiaries and donors The effort to develop new activities is periodically revised so as to ensure it is in keeping with the beneficiaries’ and donors’ desire The beneficiaries’ and donors’ complaints are attended to rapidly We are very sensitive to how our beneficiaries and donors evaluate our activities, so that any necessary modifications may be undertaken in case of negative perceptions We use the information obtained through studies on our sector to identify groups of beneficiaries and donors with different needs and/or expectations We try to gain advantages in obtaining resources in opposition to other foundations, based on the comprehension of our beneficiaries’ needs and our donors’ expectations

Likert scale in which (1) signified scarce fulfilment and (7) represented high fulfilment. Analysis and results Scale construction Once the content validity of the market orientation scale employed in the study was justified, we evaluated its unidimensionality, reliability, and convergent, discriminant and concurrent validity. The evaluation process employed follows the recommendations suggested by Churchill (1979), Gerbing and Anderson (1998) and Deng and Dart (1994). Unidimensionality. To analyse the unidimensionality of the market orientation scale, we conducted a confirmatory factorial analysis, employing EQS 5.7. The EQS robust method was utilised (Bentler, 1995; West et al., 1995). The application of the confirmatory factorial analysis was performed in a sequential manner by estimating different fit models for one and three factors in order to obtain the most ideal one (Kohli et al., 1993; Bhuian, 1998; Han et al., 1998). The evaluation of the overall appropriateness of the sample data with respect to the proposed scale structure was performed by means of the simultaneous examination of the measurements for goodness of fit. This was done, assuming that the model’s overall fit provides sufficient information to determine whether a set of items is unidimensional (Kumar and Dillon, 1987; Steenkamp and Van Trijp, 1991). The transition from one model to another takes place, if an improvement is noted in the goodness of fit, and is the result of the sequential elimination of the items which do not substantially converge with their corresponding latent variable (Gerbing and Anderson, 1988; Steenkamp and Van Trijp, 1991). In order to consider one model superior to another, it is required that in addition the difference test between the respective statistical values of chi-squared should be significant (Dutta et al., 1999). Following this procedure, the optimum fit model (M0) was estimated, reducing the proposed scale from 31 to 16 explicative variables, saturated in three critical dimensions corresponding to those which were theoretically

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posed. The chosen model presents measurements for goodness of fit that are superior to those obtained in the alternative estimated models. It is worth pointing out the significance of the 2 difference test calculated for each pair of models (Table II). Furthermore, it is noteworthy that the different factorial loads surpass the minimum recommended value of 0.5 (Hildebrandt, 1987), which indicates the convergence of all the items in their respective latent variables (Table II). When evaluating any model’s fit, it must be pointed out that no test is available that could absolutely qualify a particular fit as optimum. It is the investigator who must make the decision, assessing the different indicators as to whether the model’s fit merits such a qualification (Caruana, 1999; Hair et al., 1998). In light of this recommendation, the overall assessment for all the fit parameters in the selected model (M0) turn out to be positive (Table II). In particular, the NC index, as an alternative to the 2 test, is inferior to the recommended value of (5) (Mueller, 1996), while the SNCP and the ECVI approach (0) (Hair et al., 1998). As for the IFI and CFI parameters, they go beyond the required value of 0.9 (Hair et al., 1998), the NNFI that of 0.89 (Grave et al., 1999) and the GFI and AGFI near the minimum recommended value of 0.8 (Jo¨reskog and So¨rbom, 1993; Mueller, 1996). Finally, the NFI and RMSEA measurements are very close to reaching the required fit value in each case; 0.89 for the first measurement (Grave et al., 1999) and 0.005-0.08 for the second (Hair et al., 1998). This positive assessment of the chosen model is reinforced by the excellent results obtained in the first-order confirmatory factor analysis executed for each one of the concept’s critical dimensions (Table III). The decision to carry out these additional confirmatory analyses was taken on considering Steenkamp and Van Trijp (1991), Golden et al. (1995) and Becker and Homburg (1999). Based on the previous arguments, it may be stated that the proposed scale is unidimensional. Three underlying structures in conformance with the critical dimensions posed in their development were identified. These structures are: intelligence generation, its internal dissemination and the development and initiation of response action. The scale’s unidimensional nature is accepted, Model comparison M1-M0 M2-M0 M3-M0 M4-M0

Table II. Model comparison by means of the 2 difference test

Notes: M0 = 16 items, three critical dimensions M1 = 31 items, one critical dimension M2 = 31 items, three critical dimensions M3 = 16 items, one critical dimension M4 = null model

2 (d.f.) 1,322.6 (333) 1,083.6 (330) 226.7 (3) 1,450.92 (19)

Significance level (p) < < <
0.179 are significant at p < 0.01

Five LISREL models were run. In Model 1, we included only the hypothesized relationship between management support and performance and the effects of attitudes and barriers were constrained to be indirect (through management support). In Model 2, we constrained the analysis such that international attitudes and management support had a direct impact on international performance. In Model 3, only perceived barriers and management support had direct impacts on performance. In Model 4, attitudes, barriers, and management support had direct effects on international performance. Since the three measures of management support are objective measures of observable constructs, we fixed their coefficients at one. In all other cases, measurement coefficients for the scales were fixed at
and the error variance was fixed at [(1 –
) * variance]. Models 2 and 3 outperformed Model 1 significantly. Squared multiple correlation for international performance was lowest (R2 = 0.48) when only management support had a direct impact. When a direct impact for perceived barriers was added (Model 2), R2 improved to 0.68. When a direct impact for international attitudes was added (Model 3), R2 improved to 0.85. When perceived barriers and international attitudes were included with management support (Model 4), R2 improved to 0.88. The addition of either perceived barriers or international attitudes to the analysis resulted in significant reductions in 2 (82 for Model 1 = 78.13, 62 for Model 2 = 45.98, and 62 for Model 3 = 17.21). Entering both direct effects simultaneously (Model 4) resulted in significant improvements in 2 (42 = 6.90) over Models 2 and 3. These analyses imply that international barriers and attitudes affect international performance directly beyond the mediated impact through management support. In Model 5, we allowed barriers and international attitudes to affect performance directly, but allowed neither to have a mediated effect on performance. While the two models have a similar squared multiple correlation for performance (R2 for Model 4 = 0.88; Model 5 = 0.87), the reduction in 2 from Model 5 to Model 4 is significant (72 for Model 5 is 34.29 and 42 for Model 4 is 6.90). In sum, barriers, attitudes, and management support affect

international performance directly. Additionally, barriers and international attitudes affect performance indirectly through management support. Since Model 4 was the best in terms of the variance in export performance accounted for and in terms of 2 (42 = 6.90, p = 0.14), tests of H1-H6 are based on this model (Figure 2). Model 4 performed well on other measures of fit (GFI = 0.99; AGFI = 0.92; SRMR = 0.03). Tests of hypotheses Management support of international operations was expected to affect international performance positively. In support of H1, the coefficients of all management support factors are positive and significant. Australian service firms that use more senior managers in international decision making, provide a higher level of support to foreign customers and the local office through frequent visits, and allocate a higher proportion of the workforce to deal with international operations outperform firms that do not. H2 posited that international barriers would have a direct, negative impact on international performance. All coefficients emanating from internal barriers are positive and significant, as expected. However, the impact of external barriers was not. Thus, H2 is partially supported. The impact of external barriers on the number of senior managers involved in international decision making is significant and positive as expected (H3). The impact of internal barriers on the frequency of overseas visits is significant, but contrary to expectations. The higher the impact of these barriers, the lower the visit frequency. Barriers were expected to affect international attitudes negatively (H4). Internal barriers significantly affected international attitudes in the expected direction – the higher the barriers, the higher the negative sub-dimension of attitude and the lower the positive sub-dimension. External barriers did not affect attitudes significantly, but their effect on the negative attitude subdimension is in the expected direction and is marginally significant (p < 0.08). Thus, H4 is partially supported. Positive international attitudes were expected to enhance management effort and support (H5). The positive attitude sub-dimension had a positive and significant impact on the number of senior managers involved in international decision making and on the frequency of overseas visits. Its positive impact on the proportion of the workforce allocated to international operations was marginally significant (p < 0.08). The expected negative impact of negative attitudes on the proportion of the workforce involved in international operations was also significant. The data provide partial support to H5. International attitudes were expected to have a direct impact on performance (H6). Indeed, the impact of the positive sub-dimension is positive and significant and the impact of the negative sub-dimension is negative and significant. In sum, the data provide strong or partial support to all six hypotheses. H1/H6 were supported, whereas H2-H5 were partially supported.

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Figure 2. Structural coefficients

The overall impact of each independent construct is reflected in the table of direct and indirect effects (Table III). Discussion We first discuss the cases where the data provided partial support. The direct link between external barriers and performance was disconfirmed. Earlier, we argued that such barriers are more important for inexperienced firms (Karafakioglu, 1986). Most respondents have been active internationally for over three years, so they have had an opportunity to counter the effect of barriers. Another explanation arises from the way in which the importance of barriers was measured. Managers indicated the extent to which barriers hindered their firms from expanding internationally. Measures of performance, however, included satisfaction and confirmation of expectations that may have tapped into non-sales facets of performance. If barriers only affect sales, their relationship with a performance scale that taps into profitability may have been weakened. These explanations are weakened by the fact that internal barriers were related to performance, as expected. We draw on Shoham and Albaum (1995), who note that experience-based decision making reduces the impact of external barriers, due to the importance of experience for avoiding operations in high-barrier markets. The importance of external barriers was associated with senior management international involvement, but not with visit frequency or the proportion of workers involved in international operations. This is consistent with Shoham and Albaum (1995), who find that the importance of external barriers can be reduced internally through experiential decision making, but not by other decision-making characteristics. Top managers can stimulate the government to act to reduce the barriers imposed by foreign governments. Sales visits and allocating a higher proportion of the workforce to international operations will not help combat these barriers. Total standardized effects

Explanatory variables

Direct effects

Indirect effects

Attitudes to exporting Positive attitudes Negative attitudes

0.35 –0.38

0.11 –0.07

0.46 –0.45

Barriers to exporting External – non-controllable Internal – controllable

–0.26

0.03 –0.31

0.03 –0.57

Managerial support Senior management involvement Frequency of overseas visits Proportion of workforce involved in international marketing

0.15 0.21

0.15 0.21

0.31

0.31

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Table III. Direct, indirect and total effects of explanatory variables on export performance

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The weak relationship between internal barriers and attitudes may be due to the fact that these barriers are firm-controllable. For example, if there are insufficient international contacts, the firm can act to locate such contacts through international databases, embassies, or trade missions. Negative attitudes affected the proportion of the workforce involved in international operations, but not management involvement or overseas visits. Negative attitudes include perceptions of international operations being riskier/ costlier than domestic operations, which may have been accounted for by previous managerial action. Since the sample includes mostly experienced firms, persistent negative attitudes may have been handled by managers’ involvement and visits early in internationalization. Because ensuring consistent quality of services is difficult, senior management involvement and visit frequency should affect performance. The explanation for positive attitudes affecting top management involvement and overseas visits, but not the proportion of the workforce, mirrors this logic. Positive attitudes include perceptions of international operations contributing to sales and profits. If managers have positive attitudes, continuous involvement and overseas visits are required. Implications Theoretical implications The findings offer substantial support to the links in Figure 1. Testing a multivariate model of Madsen’s (1987) factors shows that the structure of relationships is more complex than previously thought. Our model includes organization structure, environment structure, strategy, and performance constructs (Madsen, 1987). Earlier research modeled these factors as affecting international performance directly. Our study suggests that the effect of barriers on performance is negative, the effect of positive attitudes is positive, and the effect of top management support is positive as found previously. Including all three dimensions resulted in a high proportion of explained variance in international performance (88 per cent). This compares favorably with previous research, meta-analyzed by Shoham and Rose (1993), who reported that previous studies explained, on average, 22.3-31.4 per cent of the variance in performance. First, the study was conducted in a services context. The explanatory variables used here are more relevant to a services context. For example, export barriers have the capacity to more seriously impede services export because services rely on local presence from day one. Second, because people provide services, service quality is difficult to manage (Lovelock et al., 2001); hence senior management involvement, overseas visits, and communication frequency should affect export performance. Many of our findings can be viewed in the context of the market orientation model. Market orientation, which involves data generation and dissemination, can reduce the impact of internal barriers. Future longitudinal research is needed to directly test the potential reduction in barrier perceptions. Additionally, market orientation can enhance positive and reduce negative

export attitudes. Given the impact of such attitudes on international performance, a high level of market orientation should enhance performance directly, as documented in domestic and international settings (Cadogan and Diamantopoulos, 1995; Cadogan et al., 1999; Jaworski and Kohli, 1993; Narver and Slater 1990), and indirectly, through attitudes, as documented here.

Antecedents of international performance

Managerial implications Madsen (1987) recommended that managers should maintain personal contacts with the market and maintain continuously good relations with customers and the foreign channel. This is even more important for services where a high degree of interpersonal contact is needed. Similar recommendations can be made on the basis of our findings. Firms should involve a sufficiently large number of managers in international decision making, visit overseas frequently, and allocate a high proportion of the workforce to international operations. Internationalization should be a part of the culture from top management to production personnel, in line with Patterson and Cicic (1995), who find that top management commitment to internationalization enhances service export performance, and with market-orientation-based findings, which show that top management emphases drive performance through market orientation. Additionally, support, commitment, and competencies, which drive international performance, should be stressed. An international vision and favorable attitudes, exhibited through positive international attitudes, are necessary. The negative impact of barriers can be reduced through favorable international attitudes and training. Internal-controllable barriers, which had the highest impact on performance, can be corrected by a commitment to staff training and development. If barriers are important inhibitors of internationalization, top management can develop firm-wide positive international attitudes. Managers and workers need to be made aware of the potential contribution of international sales to the firm. Negative export attitudes should be reduced. Higher levels of senior management involvement in decision making, frequent visits, and allocating a high proportion of the workforce to exporting can reduce the negative impact of barriers. Additionally, the more information the firm acquires through overseas visits, the stronger its market orientation – critical in services to achieve high levels of service quality, which enhances performance. International attitudes had an indirect impact on performance via top management support. Thus, to the extent that managers want to change human resource allocation from domestic to international operations, they should include a change in international attitudes. Change agents can be internal (top management) or external (governments or agents). For external barriers, external change agents may provide more accurate information about foreign markets, help in circumventing such barriers, or exert pressures on foreign governments to reduce them. For internal barriers, top management can act to reduce their impact.

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Finally, of the three groups of factors, positive managerial attitudes and the level of management support have the strongest positive impact, while the negative attitudes and internal firm barriers have the strongest negative direct impact on performance. The route to improved performance should include addressing perceived internal barriers through training, recruitment, and seminars. Further, a concerted effort is required to change attitudes. Limitations Our results are based on a sample of Australian service firms. Further research is needed in other countries to assess whether the structure uncovered is universal. Our study is cross-sectional. While the measures of performance cover past and present, the ones for attitudes, barriers, and management support cover the present time. Some of the variance in today’s performance may depend on past attitudes, barriers, and support. Longitudinal research can shed light on the importance of the measures’ time horizon. Summary The limitations suggest directions for future research. The results of this study show that using more comprehensive models and multiple measures for latent variables and accounting for specification and measurement errors have the potential to uncover relationships that were not tested in earlier studies. As Madsen (1987, p. 197) points out: ‘‘Taking just some (of these requirements) into consideration, however, would still have the potential of pushing empirical export performance research further ahead.’’ References Aaby, N.-E. and Slater, S.F. (1989), ‘‘Management influences on export performance: a review of the empirical literature 1978-1988’’, International Marketing Review, Vol. 6 No. 4, pp. 7-26. Axinn, C.N. (1988), ‘‘Export performance: do managerial perceptions make a difference?’’, International Marketing Review, Vol. 5, Summer, pp. 61-71. Bilkey, W.J. (1982), ‘‘Variables associated with export profitability’’, Journal of International Business Studies, Vol. 13, Fall, pp. 71-80. Cadogan, J. and Diamantopoulos, A. (1995), ‘‘Narver and Slater, Kohli and Jaworski and the market orientation construct: integration and internationalization’’, Journal of Strategic Marketing, Vol. 3 No. 1, pp. 41-60. Cadogan, J.W., Diamantopoulos, A. and de Mortanges, C.P. (1999), ‘‘A measure of export market orientation: scale development and cross-cultural validation’’, Journal of International Business Studies, Vol. 30 No. 4, pp. 673-88. Cavusgil, T.S. (1984), ‘‘Organizational characteristics associated with export activity’’, Journal of Management Studies, Vol. 21 No. 1, pp. 3-22. Cavusgil, T.S. and Shaoming, Z. (1994), ‘‘Marketing strategy-performance relationship: an investigation of the empirical link in export market ventures’’, Journal of Marketing, Vol. 58 No. 1, pp. 1-21. Cicic, M., Patterson, P.G. and Shoham, A. (1999), ‘‘A conceptual model of internationalization of service firms’’, Journal of Global Marketing, Vol. 12 No. 3, pp. 81-106.

Cooper, R.G. and Kleinschmidt, E.J. (1985), ‘‘The impact of export strategy on export sales performance’’, Journal of International Business Studies, Vol. 16 No. 1, pp. 37-55. Cunningham, M.T. and Spigel, R.I. (1971), ‘‘A study in successful exporting’’, European Journal of Marketing, Vol. 5, Spring, pp. 2-12. Czinkota, M.R. (1994), ‘‘A national export assistance policy for new and growing businesses’’, Journal of International Marketing, Vol. 2 No. 1, pp. 91-101. Deshpande´, R. and Farley, J.U. (1998), ‘‘Measuring market orientation: generalization and synthesis’’, Journal of Market-Focused Management, Vol. 2, pp. 213-32. Diamantopoulos, A. and Cadogan, J.W. (1996), ‘‘Internationalizing the market orientation construct: an in-depth interview approach’’, Journal of Strategic Marketing, Vol. 4, pp. 23-52. Gomez-Mejia, L.R. (1988), ‘‘The role of human resources strategy in export performance: a longitudinal study’’, Strategic Management Journal, Vol. 9, pp. 493-505. Gomez-Mejia, L.R. and McCann, J.E. (1992), ‘‘Managerial, organisational and environmental factors impacting export effectiveness’’, International Journal of Management, Vol. 9 No. 3, pp. 354-60. Jaworski, B.J. and Kohli, A.K. (1993), ‘‘Market orientation: antecedent and consequences’’, Journal of Marketing, Vol. 57 No. 3, pp. 53-70. Karafakioglu, M. (1986), ‘‘Export activities of Turkish manufacturers’’, International Marketing Review, Vol. 3, Winter, pp. 34-43. Kohli, A.K. and Jaworski, B.J. (1990), ‘‘Market orientation: the construct, research propositions, and managerial implications’’, Journal of Marketing, Vol. 54 No. 2, pp. 1-18. Kohli, A.J., Jaworski, B. and Humar, A. (1993), ‘‘MARKOR: a measure of market orientation’’, Journal of Marketing Research, Vol. XXX, November, pp. 466-77. Lim, J.-S., Sharkey, T.W. and Kim, K.I. (1992), ‘‘Determinants of international marketing strategy’’, paper presented at the AIB. Lovelock, C., Patterson, P.G. and Walker, R.H. (2001), Services Marketing: An Asia-Pacific Perspective, Pearson Education, Malaysia. Madsen, T.K. (1987), ‘‘Empirical export performance studies: a review of conceptualizations and findings’’, Advances in International Marketing, Vol. 2, pp. 177-98. Narver, J.C. and Slater, S.F. (1990), ‘‘The effect of a market orientation on business profitability’’, Journal of Marketing, Vol. 54 No. 4, pp. 20-35. Patterson, P.G. (1993), ‘‘The role of expectations and product performance for a high-involvement product’’, Psychology and Marketing, Vol. 10 No. 5. Patterson, P.G. (2000), ‘‘A contingency approach to modeling satisfaction with management consultancy services’’, Journal of Service Research, Vol. 3 No. 2, pp. 138-53. Patterson, P.G. and Cicic, M. (1995), ‘‘A typology of service firms in international markets: an empirical investigation’’, Journal of International Marketing, Vol. 3 No. 4, pp. 57-83. Rosson, P.I. and Ford, D. (1982), ‘‘Manufacturer-overseas distributor relations and export performance’’, Journal of International Business Studies, Vol. 13, Fall, pp. 57-72. Rumelt, R.P. (1974), Strategy, Structure, and Economic Performance, Harvard University Press, Cambridge, MA. Shoham, A. (1998), ‘‘Export performance: a conceptualization and empirical assessment’’, Journal of International Marketing, Vol. 6 No. 3, pp. 59-81. Shoham, A. (1999), ‘‘Bounded rationality, planning, standardization of international strategy, and export performance: a structural model examination’’, Journal of International Marketing, Vol. 7 No. 2, pp. 24-50.

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Shoham, A. and Albaum, G.S. (1995), ‘‘Reducing the impact of barriers to exporting: a managerial perspective’’, Journal of International Marketing, Vol. 3 No. 4, pp. 85-105. Shoham, A. and Rose, G.M. (1993), ‘‘Export performance: a meta-analytical integration’’, in Levy, M. and Grewal, D. (Eds), Developments in Marketing Science. Vol. 16, Academy of Marketing Science, Coral Gables, FL, pp. 230-4. Shoham, A., Rose, G.M. and Albaum, G.S. (1995), ‘‘Export motives, psychological distance, and the EPRG framework’’, Journal of Global Marketing, Vol. 8 No. 3/4, pp. 9-37. Styles, C. (1998), ‘‘A cross-cultural examination of export performance’’, Journal of International Marketing, Vol. 6 No. 3, pp. 5-31. Winsted, K. and Patterson, P.G. (1998), ‘‘Internationalization of services: the service export decision’’, Journal of Services Marketing, Vol. 12 No. 4, pp. 294-309. Appendix: Partial list of measures (complete list available from the authors) Target market barriers (
¼ 0:98) To what extent has each of the following factors hindered your organization from expanding your export program (1 = hindering to great extent, 5 = not hindering at all)? Note, items reverse scaled prior to analysis: (1) Too many export restrictions in our target countries. (2) Foreign exchange control in target countries. Internal access barriers (
¼ 0:85) To what extent has each of the following factors hindered your organization from expanding your export program (1 = hindering to great extent, 5 = not hindering at all)? Note, items reverse scaled prior to analysis: (1) Lack of contacts in foreign markets. (2) Difficulty of gaining foreign market entry. Positive export attitudes (
¼ 0:83) Please indicate the extent to which you agree or disagree with each of the following statements (1 = strongly disagree, 5 = strongly agree): (1) Exporting could make a major contribution to my firm’s growth. (2) Exporting is potentially more profitable than selling in the Australian market. Negative export attitudes (
¼ 0:82) Please indicate the extent to which you agree or disagree with each of the following statements (1 = strongly disagree, 5 = strongly agree): (1) Exporting involves a greater risk than selling in the local Australian market. (2) Exporting involves a greater cost than selling in the local Australian market. Satisfaction with performance (
¼ 0:91) Thinking about your overall export performance, indicate the extent to which you agree or disagree (1 = strongly disagree, 5 = strongly agree): (1) I am very satisfied with our decision to export. (2) If we had to do it all over again, we would still enter foreign markets. Confirmation of expectations (
¼ 0:74) Thinking about your firm’s overall export performance over the past one to three years, how close did it come to what you expected?: Much worse than expected (1) to much better than expected (5).

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Redefining market orientation from a relationship perspective Theoretical considerations and empirical results Gabriele Helfert

Redefining market orientation 1119 Received December 2000 Revised April 2001 and November 2001

Marketforce GmbH, Frankfurt/Main, Germany

Thomas Ritter Copenhagen Business School, Frederiksberg, Denmark, and

Achim Walter University of Karlsruhe, Karlsruhe, Germany Keywords Market orientation, Relationship marketing, Alliances Abstract Many studies have shown that market orientation is important for firms because it has a positive impact on performance. However, several studies have indicated that the relation between a firm’s market orientation and its success is sometimes weak and that moderating variables need to be considered at least under certain circumstances. As such the overall message from the market orientation studies is not clear. The usefulness of the market orientation concept must also be questioned when looking at the realities of business markets. In most if not all cases the firms’ ‘‘surroundings’’ should be seen as a network of inter-organizational relationships rather than an anonymous market. Therefore, in this paper the notion of market orientation is explored with particular focus on inter-organizational relationships. Hereby, it is argued that the relationships are important and that the overall market orientation of firms needs to be translated to a relationship level in order to be effective. It is further argued that market orientation on a relationship level can be interpreted in terms of a firm’s employed resources and executed activities dedicated to relational exchange processes.

Introduction Market orientation has attracted a lot of interest with both academics and practitioners (for an overview, see Deshpande´ (1999) and Wilkinson (2001)) and for many years research on market orientation has shaped marketing thinking. Most studies have supported the view that market-oriented firms have higher innovation and corporate success (Deshpande´ et al., 1993; Han et al., 1998; Jaworski and Kohli. 1993; Narver and Slater, 1990; Pelham, 1997). The original results on market orientation from the USA have led to replications in other parts of the world (Deng and Dart, 1994 (Canada); Gray et al., 1998 (New Zealand); Greenley, 1995 (UK); Hooley et al., 2000 (Hungary, Poland and Slovenia); Pitt et al., 1996 (UK and Malta); Shipley et al., 1995 (Hungary and Poland)), the development of better measures (Gray et al., 1998) and the analysis of moderating effects (Han et al., 1998; Greenley, 1995; Kumar et al., 1998; Pelham, 1997). Market orientation has also been tested outside

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manufacturing, especially in service industries (Chang and Chen, 1998; Han et al., 1998; Van Egeren and O’Connor, 1998). Even though all studies use the term ‘‘market orientation’’, three different perspectives can be distinguished from a conceptual point of view (Becker and Homburg, 1999; see also Dreher, 1994): (1) Behavioral perspective on market orientation. Kohli and Jaworski (1990) base their discussion on behavioral aspects, i.e. they put action as a central focus of market orientation. ‘‘Market orientation is the organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization-wide responsiveness to it’’ (Kohli and Jaworski, 1990, p. 6). As such there is a clear focus on informationrelated behavior. For this perspective, measurement scales have been developed and tested with positive results (Jaworski and Kohli, 1993; Kohli et al., 1993). This perspective was later used by, for example, Deng and Dart (1994) and Atuahene-Gima (1996). (2) Cultural perspective on market orientation. According to Narver and Slater (1990, p. 21), ‘‘market orientation is the organization culture (i.e. culture and climate (Deshpande´ and Webster, 1989)) that most effectively and efficiently creates the necessary behaviors for the creation of superior value for buyers and, thus, continuous superior performance for the business’’. However, while discussing the content of market orientation the authors look heavily at behavioral components. ‘‘Market orientation consists of three behavioral components – customer orientation, competitor orientation, and inter-functional coordination’’ (Narver and Slater, 1990). This blurs the distinction between both approaches slightly. (3) System-based perspective on market orientation. Becker and Homburg (1999) detect a missing discussion about management issues related to market orientation and fill this gap by taking a systems-based perspective. The authors conceptualize ‘‘market-oriented management in terms of the degree to which management systems are designed in such a way as to promote a business organization’s orientation towards its customers and competitors’’ (Becker and Homburg, 1999, p. 18). In this approach the management system is divided into five subsystems: organization, information, planning, controlling, and human resource system. Items have been generated which measure the extent of market orientation in all these subsystems by the authors. Even though the perspectives have remarkable differences in their understanding of market orientation (Dreher, 1994), there is a fair amount of overlap as well. Cadogan and Diamantopoulos (1995) argue that the behavioral and the cultural perspectives have conceptual and operational overlaps in nearly all dimensions. Especially with regard to the operationalization the commonness is quite remarkable. Based on their empirical findings, Avlonitis

and Gounaris (1997) suggest that a dissociation of the cultural and the behavioral approach should be avoided. There is also an overlap between the system-based perspective and the other two. For example, a market-oriented information system has information generation and dissemination as two of the three sub-dimensions. In addition, all system-based dimensions are operationalized with regard to customers and competitors as well as interfunctional coordination. Apart from the conceptual overlap, there is an additional problem with the existing perspectives of market orientation in so far as a relational perspective is missing. According to Gro¨nroos (1989), marketing’s aim should be the development of long-term customer relationships. Marketing research has already highlighted the importance of inter-organizational relationships and networks for firms’ survival and success (Achrol, 1991; Achrol and Kotler, 1999; Anderson et al., 1994; Day, 2000; Gadde and Mattson, 1987; Ha˚kansson and Snehota, 1995; Wilson, 1995). It has been argued that relationships are a firm’s most valuable resources. This relational view of markets questions the goodness of a ‘‘general’’ orientation to a market. Therefore, the question arises how the two streams of literature can be integrated. Up to now the two streams of literature have not been combined apart from two contributions: (1) Steinman et al. (2000) analyzed the impact of the length and importance of a relationship on the market orientation gap, i.e. the difference between the buyer’s and the seller’s judgment of the supplier’s market orientation. Using data from the USA and Japan, they found out that the gap decreases with time and importance. (2) Baker et al. (1999) regarded a distributor’s market orientation towards his customer as an influencing variable for suppliers to deal with distributors, as suppliers expect better sales figures from a marketoriented distributor. Relying on some 380 supplier questionnaires, it is shown that the distributor’s market orientation perceived by the supplier has a positive impact on supplier’s trust, cooperation and commitment. There are also effects from supplier’s market orientation on distributor’s market orientation (Siguaw et al., 1998). However, we still have little understanding of the interplay between market orientation and inter-firm relationship management inside a firm. This paper aims at filling this gap by discussing and investigating market orientation on the relationship level. Hereby, we look inside the firm: How does a firm’s market orientation affect its relationships and the management of these? The paper is organized as follows: First, the concept of market orientation is introduced and the effects on the relationship level resulting from a firm’s market orientation are discussed theoretically. Second, relationship effectiveness and hypotheses on the impact of market orientation on it are presented. Then, the hypotheses are empirically tested. Finally, limitations of the study and managerial implications are discussed.

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Market orientation on a relational level The rationale for a new perspective In a traditional view firms operate in a faceless environment with which they have an antagonistic relationship. This means that firms are supposed to maximize their own profits by disregarding other actors’ requirements and seeing them as ‘‘enemies’’. In such an understanding the marketing task is to design an offering which is determined by the four Ps. At best, meaning the highest level of relating to the environment, marketing research will collect data about the enemies known as customers as well as competitors. Markets – in this view – comprise customers (or segments of customers) that are somehow identical. At least these customers have identical needs and wants to be satisfied. Under such circumstances firms can gain by being market-oriented. According to Wilkinson (2001), the origins of the construct of market and customer orientation can be traced back to Adam Smith who stated in the eighteenth century in his Wealth of Nations that ‘‘consumption is the sole end and purpose of all production and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer’’. Most articles, however, refer to Drucker (1954) as the roots of market orientation. Especially after a Marketing Science Institute (MSI) conference in 1987, interest in and publications on market orientation have increased significantly. However, practitioners and academics get increasingly concerned about the notion of markets. In reality there is increasing pressure towards customization, i.e. changing offerings so that they solve individual customers’ problems better. Even though the same physical product is exchanged or the same service is delivered, the offering can be significantly different in other areas – one being the relationship between a seller and a buyer (Ford et al., 1998). This is due to the fact that the actors are not faceless but do have an identity. Furthermore, the relation between two actors has a history because the actors do remember (IMP Group, 1982). This argument stands true for new exchange relations as well. In those cases the actors do take into account the non-existing history of the relationship. This can be seen in a lack of trust and commitment to the other party. The atmosphere (e.g. trust and commitment) becomes a part of the offering. As such there are only individual customers with (at least partly) individual problems (Ha˚kansson and Ford, 2002). As such we can conclude that there are no general markets towards which a firm can be oriented. A firm just cannot say to a customer: ‘‘This is what the market wants.’’ Firms have to understand what the individual customers want. Furthermore it becomes harder to distinguish between well-defined industries which could serve as ‘‘quasi-markets’’. This is due to increasing complexity of technologies and their interdependence. Who is in the biotech industry? Limitation 1. Dealing with customers, there are no markets. Instead we need an orientation towards the individual customers. Market orientation is always measured with reference to customers but not related to the individual

customers. But in order to gain valuable, insightful and important information from other actors (i.e. customers and competitors as in market-orientation), mutually beneficial relationships must be built which are long-term oriented (Anderson, 1995). With this long-term orientation a relationship perspective is needed which is a move away from a transactional approach (Day, 2000). The relationship perspective incorporates more than pure information handling or a cultural dimension as this perspective is closer to the managerial level. It puts the interaction with customers (as well as with other types of actors) at the center of the argument. The relationship perspective has the potential to unfold the mechanisms behind the acquisition of information because we know that only actors who trust and who are committed to the other side are willing to share information. Limitation 2. Market orientation does not take into account interorganizational relationships. In conclusion we can say that the cultural variable market orientation needs to be ‘‘translated’’ into the relationship level in order to, first, overcome the limitations and, second, to be able to test its impact on this level. So what does market orientation mean on the relationship level? Redefining market orientation on a relationship level As market orientation in the behavioral perspective is about action, we need to translate the market orientation activities into relationship management activities. Following theoretical approaches in relationship marketing literature (Narus and Anderson, 1995; Helfert, 1998) as well as summarizing our own observations from previous qualitative interviews, we have identified four main relationship management task bundles that have to be performed by the supplier company: exchange, coordination, conflict resolution, and adaptation. Exchange activities (cf. Anderson and Narus, 1984, 1990; Bagozzi, 1975; Dwyer et al., 1987; Homans, 1958; Thibaut and Kelley, 1959) serve to settle needs and requirements of the partners in a relationship. We can distinguish between product/service-related exchange activities which include the transfer of goods or money, information exchange regarding specifications of goods, logistics, delivery or payment matters, special offers or orders as well as middle-range forecast of opportunities, needs and requirements of both parties; problem-related exchange activities that are important if a customer has difficulties with the use, the functionality or the quality of products or services provided by the supplier, or if a customer needs long-term support regarding specific solutions for his problems; and person-related exchange activities that serve to build up personal relationships between members of each partner company in order to get to know one another better and to establish social bonds. Inter-organizational coordination refers to the synchronization of the relationship partners’ actions (Mohr and Nevin, 1990). It is always necessary when more than one party is involved in organizational processes. Coordination comprises the establishment, use, and control of formal rules and procedures and the exertion of informal influence.

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The utilization of constructive conflict resolution mechanisms (cf. Ruekert and Walker, 1987) is a third task which extends the notion of coordination because it refers to those extraordinary, non-standard situations which are bound to occur in every long-term relationship. While rules and procedures form the basis for an efficient standardization of processes in the relationship, the conflict cannot be dealt with in a standardized way. Thus, constructive conflict resolution requires a timely reaction to the conflict as well as the readiness for compromises and a sense of justice. Adaptation often becomes necessary in customer relationships in order to meet the special needs or capabilities of a partner. These adaptation activities can refer to a multitude of different areas such as products/services, manufacturing processes, logistics, delivery or payment modes, employee qualification, or conditions for the use of a product or service (cf. Halle´n et al., 1991). The links between these relationship management tasks and the dimensions of market orientation are manifold. A customer orientation on the firm level can be seen as an enabler for these activities because the firm sets focus on understanding customers’ needs and is prepared to commit itself to customers. Also, if customer satisfaction measures are in place, employees are motivated to fulfill the relationship management tasks in order to satisfy the customer. In addition, competitor orientation may provide an understanding of competing orders and thus is the basis for conflict resolutions and coordination. Finally, as most relationships are handled by teams (Helfert and Vith, 1999; Narus and Anderson, 1995) and require complex exchange, interfunctional coordination is the key to serve customers. Supporting this, Ritter (1999) argued that only an integrated communication structure in the organization (i.e. a high degree of interfunctional coordination) is the key for a firm to manage its relationships and networks. In order to fulfill the above tasks informational, physical, human, and financial resources are needed (Helfert, 1998; Ritter, 1999). In addition to a translation of market orientation into relationship management, we expect these important resources for relationship management to be present in market-oriented firms. Owing to the information generation and dissemination about customers and competitors (as dimensions of market orientation) it is reasonable to assume that, in market-oriented firms, the people dealing with a relationship will have good information about the customers and competitors. There will also be a good understanding of the firm’s internal procedures, competencies and strategies due to a high degree of inter-functional cooperation. Market-oriented firms will also have to provide financial, physical and technical resources for relationships as they value these relationships in terms of information generation and dissemination. Therefore, we see market orientation on the relationship level in terms of resource availability. Figure 1 provides an overview of our conceptualization of market orientation on the inter-firm relationship level.

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Figure 1. A relationship concept of market orientation

Relational market orientation and relational effectiveness Relationship effectiveness Empirical studies have shown that there are huge differences in the level of effectiveness a supplier company can achieve in a specific customer relationship. Gemu¨nden et al. (1996, p. 179ff) examined 578 European business relationships between small and medium-sized manufacturing enterprises and their industrial customers. On the supplier side, between three and four employees had been directly and constantly involved in the customer relationship. The authors identified three major dimensions of relationship success: The amount of sales to the customer, the extent to which a customer helps the supplier to gain market availability, and the extent to which a customer relationship is useful for the supplier’s technological development. A cluster analysis of the 578 relationships revealed four different success patterns regarding these three dimensions (cf. Gemu¨nden et al., 1996, p. 30ff): while only 15.22 per cent of the suppliers exploit all three success potentials of their customer relationship above average, 32.70 per cent are high performers regarding two of the three dimensions, 29.41 per cent make an above-average use of their customers only with respect to the sales dimension, and 22.67 per cent are poor performers concerning all three dimensions in question. The four clusters and their exploitation of the relationship potential on the three success dimensions are shown in Figure 2. The gray centered triangle symbolizes the sample means on these three dimensions. Relationship effectiveness for a supplier firm thus equals the extent of goal attainment the company is able to reach due to the relationship.

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Figure 2. Success patterns in 578 European business relationships

Hypotheses In relationship management, information plays a key role. The people involved from the service provider’s side need to know their own firm in order to be able to put together a consistent, realistic, and at the same time customized offering. This also assumes that there is sufficient information available on customers’ needs and competitors’ offerings. Put together with in-house resources this will build the basis to convince the customer to make business with the service provider. Furthermore, good resources provide the relationship with substance to explore future opportunities in joint development activities. Also, a good resource situation will satisfy the customer, which in turn may prove to be valuable to gain further market access through the customer: H1. Better resource availability leads to higher relationship effectiveness. A good relationship management task performance regarding exchange, coordination, and adaptation in the customer relationship is a necessary precondition for relationship effectiveness. This can be explained as follows: If the service provider is able to manage the exchange of goods, services, technology, information, attitudes, etc. with the customer in the right way, to coordinate the actions of the own company with those of the customer, to solve conflicts in a constructive and timely fashion, and to recognize, initiate, and

perform adaptation activities and processes, it is more likely that the goals of the relationship can be attained: H2. Higher relationship management task performance leads to higher relationship effectiveness. Empirical findings have suggested various variables to explain relationship effectiveness. We will therefore include the most important ones in our discussion in order to control for their impact. As such we will not develop formal hypotheses but explain the constructs in the following. Many studies conclude that trust and commitment are integral features of successful relationships (e.g. Dwyer et al., 1987; Gundlach et al., 1995; Mohr and Spekman, 1994; Moorman et al., 1992; Morgan and Hunt, 1994). Trust is included in most relationship models (cf. Wilson, 1995). Although scholars have used a variety of definitions for trust, nearly all researchers have implicitly accepted the definition of trust as a positive belief, attitude or expectation of a party concerning the likelihood that the action or outcomes of another will be satisfactory (Andaleeb, 1992). In this study trust exists to the extent that a customer in a relationship believes the supplier to be honest (cf. Doney and Cannon, 1997), benevolent (cf. Geyskens et al., 1996), and competent (cf. Moorman et al., 1992). Where partners trust one another, constructive dialogue and cooperative problem solving allow difficulties to be worked out. Trust reduces fears of exploitation and minimizes feelings of vulnerability (Boon and Holmes, 1991). Therefore, trusting customers increase their business and are likely to share restricted information. Trusting partners feel fewer risks concerning (investment) decisions and activities connected with a partnership because they see negative consequences as less likely (Dodgson, 1993; Littler et al., 1995). Most studies conceptualize commitment as an attitudinal component signifying a durable intention by the parties to develop and sustain a long-term relationship (e.g. Anderson and Weitz, 1992). Moorman et al. (1992, p. 316) view commitment ‘‘as an enduring desire to maintain a valued relationship’’. In the present study four characteristics of relationship commitment are used to describe customer commitment: loyalty (cf. Geyskens et al., 1996), willingness to make short-term sacrifices (cf. Anderson and Weitz 1992), long-term orientation (cf. Ganesan, 1994), and willingness to invest in the relationship (cf. Gundlach et al., 1995). Commitment encourages partners to resist attractive short-term alternatives in favor of the expected long-term benefits of staying in a relationship (Ganesan, 1994). Committed customers will cooperate because of a desire to make the relationship work (Morgan and Hunt, 1994). Furthermore, demographic information describing the relationship are used: Firm size of the supplier, firm size of the customer, and duration of the relationship. These variables are positively related to relationship effectiveness but sometimes no effect is found. However, it is recommended to control for size and age effects. Our theoretical model is summarized in Figure 3.

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Figure 3. Conceptual model

Empirical study Data collection and sample Even though we believe that our arguments stand true in any business sector, we have chosen to test our model in service industries. With regard to service industries the missing relationship perspective of market orientation becomes even more problematic as service design and exchange most frequently do require provider-customer interactions. The service and business-to-business marketing literature regularly highlights the importance of personal interactions, i.e. inter-firm relationships, in creating customer satisfaction (Crosby and Stephens, 1987; Parasuraman et al., 1985). This is most critical when the service provider’s offering is complex, customized and delivered over a continuous stream of transactions. The data were collected in standardized personal interviews with managers in two German industries: software companies and advertising agencies. Originally, the authors had selected the companies randomly from German company directories of the two industries. The companies were first contacted by telephone in order to find an interview partner who had all the information we needed about a customer relationship. Regarding the research question of this study, 153 questionnaires are sufficiently completed. This equals an effective response rate of 37.8 per cent (compared with 405 companies that were contacted originally).

The sample can be described as follows: The average business relationship had been in existence for 8.9 years. Mostly SMEs were interviewed, which is reflected in an average number of employees of 111 (median = 13). The customers employed 776 persons on average (median = 200). For the purpose of this study, respondents seemed to be appropriate as key informants who deal with relationship and network management and hold personal contacts to customers themselves. In the majority of our cases, the key informants were members of the top management or from middle management, and only a minority of the interview partners were members of the lower management. Measures The present study was preceded by a pretest. A total of 12 semi-structured interviews were conducted with employees of supplier companies in Germany who were responsible for the management of business relationships. The purpose of these interviews was to develop a set of items that tap each of the relevant constructs and to provide an initial test of some of the measures. Furthermore, we modified several items that were extracted from various previous studies and verified them for their relevance to the context of the present study through the interviews with relationship managers. The managers in the pretest answered the questionnaire and verbalized any thoughts that came to mind. The items were revised following each personal interview until no further changes were suggested. All constructs were measured using seven-point multiple-item scales. The proposed measures were purified by assessing their reliability and uni-dimensionality following guidelines of Anderson and Gerbing (1988). Itemto-total correlations were examined in each of the proposed scales and items with low correlations were deleted if they tapped no additional domain of interest. Then, a factor analysis was performed on items from subsets of theoretically related measures to assess the extent to which they reflected a single dimension. (Scale items are displayed in the Appendix.) Resource availability was measured by five items that were developed for this study. The items capture the access to resources with which the relationship managers in a market-oriented firm will be provided (cf. Jaworski and Kohli, 1993; Narver and Slater, 1990): customer information, market information, information on strategic goals of the service provider, technical equipment, and time for relationship management. The construct relationship management tasks performance of the supplier captures the positive influence of managers in the service provider firm within a focal customer relationship setting who fulfill relationship management tasks. The scale was based on scales to assess relationship management tasks (c.f. Mohr and Nevin, 1990; Halle´n et al., 1991). Several of their items were adopted and modified to the context of the present study. Some items were newly developed, reflecting concepts of crucial relationship management tasks (c.f. Dwyer et al., 1987; Ruekert and Walker, 1987). A principal component analysis with varimax rotation was performed using 12 items assessing tasks

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of relationship managers in the supplier and customer firm. Four factors with eigenvalues greater than 1.0 were extracted, which explained 64.4 per cent of total variance: adaptation activities (two items,  = 0.73); coordination activities (three items,  = 0.83), conflict-handling activities (three items,  = 0.66), and exchange activities (four items,  = 0.61). The arithmetic means of the four multi-item scales were used to measure the construct relationship management tasks of the service provider. Sales effectiveness was measured using five items covering high turnover volume, continuity of sales and high profits. This scale covers the main direct value-creating functions that are suggested by Walter et al. (2001). Performance development effectiveness was operationalized with four items covering various stages in the development process as well as judging the overall involvement of the customer in new offerings development. The market development effectiveness measure used four items describing typical activities of customers helping suppliers to gain access to new customers. Customer commitment was operationalized as a five-item scale adapted from the Anderson and Weitz (1992) study. The items represent the partners’ loyalty, willingness to make short-term sacrifices, long-term orientation, and intention to invest in the relationship. The four-item scale customer trust taps the three major facets of trust: honesty, benevolence, and competence. The four-item scale was developed through a review of literature (e.g. Andaleeb, 1992) and from interviews with relationship managers. To control for the effects of further determinants of relationship effectiveness, the three variables ‘‘firm size of the service provider’’, ‘‘firm size of the customer’’ (both measured as numbers of employees), and ‘‘duration of the supplier-customer relationship’’ (measured in years) were incorporated as independent variables in the regression equation. As a more rigorous test of each of the multi-item constructs, a single-factor confirmatory factor analysis (CFA), with covariance matrix as the input, was then conducted using LISREL 8. Information on this is shown in Table I. In the context of scale validation, CFA is considered superior to more traditional criteria, e.g. such as Cronbach’s alpha (cf. Gerbing and Anderson, 1988). Separate single-factor models were evaluated for each of the constructs’ measures. Because of sample size constraints it was not possible to run CFA on all measures simultaneously (see Bagozzi and Baumgartner, 1994). The Cronbach’s alphas and extracted variances for each purified scale, along with the CFAs, are reported in Table I. These results provide evidence of the uni-dimensionality of the seven constructs. All items exhibit reasonably high reliabilities. All Cronbach’s alphas except one exceed the threshold value of 0.7 (Nunnally, 1978). The fit indices suggested by Jo¨reskog and So¨rbom (1996) were used to assess the model adequacy. The ratio of 2 over the degree of freedom (df) was used as a descriptive measure of overall fit. Values of this ratio smaller than two indicate an acceptable model fit (Medsker et al., 1994). The goodness-of-fit index (GFI) and the adjusted goodness-of-fit index (AGFI) are fit measures for which a minimum value of 0.9 usually is considered to be

Construct

Number Cronbach’s Variance of items alpha extracted 2/df (p) GFI AGFI RMSEA

Sales effectiveness

5

0.75

0.52

Performance development effectiveness Market development effectiveness Customer commitment

4

0.84

0.68

4

0.80

0.54

5

0.76

0.52

Customer trust

4

0.71

0.54

Relationship management tasks of the supplier Resource availability

4

0.68

0.52

5

0.77

0.53

1.84 (0.10) 2.85 (0.06) 1.77 (0.17) 01.57 (0.17) 1.43 (0.24) 0.34 (0.74) 1.72 (0.13)

0.98

0.93

0.08

0.98

0.90

0.12

0.99

0.94

0.07

0.98

0.94

0.06

0.99

0.96

0.05

1.00

0.99

0.00

0.98

0.93

0.07

acceptable (Bagozzi and Yi, 1988; Baumgartner and Homburg, 1996). For the root mean square error of approximation (RMSEA) values up to 0.08 are usually considered to indicate a reasonable model fit (Browne and Cudeck, 1993). We examined convergent validity by examining whether each indicator’s estimated coefficient was significant. All factor loadings were significant, indicating convergent validity (cf. Gerbing and Anderson, 1988). Discriminant validity between the seven constructs is given applying the criterion suggested by Fornell and Larcker (1981). The average variances extracted for the measures were all greater than the squared correlations between the constructs (correlation matrix of measurement scales is displayed in Table AI). Hypotheses tests The hypotheses were tested by regressing ‘‘resource availability’’, ‘‘relationship management task performance’’, and the control variables (e.g. customer commitment and customer trust on the three relationship effectiveness measures. The results of the three regression analyses are given in Table II. Discussion and outlook The standardized beta coefficients were used for interpreting the results of the multiple regression (Table II). As was expected, relationship management task performance was found to be a significant predictor of relationship effectiveness (H1 supported). Resource availability as such had no significant impact. As this was contrary to our hypothesis we analyzed the correlations between resource availability and the other three independent variables. This resulted in highly significant correlations. Therefore, we have to interpret resource availability as an antecedent of relationship management task performance. Given that resource availability is a result of market orientation, this result supports the findings of Siguaw et al. (1998) where a distributor’s

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Table I. Measure-related information regarding multi-item measures

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Table II. Antecedents of relationship effectiveness of the supplier

Dependent variable Performance Market Sales development development effectiveness effectiveness effectiveness

Independent variable Customer commitment Customer trust Relationship management tasks of the supplier Resource availability Duration of the relationship Number of employees service provider Number of employees customer R2 F N Notes: * p < 0.10,

**

p < 0.05,

***

0.14** 0.25*** 0.32*** n.s. 0.10* n.s. n.s. 0.34 18.97*** 153

0.20*** 0.17** 0.30*** n.s. –0.10* n.s. n.s. 0.32 17.05*** 153

0.12* 0.12* 0.36*** n.s. n.s. n.s. n.s. 0.24 16.03*** 153

p < 0.01 (one-sided tests for coefficients)

market orientation had no direct but only an indirect impact on the distributor’s performance. Market orientation and resource availability build the context in which relationships and their effectiveness can prosper. Owing to our sample size we were not able to test this interpretation using structural equation modeling. This non-significant relation also supports our main argument, i.e. that market orientation needs translation because even resource availability, seen as closer to the relationship construct, fails to show a direct impact. Of the control variables commitment, trust and duration of the relationship show significant effects. Regarding trust and commitment, this is in line with findings in other studies. Duration of the relationship has impacts but with different direction. In terms of sales effectiveness, there is a positive impact, i.e. the longer the relationship lasts, the higher sales. This is in line with our experience in practice where professional service providers do accept small profits or even losses at the beginning of a relationship in order to win the business. Over time the service provider learns to know the customer’s business better and as such can offer more value for a higher price. Regarding development activities, a negative impact of duration was found. This may underline the notion that over time the two parties become too accustomed to each other and no longer challenge their views and look for innovations. As such there are not only gains in long-term relationships but also losses in terms of creativity and progression. These additional results offer some indication for the development of inter-firm relationships (Ford, 1980; Dwyer et al., 1987). The independent variables explain a substantial portion of the variance of relationship effectiveness, which shows that we have analyzed important predictors of relationship effectiveness. Limitations There are some limitations of the present study which must be recognized. First, the data for this analysis were obtained from a single informant in the

supplier company. This is a common practice in marketing research (Phillips, 1981). Kumar et al. (1993) have suggested that choosing the appropriate key informant could alleviate some of the potential problems. We have invested a considerable amount of time to identify a person that is equally well-informed about the supplier and customer company in general, and the inter-firm relationship in question. It remains vigorously debated in the literature whether multiple respondents from each interviewed supplier are necessary to ensure the validity of results such as those of this study (John and Reve, 1982). However, results from team member questionnaires, which were sent to members of the relationship management team, did not indicate large differences between the key informant’s view of the relationship and the view of others involved in the relationship, providing support for the validity of data collected solely from supplier informants. Second, there are more potential independent variables and also moderators which might explain relationship effectiveness. Especially with regard to market orientation, it has been argued that moderating effects can be found for technology and market turbulence and competitiveness. It would be interesting to test whether or not such effects can be found on the relationship level as well. In addition, potential variables from relationship literature are dependency and adaptations. Managerial implications In this study, we have looked at the impact of market orientation on a relationship level. We have argued that market orientation will translate into first, a specific resource availability which was supposed to have an effect on relationship effectiveness and second, into a high degree of relationship task performance. However, the results show that resource availability has no direct impact on the relationship level. But it has an indirect one. A highly significant positive impact of relationship task performance on relationship effectiveness was found. As such, market orientation matters on the relationship level! Also in the network economy market orientation has its place. However, as a firm does not – and should not – have deep relationships with all its customers and, as all relationships are different, market orientation needs to be translated to the relationship level. This message is especially important for service providers who are more likely to interact intensively with their customers. Therefore, firms do need to look at the relationship level in addition to the corporate level of market orientation. Further research questions We have used professional service firms to illustrate our ideas because service firms do normally have more interactions with their customers than traditional manufacturers. However, relationships do exist in all areas of business and as such further research could compare different industries and how the impact of market orientation on relationships may vary. We are convinced that our ideas are also applicable to other industries, although this needs yet to be tested.

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Ruekert, R.W. and Walker, O.C. (1987), ‘‘Marketing’s interaction with other functional units: a conceptual framework and empirical evidence’’, Journal of Marketing, Vol. 58, January, pp. 1-19. Shipley, D., Hooley, G., Beracs, J., Fonfara, K. and Kolos, K. (1995), ‘‘Marketing organizations in Hungarian and Polish firms: part 1’’, Journal of Marketing Practice: Applied Marketing Science, Vol. 1 No. 2, pp. 39-54. Siguaw, J.A., Simpson, P.M. and Baker, T.L. (1998), ‘‘Effects of supplier market orientation in distributor market orientation and the channel relationship: the distributor perspective’’, Journal of Marketing, Vol. 62, July, pp. 99-111. Steinman, C., Deshpande´, R. and Farley, J.U. (2000), ‘‘Beyond market orientation: when customers and suppliers disagree’’, Journal of the Academy of Marketing Science, Vol. 28, pp. 109-19. Thibaut, J.W. and Kelley, H.H. (1959), The Social Psychology of Groups, Wiley, New York, NY. Van Egeren, V. and O’Connor, S. (1998), ‘‘Drivers of market orientation and performance in service firms’’, Journal of Service Marketing, Vol. 12 No. 1, pp. 39-58. Walter, A., Ritter, T. and Gemu¨nden, H.G. (2001), ‘‘Value-creation in buyer-seller relationships: theoretical considerations and empirical results from a supplier’s perspective’’, Industrial Marketing Management, Vol. 30 No. 4, pp. 365-77. Wilkinson, I. (2001), ‘‘Conceptualizing and measuring the nature, causes and consequences of market orientation: a review of Rohit Deshpande´ (Ed.), Developing a Market Orientation, Journal of Business to Business Marketing, Vol. 8 No. 2, pp. 65-76. Wilson, D.T. (1995), ‘‘An integrated model of buyer-seller relationships’’, Journal of the Academy of Marketing Science, Vol. 23 No. 4, pp. 335-45. Appendix. Measures Sales effectiveness (mean = 4.25, SD = 0.80; 0 = not at all, 6 = to very high degree) High turnover with this customer. Continued sales of products to this customer. Continued sales of services to this customer. High profit margins with this customer. Sales increase with this customer. Performance development effectiveness (mean = 3.59, SD = 1.27; 0 = not at all, 6 = to very high degree) Development of new or improved offerings with this customer. Use of this customer for testing new offerings. Use of this customer for generating new offering ideas. Use of this customer’s know-how for improving existing offerings. Market development effectiveness (mean = 3.68, SD = 1.27; 0 = not at all, 6 = to very high degree) Image improvements through collaboration with this customer. Contacts to new customers through this customer. Information on potential customers from this customer. Joint appearance with this customer to potential customers. Customer commitment (mean = 3.98, SD = 1.13; 0 = strongly disagree, 6= strongly agree) This customer regards our current collaboration as part of a long-term relationship. This customer is willing to accept short-term disadvantages in order to maintain our relationship. This customer is willing to invest time and money in order to work together with us in the long run. This customer would not do business with others at our expense. This customer puts the long-term cooperation with us before his short-term profit.

Customer trust (mean = 4.70, SD = 0.89; 0 = strongly disagree, 6 = strongly agree) This customer believes that we would take advantage without looking at their interests (reverse scored). This customer knows that they can count on our support in important matters. This customer trusts us when we conduct activities they cannot perform on their own. This customer is not open to additional information requests from our side (reverse scored).

Redefining market orientation

Relationship management tasks performance (mean = 2.99, SD = 0.55; 0 = strongly disagree, 6 = strongly agree) Adaptation Members of our relationship team adapt offerings to this customer’s needs. Members of our relationship team adapt delivering and usage of our offerings to customer’s demands. Coordination Members of our relationship team discuss in collaboration with this customer who is doing what. Members of our relationship team control that promises on both sides are fulfilled. Members of our relationship team discuss the steps with which the aims of the relationship are fulfilled. Conflict Members of our relationship team try hard to realize our firm’s interest in case of conflicts (reverse scored). Members of our relationship team wait a considerable time in case of conflicts in order to calm down the situation (reverse scored). Members of our relationship team try to establish a compromise which is acceptable for both sides when a conflict arises. Exchange We send members of our relationship team to this customer to learn more about the particular needs of this customer. Members of our relationship team react immediately if this customer has any problems with our offerings. Members of our relationship team talk with employees of the customer about private matters. Members of our relationship team jointly develop solutions for this customer.

1139

Resource availability (mean = 4.50, SD = 0.79; 0 = strongly disagree, 6 = strongly agree) Technical systems and equipment which the relationship team members can use. Information about customers which the relationship team members can use. Market information which the relationship team members can use. Information about our firm’s strategic aims which the relationship team members can use. Time which can be used to maintain the relationship with this customer. Construct 1. 2. 3. 4. 5. 6. 7.

Sales effectiveness Performance development effectiveness Market development effectiveness Customer commitment Customer trust Relationship management tasks of the supplier Resource availability

1

2

3

4

5

6

1.0 0.47 0.37 0.39 0.48 0.50 0.13

1.0 0.52 0.42 0.44 0.47 0.17

1.0 0.32 0.36 0.46 0.12

1.0 0.53 0.37 0.36

1.0 0.50 0.25

1.0 0.22

Table AI. Correlation matrix of measurement scales

The research register for this journal is available at http://www.emeraldinsight.com/researchregisters

European Journal of Marketing 36,9/10 1140 Received November 2000 Revised March 2001, August 2001 and November 2001

The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0309-0566.htm

Market orientation and incumbent performance in dynamic market Monica L. Perry California State University, Fullerton, California, USA, and

Alan T. Shao University of North Carolina, Charlotte, North Carolina, USA Keywords Internet, Advertising, Market orientation, Competitive strategy Abstract The extant literature suggests that performance may be a function of the degree to which market information is systematically collected, disseminated and responded to (i.e. market orientation). However, the majority of empirical research on the market orientation to performance relationship has focused on manufacturers and has not distinguished between incumbents and new entrants. Our study of incumbent firms involves the market orientation to performance relationship in the context of services in the growing and competitive Internet industry. We found that market orientation did not directly affect performance, nor did the interaction of market orientation and perceptions of new competitors. However, perceptions of traditional competitors directly affected performance and interacted with market orientation to affect performance.

European Journal of Marketing, Vol. 36 No. 9/10, 2002, pp. 1140-1153. # MCB UP Limited, 0309-0566 DOI 10.1108/03090560210437370

Introduction The growing body of literature on the relationship between market orientation and performance has supported a direct relationship in a number of manufacturing environments (Narver and Slater, 1990; Slater and Narver, 1994) and in some service environments (Greenley and Matcham, 1986; Qureshi, 1993; Voss and Voss, 2000). However, the role of the environment on the relationship between market orientation and performance has received mixed results. The empirical evidence does not consistently support the claim that market orientation will have a stronger impact on performance in fast growing and unpredictable markets, such as the market for Internet services. In addition, the use of general assessments of the competitive environment may explain some of the inconsistent results. We have not seen a distinction between understanding the impact of incumbent firms and new entrants. The relative importance of market orientation may vary between incumbent firms and new entrants given differences in capabilities. As a result, empirical testing in different competitive and service environments would further our understanding of the market orientation to performance relationship. We focus on understanding the market orientation to performance relationship for incumbent service firms in the competitive and growing Internet advertising industry. At the time our data were collected, double-digit Internet advertising growth was expected (Cyberatlas, 2000). While a growing market may make market orientation less important, growing markets also attract new competitors.

When traditional agencies decide to offer Internet services they compete not only with other traditional agencies but also with interactive agencies. Such agencies represent a different and new type of competitor (Kassaye, 1997; Williamson, 1999). Interactive advertising agencies are a viable competitive threat as they have attracted both dot-com clients and traditional companies like Virgin Atlantic, 3M and GE. Investigating the market orientation of incumbent firms should help explain their ability to take advantage of burgeoning opportunities. Market orientation in some form is likely to give rise to better performance, given the necessity to keep up with new competitors. Our paper attempts to redefine the role of the competitive environment on the market orientation-performance relationship in a growing service market. As with previous studies we include general perceptions of the competitive environment. However, we expand the competitive environment to include perceptions of traditional or incumbent firms and new entrants. We hypothesize that performance results from the accuracy of competitive perceptions based on the interaction of market orientation and the perceived competitive environment, rather than or perhaps in addition to the direct effect of market orientation. We begin with our conceptual development, proceed to the methodology and results, follow with the discussion and implications and lastly present study limitations and future research suggestions. Conceptual background and hypotheses Market orientation In the extant literature, market orientation has been defined as an aspect of organizational culture as well as a collection of specific behaviors. Given our focus on the outcomes of market orientation, namely performance, we define market orientation as the set of behaviors associated with the acquisition, dissemination and processing of market information (Kohli et al., 1993). A firm with a strong market orientation would engage in these behaviors to a greater extent and more systematically than one with a weak market orientation. Performance Performance has been defined in numerous ways, but usually is assessed along both qualitative and quantitative dimensions. Our definition of performance includes both quantitative and qualitative aspects of Internet services performance. We include both aspects for two reasons. First, we focus on performance of a specific set of Internet advertising services. Internet advertising services represent a market in the growth stage and, as a result, some agencies may not have clearly identified long-term sales and profit goals for Internet services. Second, and more importantly, Internet advertising services for traditional advertising agencies represent only part of the total service mix. The overall profitability of the agency may be affected by including Internet services, even if the Internet services are not profitable. In other words, advertising agencies have varying reasons for adding Internet services to their service mix, including attracting new clients for all its services

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or improving retention of existing clients. Thus, both qualitative and quantitative measures of performance are relevant. The qualitative aspects of performance include the impact of Internet services on the agency’s image, ability to attract important new clients, ability to better respond to competitors and create competitive advantage. In line with Narver and Slater (1990), quantitative performance is a measure of the degree to which Internet services increase revenue and profitability. Given the services context, we exclude return on assets. Performance of Internet advertising services represents a more specific measure of performance than what is typically measured in market orientation studies. Performance has typically been measured at the level of the SBU for returns, profitability or overall product performance. While an overall measure of performance is useful in the strategic sense, ongoing businesses may want to understand antecedents of performance for broad product lines or in this case a broad category of services. The incremental revenue and contribution of new and somewhat different services are important criteria in the decision to expand the services offering. Market orientation and performance When investigating the relationship between market orientation and performance Narver and Slater (1990) as well as Slater and Narver (1994) found that return on assets, sales, profitability, and new product success were all positively related to market orientation. Conceptually, the argument has been made that, when the market environment is volatile, the relationship between market orientation and performance is strengthened (Atuahene-Gima, 1995; Kohli and Jaworski, 1990). When customer preferences and competitors in the market are relatively stable, effective firms do not need to adjust the marketing mix to be successful. More heterogeneous and volatile customer preferences and competitors create an environment that requires sellers to more systematically collect information as the basis for adjusting the marketing mix. However, the empirical evidence does not consistently support the claim that market orientation will have a stronger impact on performance in fast growing and unpredictable markets, such as the market for Internet services. Slater and Narver (1994) tested a number of environmental moderators such as market turbulence, technological turbulence, competitive hostility and market growth. However, they found little support for moderators. A few weak moderating results were identified and they were highly dependent on which measure of performance was investigated. In less turbulent markets, return on assets was better explained by market orientation. A plausible explanation may be that, in stable markets with equally matched competitors (i.e. Coke and Pepsi), competition may be quite intense. In such a situation the need for systematic collection of and quick response to competitive information becomes even more important. However, their results suggest that market orientation is a better explanation of selected aspects of performance when markets are relatively stable than when growing and dynamic.

The disparity between the conceptualization and the measurement of the environment might explain the inconsistent empirical results. The environment has been conceptualized as the degree to which competitors are hostile, technology is volatile or customers are heterogeneous. The conceptualization is based on objective characteristics of the environment. Yet measurement of the environment typically relies on key informants; what has actually been measured is the perceived rather than the objective environment. While the perceived environment will vary with the objective environment, the perceived environment will differ for firms within the same industry (Boyd et al., 1993). Based on archival records, Brittain and Freeman (1980) characterized the semiconductor industry as having high levels of growth with only occasional downturns. However, when perceptual measures were obtained from firms in the industry there was significant variation across firms. Differences in perceptions of the environment form the basis for developing marketing strategies. Firms respond to the environment as they perceive it. They develop marketing strategies based on the perceived rather than the objective environment. A firm will not adjust its marketing mix for a volatile environment if it perceives little volatility. Market orientation and competitive assessments would combine to indicate the accuracy of the firm’s perceptions. The accuracy of these perceptions is what drives performance-related behaviors. A firm with a strong market orientation would be more accurate in its perceptions, regardless of whether the perceived environment is volatile or stable. Consistent with the results of Vorhies et al. (1999), we would expect that firms which engage in more marketoriented behaviors (market-driven as described by Vorhies et al., 1999) would be more capable with respect to competitive marketing research. Conversely, a firm with a weak market orientation would have inaccurate perceptions and thus make poor marketing decisions. Perceptions of competitors Assessments of the competitive environment reflect the degree to which competitors remain the same over time (Achrol and Stern, 1988; Avlontis and Gounaris, 1999). As an extension to previous studies, we also include competitive dynamism as part of the competitive environment. Competitive dynamism is the degree to which the firm perceives significant shifts in the overall nature and number of competitors. As previously discussed, the competitive environment for advertising services is likely to be relatively dynamic regardless of the particular country in which the agency operates. More dynamic environments impose on organizations by reducing the time available to process information and make decisions (Pearce, 1997). However, in a growing market poor decisions may not have a dramatic impact on performance if demand outpaces supply. Such markets may buoy even those firms that are not the most effective or efficient. As with previous studies, we expect the interaction of market orientation and competitive dynamism to affect performance. An agency that has a low

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degree of market orientation may erroneously believe the competitive environment is relatively stable, when in fact it is quite unstable. Our reasoning is consistent with what Picken and Dess (1996, p. 99) refer to as the number one strategic trap, that of ‘‘Failing to recognize and understand events and changing conditions in the competitive environment’’. Agencies with a weak orientation would be less capable of developing and marketing Internet services that provide value superior to competitors. Therefore, we offer the following hypothesis: H1. Perceptions of competitive dynamism interact with market orientation to affect performance. However, perceptions of the competitive environment should reflect identification of new competitors that may differ from established competitors. Competitive identification is the degree to which different types of agencies are perceived as relevant in the market for Internet advertising services. Our definition of competitive identification is consistent with Clark and Montgomery’s (1999) findings on competitive identification in practice. They found that managers identified a relatively small set of competitors and, more importantly, that managers used supply-based attributes in defining competitors. Supply-based attributes relate to the product offerings of competitors. Thus, the most relevant perceived competitive set comprises those firms that offer similar Internet services. The two main types of competitors in the Internet context are traditional advertising agencies and Internet specialty agencies (Kassaye, 1997; Williamson, 1999). As a result of focusing on supplybased attributes, a traditional advertising agency would identify specialty agencies as competitors across a wide range of Internet services. Thus: H2. Specialty (non-traditional) agencies will be identified as competitors to a greater extent than traditional agencies. However, it does not necessarily follow that the identification of competitors would directly affect performance. While specialty agencies may be more likely to be identified as competitors, having detailed knowledge of both sets of competitors is contingent on the degree of marketing orientation. Thus: H3a. The greater the competition from traditional competitors when marketing orientation is high, the greater the performance. Conversely, the greater the competition from traditional competitors when market orientation is low, the worse the performance. H3b. The greater the competition from non-traditional competitors when marketing orientation is high, the greater the performance. Conversely, the greater the competition from non-traditional competitors when market orientation is low, the worse the performance. The market for Internet services may be treated as essentially separate from the traditional agency business. Account management represents a relatively

complex process (Napolitano, 1997; Pardo, 1997), and viewing Internet services as separate from the rest of the agency’s business would prevent synergy between Internet services and traditional services. In such a situation, we would not expect general assessments of the competitive environment to reflect Internet markets. Conversely, if an advertising agency considers Internet services integral to the agency’s business, then we would expect general perceptions of competition to reflect the environment for Internet services. Clients for Internet advertising services may also be clients for other services. Consequently, more integrated agencies should have an advantage in retaining existing clients and attracting new clients. A positive, significant association between the general and specific aspects of the perceived competitive environment would be indicative of a more integrated approach. Thus we offer a preliminary hypothesis: H4. Agencies with an integrated perspective of the competitive environment perform better than advertising agencies with a less integrated view. Research methodology Sample The sample consisted of foreign affiliates (subsidiaries) of US-based advertising agencies. The US parent was not included in our sample as these data were collected as part of a larger study on agency affiliate structure and performance. We focused on affiliates outside the USA because of our interest in the global marketplace and because affiliates of US agencies would be likely to interact with the US parent agency in English. Therefore, the survey could be conducted relatively quickly (critical in Internet-related research) without forward and backward translations in multiple languages. A random sample of the names of managing directors and addresses for 1,005 affiliates was drawn from the Standard Directory of Advertisers and data collected in two waves between June and December 2000. To encourage participation in the study, each managing director received a personalized cover letter, was offered a summary of research findings about the advertising industry world-wide, and entered into a drawing to win a comprehensive analysis of their agency’s Web site. A paper copy of the questionnaire was enclosed with the cover letter and potential respondents could also complete the survey online. The Web address was printed in the cover letter and on the front page of the survey in an attempt to appeal to those individuals preferring online convenience and who may seek to avoid mailing labels and costs. A total of 125 questionnaires were returned because of incorrect addresses, no forwarding addresses or addressee moved. A reminder was sent to nonrespondents. A total of 148 questionnaires were received, yielding a 16.8 per cent response rate. Respondents represented agency affiliates from Europe (53), South America (37), Asia (15), Africa (11), North America – Canada only (5), other (19) and unidentified (8). In 1999, the top ten countries by total advertising

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spending were spread throughout the world. The USA led the way at $134.3 billion. As for online advertising, the USA once again was out front with $4.6 billion, followed by Japan ($201.3 million), Spain ($170 million), Italy ($123.3 million), France ($90 million), UK ($79.6 million), Brazil ($44.7 million), Canada ($38.5 million), Germany ($25 million) and Australia ($20.7 million) (Koranteng and Madden, 2000). While the relative proportion of respondents for Europe and Asia is consistent with the sampling frame, given the size of online advertising in Japan, the proportion of Asian respondents is somewhat less than we would have hoped. While the response rate was not as high as we hoped, occasional technical difficulties with the online version of the questionnaire may have contributed to a response rate slightly lower than expected. Over the course of one weekend we received three faxes/e-mails that indicated the site was unavailable. While we quickly remedied technical difficulties, it is certainly possible that the online survey was occasionally unavailable. A total of 66 completed paper questionnaires and 82 completed online questionnaires were received. The first half of the questionnaire included general questions about agency structure, nature of campaigns, revenue, and so on, while the latter half focused exclusively on Internet services. Seven surveys were excluded due to a large number of unanswered questions in both parts. Since we focused on Internet services performance, we excluded an additional 33 from the analysis because they do not currently offer Internet-related services (thus no performance to report). Most of those excluded were planning on offering Internet services within three years. Questionnaire development and variable measurement Constructs of interest were adapted from the existing literature. Executives from several major ad agencies located in three major US cities helped with the initial draft of the survey. After several revisions and amendments, ad executives from two additional agencies based in non-US markets further examined the questionnaire. Their suggestions were relatively minor, indicating that the questionnaire was ready to be sent. Market orientation. Seven-point Likert scales representing all three aspects of market orientation (intelligence generation, dissemination, response implementation) were adapted for the questionnaire (Kohli et al., 1993). Respondents were asked to indicate their agreement with each of eight statements. Two items were reverse coded. Performance. Seven-point scales were adapted for the questionnaire (Slater and Narver, 1994). Respondents were asked to indicate the extent (from ‘‘not at all’’ to ‘‘very much’’) to which Internet-related services increased or improved particular aspects of performance. Performance elements included: new client revenue, existing client revenue, profitability, agency image, responsiveness to existing clients, and the ability to attract new clients. Competitive dynamism. Seven-point agree-disagree scales were adapted for the questionnaire (Achrol and Stern, 1988; Jaworski and Kohli, 1993).

Respondents were asked about the degree to which competitors represented new types of competitors, easily match offerings, and easily enter the market. Competitive identification. Three-point scales (from ‘‘not at all’’ to ‘‘very much’’) were adapted for the questionnaire based on Clark and Montgomery’s (1999) definition of how competitive firms are in an industry. Respondents were first asked to assess traditional advertising agencies and then asked to assess specialty Internet agencies with respect to nine Internet-related services. The items included services such as banner advertising design, design of Internet sales promotions and direct response campaigns. The items were summed rather than averaged because each of the items represents a different Internetrelated service. For constructs with multiple items, we assessed reliability with Cronbach’s alpha (see Table I).

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Control variables The performance of Internet-related services is likely to reflect economic factors in the region where the affiliate operates. To control for possible economic effects we included a dummy variable for high and low income countries. The categorization is based on the World Bank’s designations for countries. Our quantitative performance measure included revenue, so we used a proxy to control for the relative size of the agency: the ratio of the number of services offered to the number possible. Larger agencies would be more likely to offer more services and to some extent be more capable of engaging in marketing orientation behaviors (Liu, 1995). Similarly, it is likely that agencies that offer more Internet services would experience better performance on quantitative measures, so we also included the number of Internet services currently offered. Given the response rate, we also were concerned about potential nonresponse bias. While we did not have data on non-respondents (other than physical address), we compared early with late respondents on a number of variables, as late-respondents are likely to be similar to non-respondents (Armstrong and Overton, 1977). We compared early versus late respondents on performance, market orientation, net billings, and country group. At the 5 per cent significance level, we found no significant mean differences between the early and late respondents.

Competitive dynamism Qualitative performance Quantitative performance Market orientation Competitive orientation Specialty competitor identification Traditional competitor identification Note: * Sum of items

Mean

Cronbach alpha

4.5 4.8 4.2 4.9 4.8 19.6 15.7

0.53 0.88 0.87 0.83 0.63 * *

Table I. Descriptive statistics and reliabilities

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Results A series of regression equations was estimated to test H1 and H3 (see Table II). Multiplicatives were used to assess the hypothesized interactions (Ping, 1995). Independent effects of market orientation on performance were excluded in regressions with interactions to minimize collinearity between market orientation and its interactions. The results for regression models using quantitative performance as the dependent variable indicated that one of the control variables, country economy, had a positive and significant effect on quantitative performance (p < 0.05). Other than country economy, we failed to find that market orientation, traditional competitors or specialty competitors had a direct effect on quantitative performance. In addition, we failed to find any significant interaction effects of market orientation with either traditional or specialty agency competitors. The results for regression models using qualitative performance as the dependent variable also indicated that country economy had a positive and significant effect on qualitative performance (p < 0.05). We failed to find that market orientation or specialty competition had a direct effect on qualitative performance. However, traditional competition had a direct and positive effect on qualitative performance. While we failed to find significant interaction effects of market orientation with specialty competition we did find that the interaction of market orientation with traditional competition, had a positive

Dependent variable Independent variables Competitive dynamism Country economic group Market orientation Traditional competition Specialty competition Market orientation  competitive dynamism Market orientation  trading competition Market orientation  specialty competition R squared

Table II. Regression results

Standardized beta coefficients Quantitative performanceb Qualitative performancea Direct Direct effects Test Test Test effects Test Test Test model of H1 of H3a of H3b model of H1 of H3a of H3b 0.04 0.23** 0.06 0.23** 0.14

0.22** 0.29** 0.23** 0.23** 0.13 0.16*

0.24**

0.04 0.32** 0.32** 0.33** 0.32** –0.03 0.12 0.12 0.03 0.03 0.04

0.09

0.04 0.21**

0.18

0.18

0.17

0.08 0.13 0.17

0.14

0.14

0.13

0.00 0.14

Notes: a Qualitative performance is the mean of the following items: agency image, ability to attract new clients, ability to respond to competitors and create competitive advantage b Quantitative performance is the mean of revenue and profitability * p < 0.10, ** p < 0.05

effect on qualitative performance (p < 0.05). Thus, we found support for H3a but not for H3b. The market orientation measure used is composed of three different dimensions of market orientation (customer, competitive, interfunctional coordination). Given our interest in the moderating effects of the competitive environment, a test of the competitive dimension of market orientation may provide further insight. Subsequently, we tested the interaction of competitive orientation and competitive environment (see Table III). While competitive orientation yielded results similar to those for market orientation, we did find some additional significant results. With respect to qualitative performance, the interaction of competitive orientation and specialty competition was positive and marginally significant (p < 0.10). We also found that traditional competition had a positive and marginally significant relationship with quantitative performance (p < 0.10). Thus, we found additional support for H3. A means test was used to assess H2 by comparing traditional to specialty agency competitors. The mean for specialty agency identification (19.6) was significantly higher (p < 0.01) than the mean for traditional agency identification (15.7), thus supporting H2. Subgroup analysis with correlations was used to test H4. The sample was divided into three groups based on a split of performance. Correlations between competitive identification and competitive dynamism were estimated for each performance group (see Table IV). Competitive identification was the mean of traditional and specialty agency competitive identification. With respect to

Dependent variable Independent variables Competitive dynamism Country economic group Competitive orientation Traditional competition Specialty competition Competitive orientation  dynamism Competitive orientation  trading competition Competitive orientation  specialty competition R squared

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Standardized beta coefficients Quantitative performanceb Qualitative performancea Direct Direct effects Test Test Test effects Test Test Test model of H1 of H3a of H3b model of H1 of H3a of H3b 0.04 0.22** 0.11 0.31** 0.8

0.22** 0.24** 0.21** 0.30** 0.07 0.12

0.31**

0.05 0.31** 0.33** 0.27** 0.27** –0.03 0.18* 0.18* 0.16 –0.05 –0.04 –0.04

0.11

0.04 0.24**

0.21

0.21

0.13

0.09 0.17* 0.22

0.15

0.15

0.17

0.14 0.15

Notes: a Qualitative performance is the mean of the following items: agency image, ability to attract new clients, ability to respond to competitors and create competitive advantage b Quantitative performance is the mean of revenue and profitability * p < 0.10, ** p < 0.05

Table III. Additional regression results with competitive orientation

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qualitative performance, the correlation between competitive dynamism and competitive identification for the highest performing group was positive (0.31) and significant (p = 0.07). Conversely, the correlation for the lowest performing group, although positive (0.20), was not significant (p = 0.25), providing support for H4. With respect to quantitative performance, the correlation between competitive dynamism and competitive identification for the highest performing group was positive (0.34) and significant (p = 0.07). Conversely, the correlation for the lowest performing group, although positive (0.09), was not significant (p = 0.57), providing support for H4. Discussion and implications As with several previous studies of the moderators of market orientation we found that a general perception of the competitive environment does not moderate the market orientation to performance relationship. However, we did find some support for the role of particular dimensions of the competitive environment. Established competitors had both a direct and a moderating effect on performance. Established firms developing ‘‘new economy’’ products, such as Internetrelated services, clearly operate in a different competitive environment. However, the competitors that have the greatest impact on an established firm’s foray into the new economy may be firms with which it competes in the ‘‘old economy’’. If traditional competitors represent the most relevant competitors, then resources should focus on understanding established competitors. Equally dividing resources between incumbent and new competitors may prove detrimental to performance. The issue of incumbents versus new entrants is relevant across many industries as the Internet continues to provide significant opportunities and threats for incumbent firms. Unlike some previous studies we found that market orientation had no direct effect on performance. Our result contradicts the common wisdom that the systematic collection and dissemination of market information are a necessary and vital ingredient for success. Markets in the early growth stage may be a ‘‘rising tide that lifts all boats’’. Firms in markets where demand is growing quickly lack the incentive to systematically collect and disseminate market information, particularly if demand is greater than supply. However, the life cycle stage for advertising services appears to be changing. While we saw online advertising increase rapidly in 2000, Internet advertising Performance

Table IV. Correlations between competitive dynamism and competitive identification

Bottom third (low performing) Middle third Top third (high performing) Note: * p < 0.10,

**

p < 0.05

Quantitative performance

Qualitative performance

0.09 0.37** 0.34**

0.20 0.13 0.31*

was expected to increase slightly or remain fairly level in 2001 (Norton, 2001). The recent e-commerce shakeout suggests that, while a rapidly growing market may support firms that are far from market-oriented, the lack of systematic market analysis may eventually form the basis of their demise. While market orientation processes are important, the resulting analysis must be well integrated with a firm’s overall marketing strategy and decisions. Identification of different competitors must be brought into a firm’s overall strategy. High performing firms integrated general assessments of the competitive environment with different competitors. Integrating Internet services with existing services may provide synergistic opportunities and reflect a greater commitment to Internet services. Such synergy and commitment may bolster performance. Limitations and future research As we noted earlier, we had hoped to obtain more responses than we actually received. Of course, we realize that low response rates are typical of global mail surveys. Nonetheless, our relatively small sample size placed considerable limits on the number of relationships we could investigate. As a result we could only test a modest number of variables; the majority of the variance in performance went unexplained. A larger sample would allow testing of additional variables that may better explain performance. A logical addition to our study would include perceptions of the customer environment. While sellers’ perceptions of the customer environment may drive sellers’ decisions that ultimately impact performance, it would also be useful to collect data directly from customers. Combining a seller’s perceptions and customers’ perceptions would provide a more accurate assessment of the market orientation process, and therefore may lead to a better understanding of performance. Our focus on Internet services hindered our ability to draw conclusions about the role of market orientation in the firms’ overall performance. Agencies may use Internet services as ‘‘loss-leaders’’ to attract new clients or retain existing clients, making quantitative performance for Internet services misleading. We suggest as future studies: first, identify the role of Internet services in the overall service mix strategy; and second, include quantitative performance for individual product lines and the SBU. Expanding our study to respondents in specialty agencies would help develop an even more robust understanding of the influences on performance in the new economy. The role of market orientation may be even more important for new entrants that attempt to carve a niche for themselves in the marketplace. Further sampling would provide greater generalizability of our findings. While we have respondents from a number of countries and regions of the world, our sample is composed of primarily European and South American agency affiliates. We were particularly disappointed in the few surveys received from Asian countries. Internet penetration, mobile Internet

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penetration and use certainly vary from country to country. Japanese consumers’ usage and infrastructure are far ahead of many other countries with respect to the mobile Internet market. Agencies in high-income economies consistently outperformed those in low-income economies, which is logical, given the necessary infrastructure for Internet access. Therefore, country differences in consumer use and expectations, government regulation (e.g. relatively strong privacy legislation in the European Union), and infrastructure place a considerable limit on the generalizability of our results. The results of our study should apply to Internet marketing issues in a variety of types of professional services, such as consultants, marketing researchers and so forth. Future research on the impact of Internet-related services in these contexts may prove fruitful, given the particularly large impact the Internet has made on services. We strongly recommend that future studies develop relevant classes of competitors for each empirical context. As with previous studies, the nature of the market orientation to performance relationship is contingent on market conditions and contexts. In other words, the effect of market orientation on performance depends on various issues such as the stage in the product life cycle, the economic conditions of the country, and the like. As researchers we must be vigilant in carefully defining and controlling for these conditions when market orientation and performance are investigated. Conclusions We shed some light on the market orientation to performance relationship in a different context, advertising services, and in the growing market for Internet services. Market orientation has only a minor impact on performance in the context of new Internet-related services for incumbent firms. Even in new markets experiencing rapid growth, incumbent firms cannot overlook the importance of decisions that reflect a process that identifies and disseminates specific information about the competitive environment. References Achrol, R.S. and Stern, L.W. (1988), ‘‘Environmental determinants of decision-making uncertainty in marketing channels’’, Journal of Marketing Research, Vol. 25, February, pp. 36-50. Armstrong, J.S. and Overton, T.S. (1977), ‘‘Estimating non-response bias in mail surveys’’, Journal of Marketing Research, Vol. 14 No. 3, pp. 396-402. Atuahene-Gima, K. (1995), ‘‘An exploratory analysis of the impact of market orientation on new product performance’’, Journal of Product Innovation Management, Vol. 12, pp. 275-93. Avlontis, G.J. and Gounaris, S.P. (1999), ‘‘Marketing orientation and its determinants: an empirical analysis’’, European Journal of Marketing, Vol. 33 No. 11/12, pp. 1003-37. Boyd, B.K., Dess, G.G. and Rasheed, A.M. (1993), ‘‘Divergence between archival and perceptual measures of the environment’’, Academy of Management Review, Vol. 18 No. 2, pp. 204-23. Brittain, J.W. and Freeman, J.H. (1980), ‘‘Organizational proliferation and density-dependent selection’’, in Kemberly, J.R., Miles, R.H. and Associates (Eds), The Organizational Life Cycle, Jossey-Bass, San Francisco, CA, pp. 291-338.

Clark, B.H. and Montgomery, D.B. (1999), ‘‘Managerial identification of competitors’’, Journal of Marketing, Vol. 63, July, pp. 67-83. Cyberatlas (2000), ‘‘Web ads take a B2B approach’’, available at: http://cyberatlas.internet.com, March 20, article 0,1323,5941_324031,00 Greenley, G.E. and Matcham, A.S. (1986), ‘‘Marketing orientation in the service of incoming tourism’’, European Journal of Marketing, Vol. 20 No. 7, pp. 64-73. Jaworski, B.J. and Kohli, A.K. (1993), ‘‘Market orientation: antecedents and consequences’’, Journal of Marketing, Vol. 57 No. 18, pp. 53-70. Kassaye, W.W. (1997), ‘‘The effect of the World Wide Web on agency-advertiser relationships: towards a strategic framework’’, International Journal of Advertising, Vol. 16, January, pp. 85-103. Kohli, A.K. and Jaworski, B.J. (1990), ‘‘Market orientation: the construct, research propositions, and managerial implications’’, Journal of Marketing, Vol. 54, April, pp. 1-18. Kohli, A.K., Jaworski, B.J. and Kumar, A. (1993), ‘‘MARKOR: a measure of market orientation’’, Journal of Marketing Research, Vol. 30, November, pp. 467-77. Koranteng, J. and Madden, N. (2000), ‘‘Ranking the top global ad markets,’’ Advertising Age International, May 1, p. 17. Liu, H. (1995), ‘‘Market orientation and firm size: an empirical examination’’, European Journal of Marketing, Vol 29 No. 1, pp. 57-73. Napolitano, L. (1997), ‘‘Customer-supplier partnering: a strategy whose time has come’’, Journal of Personal Selling and Sales Management, Vol. 17, Fall, pp. 1-8. Narver, J.C. and Slater, S.F. (1990), ‘‘The effect of a market orientation on business profitability’’, Journal of Marketing, Vol. 54 No. 4, pp. 20-35. Norton, R. (2001), ‘‘The bright future of Web advertising’’, Ecompany, June, pp. 51-60. Pardo, C. (1997), ‘‘Key account management in the business-to-business field: the key account’s point of view’’, Journal of Personal Selling and Sales Management, Vol. 17, Fall, pp. 17-26. Pearce, R.J. (1997), ‘‘Toward understanding joint venture performance and survival: a bargaining and influence approach to transaction cost theory’’, Academy of Management Review, Vol. 22 No. 1, pp. 203-25. Picken, J.C. and Dess, G.G. (1996), ‘‘The seven traps of strategic planning’’, Inc., November, pp. 99-103. Ping, R.A. (1995), ‘‘A parsimonious estimating technique for interaction and quadratic latent variables ’’, Journal of Marketing Research, Vol. 32, August, pp. 336-47. Qureshi, S. (1993), ‘‘Market-driven public institutions attract resources’’, Journal of Professional Services Marketing, Vol. 9 No. 2, pp. 83-92. Slater, S.F. and Narver, J.C. (1994), ‘‘Does competitive environment moderate the market orientation-performance relationship?’’, Journal of Marketing, Vol. 58, January, pp. 46-55. Vorhies, D.W., Harker, M. and Rao, C.P. (1999), ‘‘The capabilities and performance advantages of market-driven firms’’, European Journal of Marketing, Vol. 33 No. 11/12, pp. 1171-202. Voss, G.B. and Voss, Z.G. (2000), ‘‘Strategic orientation and firm performance in an artistic environment’’, Journal of Marketing, Vol. 64, January, pp. 67-83. Williamson, D.A. (1999), ‘‘Agencies left in cold as marketers expand online’’, Advertising Age, July 26, pp. 526-30.

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Market orientation and business performance A framework for service organizations Chiquan Guo

University of Texas-Pan American, Edinburg, Texas, USA Received December 2000 Revised May 2001, Keywords Market orientation, Service operations, Quality, Performance September 2001 and November 2001 Abstract Market orientation is one of the major research streams in strategic marketing developed during the past ten years. Since its inception in the early 1990s, the major thrust of research in market orientation has been to study the relationship between market orientation and business performance. Although it is acknowledged that market orientation and performance are likely correlated, this paper directs attention to what may lie beneath the relationship. From both conceptual and empirical perspectives, it is argued that future research should focus on the mechanisms by which market orientation contributes to performance. To this end, we draw on the gap analysis literature and develop a framework to link market orientation and performance for service organizations. This simple framework will help shape future agendas for service research. Introduction Marketing orientation is one of the major research streams in strategic marketing developed during the past ten years (Steinman et al., 2000). Since its inception in the early 1990s, the linkage between market orientation and business performance, often measured in such terms as return on assets (ROA), has been well established in the literature (e.g. Jaworski and Kohli, 1993; Kohli and Jaworski, 1990; Narver and Slater, 1990). The purpose of this paper is to closely examine the relationship between market orientation and performance. The central question to be explored is whether or not the direct association between the two is meaningful and necessary. The basic thrust of research in market orientation has been to examine its linkage with performance. The problem is that the journey from market orientation to business performance is quite lengthy. As such, with any attempt to bridge the two, a lot of ‘‘stuff’’ in between may be swept under the rug, resulting in lost insights that managers desperately need. That is, it is nice to know that market orientation and performance are correlated, but it is more important to understand how they are related. Homburg and Pflesser (2000) separate market performance from financial performance; while the former includes customer satisfaction and loyalty, the latter can be measured in ROA. Using their dichotomy, we argue that market orientation as strategic marketing should influence market performance, which in turn impacts financial European Journal of Marketing, Vol. 36 No. 9/10, 2002, pp. 1154-1163. # MCB UP Limited, 0309-0566 DOI 10.1108/03090560210437389

The author thanks Harrison Key for his helpful comments. The author also acknowledges the financial support from the Pontikes Center for Management of Information in the Department of Management at Southern Illinois University of Carbondale.

performance. More importantly, the mechanisms by which market orientation contributes to market and financial performance for service firms are discussed. Market orientation and business performance There are several variations of market orientation definitions. Kohli and Jaworski (1990, p. 6) defined market orientation as ‘‘the organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organizationwide responsiveness to it’’. In addition, they identified three elements of market orientation: intelligence generation, dissemination, and response. Using the overall measure of market orientation, Jaworski and Kohli (1993) found that market orientation was positively related to the firm’s self-reported performance measure. Narver and Slater (1990, p. 21) defined market orientation as ‘‘the organization culture that most effectively and efficiently creates the necessary behaviors for the creation of superior value for buyers and, thus, continuous superior performance for the business’’. They included three elements in their market orientation measure: customer orientation, competitor orientation, and interfunctional coordination. They found that market orientation was positively related to the firm’s self-evaluative ROA. A third definition of market orientation was provided by Deshpande´ et al. (1993, p. 27). They defined customer orientation, which in their view is equivalent to market orientation, as ‘‘the set of beliefs that puts the customer’s interest first, while not excluding those of all other stakeholders such as owners, managers, and employees, in order to develop a long-term profitability enterprise’’. They found that customer orientation was positively related to a self-reported performance measure. Deshpande´ and Farley (1996) did a comparative study of these three scales of market orientation, finding that the above three measures were positively related to performance measures, an idea echoed in various studies in the literature. Thus, market orientation is believed to be positively related to performance (e.g. Baker and Sinkula, 1999; Jaworski and Kohli, 1993; Kumar et al., 1998; Matsuno and Mentzer, 2000; Narver and Slater, 1990; Pelham, 2000). Market orientation and business performance: a close look Although mounting evidence associates market orientation and performance, the possibility of an intermediate variable, or variables, connecting market orientation and performance is real. This possibility can be examined from both conceptual and empirical perspectives. Conceptual scrutiny Conceptually, superior performance is not a necessary result of market orientation. Business performance is not even mentioned in the definitions of market orientation by Kohli and Jaworski (1990) and Deshpande´ and Farley

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(1996). As market orientation consists of a series of activities, superior performance is, by no means, the necessary result. Although superior performance is implied in the conceptualization of market orientation, it is not explicitly embedded in the definitions. Conversely, Narver and Slater’s definition (1990) does mention superior performance. However, increased performance is not a direct result of ‘‘the necessary behaviors’’ required by market orientation. Rather, superior value for buyers is the immediate consequence of those behaviors. As a result of superior value provided for buyers, superior performance such as ROA for the firm should be expected. Thus, clearly, superior customer value is the intermediate construct that connects market orientation and performance. Thus far, it has been shown that superior performance may be neither a necessary nor a direct result of market orientation. Put differently, market orientation may not be a sufficient condition for superior performance. Furthermore, market orientation may not even be a necessary condition for superior performance. There are moderating effects influencing the relationship between market orientation and performance. According to Houston (1986), market orientation may not be rewarded uniformly across diverse market conditions. Market orientation is more important in some circumstances than in others, as far as its impact on performance is concerned. So long as market orientation requires resources and efforts, it is not going to be a clear-cut strategy for every single firm, simply because some firms may deem those investments unwarranted. Thus, firms may conduct a cost-benefit analysis to evaluate the merit of market orientation for the circumstance in which they are competing. For instance, technological turbulence, a rapid change in technology, may lessen the importance of market orientation because technology provides a second avenue for firms to achieve superior performance (Kohli and Jaworski, 1990). Empirical evidence Although many studies (e.g. Jaworski and Kohli, 1993; Narver and Slater, 1990) found a positive relationship between market orientation and performance, a problem lies therein: those measures of performance were self-reported. In fact, Jaworski and Kohli (1993) did not find any relationship between market orientation and an objective measure of performance (market share). Likewise, Han et al. (1998) found no direct relationship between market orientation and objective or subjective measures of performance. Since many firms are unwilling to reveal their performance on objective measures such as ROA, Siguaw et al. (1998) argued for the use of subjective measures of performance, such as self-reported satisfaction with ROA. However, they did not find any relationship between distributors’ market orientation and their satisfaction with financial performance.

Market orientation and performance: the role of mediating constructs Thus far, it has been argued from both the logical and empirical points of view that market orientation and performance may not be directly related. To explore the mechanisms through which market orientation and performance may be related, some mediating constructs must be introduced to explain how market orientation produces superior performance. Conceptual foundation Narver and Slater (1990) provide a hint in looking for the mediating variables connecting market orientation and performance. Their definition of market orientation is rather revealing. A series of activities dictated by market orientation create superior customer value, which in turn brings superior return to the firm. Thus, superior value is one of the possible constructs that mediate the relationship between market orientation and performance. In fact, as Slater and Narver (1994) further explicated, a firm’s core capabilities, such as customer service and innovation, are crucial to provide superior value to customers. Empirical evidence Han et al. (1998) empirically tested the ‘‘market orientation-innovationperformance’’ chain, finding that market orientation was positively related to organizational innovation in terms of both technical and administrative innovation, which in turn was positively related to performance. Interestingly, market orientation itself had no direct relationship with performance. The findings were similar using objective and self-reported measures of net income growth and ROA. Market orientation and business performance: a framework for service firms A service can be defined as a value-creating activity performed for a buyer that cannot be evaluated before the task is carried out. In comparison with goods, services have the following unique characteristics: intangibility, perishability, inseparability, and variability (Sasser et al., 1978). Lovelock (1983, 1991, 1994) classified services into three categories. Peopleprocessing services require customer presence, such as health care. Possessionprocessing services include tasks performed on physical objects without involvement of customers, such as car repair. Information-based services are value creating activities related to data, such as banking. In addition to these three core services, service firms also provide eight categories of supplementary services, such as billing and payment. The above typology provides a useful tool for service research. In fact, Lovelock and Yip (1996) used the classification as a basis to develop global strategies for service businesses. However, a stream of empirical research in service emerged as a result of a series of conceptual and methodological works

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by other researchers (Parasuraman et al., 1985, 1988, 1991, 1993; Zeithaml et al., 1988, 1993). Parasuraman et al. (1985) proposed a conceptual model for service quality. The essence of the model is the framework of gap analysis for identifying problems in services. There are probably two reasons for the rising popularity of research in service quality. First, the conceptual framework of gap analysis is not industryspecific, making it applicable to all three of Lovelock’s service categories. Second, the development of the measurement by Parasuraman et al. (1988) paved the road for empirical investigation on service quality. In this paper, we draw on the gap analysis literature to develop our market orientation model for service firms, incorporating service gaps as the mediating variables in linking market orientation and performance (see Figure 1). Market orientation and service gaps Market orientation is considered strategic marketing. Strategic marketing can be defined as fundamental approaches for marketing strategy. That is, market orientation sets the tone and determines the basic approach for making marketing strategies. For example, two fundamental competing approaches for the strategy mix and operational tactics are customer-driven and competitordriven (Day and Nedungadi, 1994). Lewis and Booms (1983) defined service quality as the difference between service delivered and customer expectations. Services can be evaluated as an outcome, but more importantly as a process (Brady and Cronin, 2001; Lewis and Booms, 1983; Sasser et al., 1978). As such, Parasuraman et al. (1985) suggested that service firms identify gaps in the process of service delivery to achieve a high level of service quality. The first gap in the service quality model is between consumer expectations of a service versus management perceptions of those expectations. For an existing service, consumers form their opinions about what the service should be, based on their past experience, personal needs, and information from others. Managers, however, may not fully understand what consumers expect in a service (Langeard et al., 1981; Parasuraman and Zeithaml, 1983) due to lack of market information and miscommunication (Zeithaml et al., 1988). Market-oriented firms gather market information systematically and disseminate the market intelligence across the organization (Jaworski and Kohli, 1993; Kohli and Jaworski, 1990), and they place a top priority on

Figure 1.

discovering customer needs and building consensus among departments (Narver and Slater, 1990). Thus, market orientation is negatively related to the first gap. Stated differently: P1. Market orientation is positively related to the match between consumer expectations of a service and management perceptions of those expectations. This first gap can be broken down into four smaller (gaps two to five) gaps (Parasuraman et al., 1985). The second gap, management perceptions-service quality specifications, occurs when managers are unwilling or unable to fully translate their service ideas into actionable guidelines for service delivery. This occurrence could be a result of lack of commitment or lack of resources (Garvin, 1988). It requires resources and long-term investment to be market-oriented and, as such, market orientation is rare (Hunt and Morgan, 1995). Top management in market-oriented firms are willing and prepared to take risks in utilizing their resources (Jaworski and Kohli, 1993). Also, market-orientated firms intend to discover and satisfy customer needs (Narver and Slater, 1990). Management and employee commitment to the firm’s goal is resolute (Jaworski and Kohli, 1993); thus, we have the following: P2. Market orientation is positively related to the match between management perceptions and service quality specifications. The third gap, service quality specifications-service delivery, exists when frontline employees fail to deliver services to the highest standards according to the guidelines. Since contact personnel are mostly involved, variability is a perplexing issue in maintaining service quality. Also, lack of appropriate technology and cooperation between frontline employees can contribute to this gap (Zeithaml et al., 1988). Research (Perrow, 1979; Levitt, 1976) suggests that technology should substitute for contact personnel to minimize variability whenever possible. For example, the use of 24-hour ATM machines for convenient and standardized services lends competitive advantages to banks (Meuter et al., 2000). Marketoriented firms are likely to take advantage of cutting edge technologies to stay competitive. As Lovelock and Yip (1996) argued, electronic communication media, such as the Internet, are especially useful for information-based services to compete globally. Firms with a market orientation also fully understand that service personnel are always an indispensable part of service delivery, providing adequate training to their employees (Hartline et al., 2000). Teamwork spirit and cooperation among employees are very high in marketoriented firms (Jaworski and Kohli, 1993). Market orientation stipulates that firms must respond proactively to market intelligence by taking effective strategic and tactical actions (Jaworski and Kohli, 1993; Kohli and Jaworski, 1990). That is, market-oriented firms are fully committed to serving customer needs in deeds, not just lip-service. Thus, we propose the following:

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P3. Market orientation is positively related to the match between service quality specifications and service delivery. The fourth gap, service delivery-external communications, transpires when firms overpromise more services than they actually deliver or when firms fail to get the message out about their services. Inefficient horizontal communication, or lateral information flows between departments (Daft and Steers, 1985), could be a factor in this gap (Zeithaml et al., 1988). When advertising people are unaware what operations people have to offer, or vice versa, discrepancies are bound to crop up, widening the gap. Market-oriented firms gather critical information and disseminate market intelligence across the organization so that functional departments can work together to achieve synergistic effects (Kohli and Jaworski, 1990; Jaworksi and Kohli, 1993; Narver and Slater, 1990; Voss and Voss, 2000). A set of open and democratic channels of communication, lateral as well as vertical, is a minimum requirement for a market-oriented firm. Thus, the following is proposed: P4. Market orientation is positively related to the match between actual service delivery and external communications about the service. The fifth, and last, gap is the difference between expected service and perceived service. This gap is a function of the previous four gaps (Parasuraman et al., 1985). The SERVQUAL scale was designed to measure service quality, gap five (Parasuraman et al., 1988). Since market orientation is negatively related to the previous four gaps, by logical reasoning, market orientation is negatively related to gap five. Stated differently: P5. Market orientation is positively related to the match between expected service and perceived service. Service gaps and market/financial performance Although we proposed the above five propositions with existing services in mind, they equally apply to new services as well. Market-oriented firms not only discover customers’ current and expressed needs but ascertain their latent and future needs and wants as well (Narver and Slater, 1990). Thus, marketoriented firms will have a much better chance to achieve success in new services (Han et al., 1998) and new products (Gatignon and Xuereb, 1997; Lucas and Ferrell, 2000). As a result of close matches discussed above, market-oriented firms should be better equipped to deliver quality services and superior value, resulting in satisfied customers and customer retention (Chang and Chen, 1998; Slater and Narver, 1994). Also, they are more likely to acquire new customers through word of mouth and new services. Thus, we propose the following: P6. The five matches in service delivery are positively related to market performance in terms of customer retention and new customer acquisition.

As Homburg and Pflesser (2000) suggest, a distinction between market performance and financial performance is meaningful. Therefore, the following is proposed:

Business performance

P7. Market performance is positively related to financial performance in terms of market share, sales growth, and ROA. Conclusions This paper has argued from both conceptual and empirical points of view that, although it is probably true that market orientation is positively related to business performance, more effort should be directed at exploring what lies beneath the relationship. Despite this paper’s proposal of a simple framework for future market orientation research in a service environment, the principle also applies to products research. Future inquiry should assess the presence and influence of intervening variables between market and performance, such as the service quality links proposed in this article. That is, research should not fixate on the direct connection between market orientation and performance. References Baker, W.E. and Sinkula, J.M. (1999), ‘‘The synergistic effect of market orientation and learning orientation on organizational performance’’, Journal of the Academy of Marketing Science, Vol. 27, Fall, pp. 411-27. Brady, M.K. and Cronin, J. Jr (2001), ‘‘Some new thoughts on conceptualizing perceived service quality: a hierarchical approach’’, Journal of Marketing, Vol. 65, July, pp. 34-49. Chang, T.-Z. and Chen, S.-J. (1998), ‘‘Market orientation, service quality and business profitability: a conceptual model and empirical evidence’’, Journal of Services Marketing, Vol. 12 No. 4, pp. 246-64. Daft, R.L. and Steers, R. (1985), Organizations: A Micro/Macro Approach, Scott, Foresman and Company, Glenview, IL. Day, G.S. and Nedungadi, P. (1994), ‘‘Managerial representations of competitive advantage’’, Journal of Marketing, Vol. 58, April, pp. 31-44. Deshpande´, R. and Farley, J.U. (1996), ‘‘Understanding market orientation: a prospectively designed meta-analysis of three market orientation scales’’, Working paper Series, Report 96-125, Marketing Science Institute, Cambridge, MA. Deshpande´, R., Farley, J.U. and Webster, F.E. Jr (1993), ‘‘Corporate culture, customer orientation, and innovativeness in Japanese dirms: a quadrad analysis’’, Journal of Marketing, Vol. 57, January, pp. 23-37. Garvin, D.A. (1988), Managing Quality: The Strategic and Competitive Edge, The Free Press, New York, NY. Gatignon, H. and Xuereb, J.-M. (1997), ‘‘Strategic orientation of the firm and new product performance’’, Journal of Marketing Research, Vol. 34, February, pp. 77-90. Han, J.K., Namwoon, K. and Srivastava, R.K. (1998), ‘‘Market orientation and organizational performance: is innovation a missing link?’’, Journal of Marketing, Vol. 62, October, pp. 30-45. Hartline, M.D., Maxham, J.G. III and McKee, D.O. (2000), ‘‘Corridors of influence in the dissemination of customer-oriented strategy to customer contact service employees’’, Journal of Marketing, Vol. 64, April, pp. 35-50.

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Homburg, C. and Pflesser, C. (2000), ‘‘A multiple-layer model of market-oriented organizational culture: measurement issues and performance outcomes’’, Journal of Marketing Research, Vol. 37, November, pp. 449-62. Houston, F.S. (1986), ‘‘The marketing concept: what it is and what it is not’’, Journal of Marketing, Vol. 50, April, pp. 81-7. Hunt, S.D. and Morgan, R.M. (1995), ‘‘The comparative advantage theory of competition’’, Journal of Marketing, Vol. 59, April, pp. 1-15. Jaworski, B.J. and Kohli, A.K. (1993), ‘‘Market orientation: antecedents and consequences’’, Journal of Marketing, Vol. 57, July, pp. 53-70. Kohli, A.K. and Jaworski, B.J. (1990), ‘‘Market orientation: the construct, research propositions, and managerial implications’’, Journal of Marketing, Vol. 54, April, pp. 1-18. Kumar, K., Subramanian, R. and Yauger, C. (1998), ‘‘Examining the market orientationperformance relationship: a context-specific study’’, Journal of Management, Vol. 24 No. 2, pp. 201-33. Langeard, E., Bateson, J.E.G., Lovelock, C.H. and Eiglier, P. (1981), Services Marketing: New Insights from Consumers and Managers, Marketing Science Institute, Cambridge, MA. Levitt, T. (1976), ‘‘Industrialization of service’’, Harvard Business Review, Vol. 54, SeptemberOctober, pp. 63-74. Lewis, R.C. and Booms, B.H. (1983), ‘‘The marketing aspects of service quality’’, in Berry, L., Shostack, G. and Upah, G. (Eds), Emerging Perspectives on Services Marketing, American Marketing Association, Chicago, IL, pp. 99-107. Lovelock, C.H. (1983), ‘‘Classifying services to gain strategic marketing insights’’, Journal of Marketing, Vol. 47, Summer, pp. 9-20. Lovelock, C.H. (1991), Services Marketing, Prentice-Hall, Englewood Cliffs, NJ. Lovelock, C.H. (1994), Product Plus: How Product + Service = Competitive Advantage, McGrawHill, New York, NY. Lovelock, C.H. and Yip, G.S. (1996), ‘‘Developing global strategies for service businesses’’, California Management Review, Vol. 38, Winter, pp. 64-77. Lucas, B.A. and Ferrell, O.C. (2000), ‘‘The effects of market orientation on product innovation’’, Journal of the Academy of Marketing Science, Vol. 28, Spring, pp. 239-47. Matsuno, K. and Mentzer, J.T. (2000), ‘‘The effects of strategy type on the market orientationperformance relationship’’, Journal of Marketing, Vol. 64, October, pp. 1-16. Meuter, M.L., Ostrom, A.L., Roundtree, R.I. and Bitner, M.J. (2000), ‘‘Self-service technologies: understanding customer satisfaction with technology-based service encounter’’, Journal of Marketing, Vol. 64, July, pp. 50-64. Narver, J.C. and Slater, S.F. (1990), ‘‘The effect of a market orientation on business profitability’’, Journal of Marketing, Vol. 54, October, pp. 20-35. Parasuraman, A. and Zeithaml, V.A. (1983), ‘‘Differential perceptions of suppliers and clients of industrial services’’, in Berry, L., Shostack, G.L. and Upah, G. (Eds), Emerging Perspectives on Services Marketing, American Marketing Association, Chicago, IL, pp. 35-9. Parasuraman, A., Berry, L.L. and Zeithaml, V.A. (1991), ‘‘Refinement and reassessment of the SERVQUAL scale’’, Journal of Retailing, Vol. 67, Winter, pp. 420-50. Parasuraman, A., Berry, L.L. and Zeithaml, V.A. (1993), ‘‘More on improving service quality measurement’’, Journal of Retailing, Vol. 69, Spring, pp. 140-7. Parasuraman, A., Zeithaml, V.A. and Berry, L.L. (1985), ‘‘A conceptual model of service quality and its implications for future research’’, Journal of Marketing, Vol. 49, Fall, pp. 41-50.

Parasuraman, A., Zeithaml, V.A. and Berry, L.L. (1988), ‘‘SERVQUAL: a multiple-item scale for measuring consumer perceptions of service quality’’, Journal of Retailing, Vol. 64 No. 1, pp. 12-40. Pelham, A.M. (2000), ‘‘Market orientation and other potential influences on performance in small and medium-sized manufacturing firms’’, Journal of Small Business Management, Vol. 38, January, pp. 48-67. Perrow, C. (1979), Complex Organizations: A Critical Essay, Scott, Foresman and Company, Glenview, IL. Sasser, W.E. Jr, Olsen, R.P. and Wyckoff, D.D. (1978), ‘‘Understanding service operations’’, Management of Service Operations, Allyn & Bacon, Boston, MA. Siguaw, J.A., Simpson, P.M. and Baker, T.L. (1998), ‘‘Effects of supplier market orientation on distributor market orientation and the channel relationship: the distributor perspective’’, Journal of Marketing, Vol. 62, July, pp. 99-111. Slater, S.F. and Narver, J.C. (1994), ‘‘Market orientation, customer value, and superior performance’’, Business Horizons, Vol. 37, March-April, pp. 22-8. Steinman, C., Deshpande´, R. and Farley, J.U. (2000), ‘‘Beyond market orientation: when customers and suppliers disagree’’, Journal of the Academy of Marketing Science, Vol. 28, Winter, pp. 109-19. Voss, G.B. and Voss, Z.G. (2000), ‘‘Strategic orientation and firm performance in an artistic environment’’, Journal of Marketing, Vol. 64, January, pp. 67-83. Zeithaml, V.A., Berry, L.L. and Parasuraman, A. (1988), ‘‘Communication and control processes in the delivery of service quality’’, Journal of Marketing, Vol. 52, April, pp. 35-48. Zeithaml, V.A., Berry, L.L. and Parasuraman, A. (1993), ‘‘The nature and determinants of customer expectations of service’’, Journal of the Academy of Marketing Science, Vol. 21 No. 1, pp. 1-12.

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Book review Service Management and Marketing: Customer Relationship Perspective (2nd edition) Christian Gro¨nroos Wiley 2000 Keywords Customer orientation, Services marketing, Management theory This first edition of this text was published in 1990. While this is called a second edition, there has been considerable change and development, to the point where Gro¨nroos claims in his preface this is a totally new book. However, while the new edition has new content, its basic philosophy of providing a broad service management perspective on business is unchanged. While the book might initially be thought of as a services marketing text, the scope is far broader. Gro¨nroos takes the view that all businesses are service businesses and the book offers a management perspective that reflects this. Thus it is just as relevant to manufacturers of physical goods and organisations in the public sector as it is to what have traditionally been thought of as service firms. The second edition augments the first edition by integrating another decade of research and business writings. New chapters have been included, chapters have been dropped and the remaining chapters have been substantially rewritten. This provides a pleasant surprise when compared with new editions of many North American texts which usually have very minor developments. A basic premise adopted by Gro¨nroos is that services are inherently relational. Thus what is needed is a customer relationship approach to management that focuses on creating shareholder value. This relationship management approach recognises the importance of the role of intellectual capital in creating value. Thus the value processes associated with internal customers (employees) are just as important as the value processes with external customers. An important contribution of this book is the way Gro¨nroos develops the logic of service competition (or cooperation). He argues that this approach is appropriate for most businesses and supersedes the strategies that focus on the core product, price/cost and image. While service competition is nothing new, what has become more important is the strategic importance of services to most organisations to the point where it is the basis of their competitive advantage. While the term marketing is used in the title, Gro¨nroos recognises the type of marketing needed for customer management and service competition is different from the traditional marketing. This is because marketing management has traditionally focused on obtaining customers and not focused on the management processes associated with the retention of customers. When retention of customers is emphasised then the boundaries between what

is marketing and what is management are blurred. What is central is the way relationships are managed. The first eight chapters focus on the basic perspective and building-blocks needed for the customer relationship approach, while the remaining eight chapters focus on more specific management issues: (1) The service relationship imperative: managing service competition. (2) Managing customer relationships: an alternative paradigm in management and marketing. (3) The nature of services and service consumption, and its marketing consequences. (4) Service and relationship quality. (5) Quality management in services. (6) Return on service relationships. (7) Managing the augmented service offering. (8) Principles of service management. (9) Managing service productivity. (10) Managing marketing- or market-oriented management. (11) Managing total integrated marketing communication. (12) Managing brand relationships and image. (13) Market-oriented organisation: structure resources and service processes. (14) Managing internal marketing: a prerequisite for successfully managing customer relationships. (15) Managing service culture: an internal service imperative. (16) Conclusions: managing relationships and the six rules of services. The later chapters that focus on specific management issues are up to date and challenging. I was particularly interested in the way the topics ‘‘Marketoriented management’’, ‘‘Integrated marketing communication’’ and ‘‘Managing brand relationships and image’’ were integrated into the relationship management approach. However, while the chapter on ‘‘Return on service relationships’’ provides an excellent foundation for the management of the value of relationships, it would have been useful for this framework to be used more in the chapters on the specific management issues. For example, little attention is given to the value of brands and the way the equity of brand relationships could be managed. Similarly, while an excellent framework for valuing and managing customers is developed, this is not integrated with the recent North American literature about customer equity. One limitation of the book is that it does not pay explicit attention to managing services in the e-commerce environment. While the relationship management processes may not differ much, this is a ‘‘hot’’ topic. It would have

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been useful to have a chapter devoted to this topic that drew on the latest academic and business writings. The structure and content of the text lend themselves ideally to a final year undergraduate or MBA services management or marketing course. It could also serve as supplementary introductory reading for a PhD seminar on this topic. The book is very well written and easy to comprehend but is also intellectually challenging. It is very much a European text, so is not cluttered with many of the pedagogical features of the more bulky North American counterparts. However, it does include a number of useful mini cases that could serve as a basis for stimulating class discussion. At the end of each chapter there are a good set of up to date further readings and a set of reference notes about the literature that has been used to develop the chapter. The book is also suitable to practising managers and consultants who would like to stimulate their thinking. It has a good index, so a view on any management issue can be easily accessed. In conclusion, I endorse the comments made by Philip Kotler who claims that the book is ‘‘the most scholarly and provocative examination of services marketing that he has seen’’, and Jag Sheth, who writes ‘‘It is the most comprehensive and integrative textbook in the field. And the real icing on the cake is its unique customer relationship perspective to service marketing’’. We have waited for a decade for this new edition and the wait has been worthwhile. This is an original and insightful book that carefully draws on a broad range of literature. Apart from using it for teaching it is an essential addition to the library of any academic who is working in this area. Richard J. Brodie University of Auckland

About the authors Brendan J. Gray Brendan J. Gray is an Associate Professor of Marketing and is the Director of the Marketing Performance Centre (MPC) at the School of Business, University of Otago, Dunedin, New Zealand. The MPC is a research group which uses a panel of 3,500 managers to investigate various aspects of marketing management and firm performance. One of its latest studies is a four-year project to determine ways of improving the international competitiveness of service firms. Dr Gray’s research interests include marketing strategy, market orientation and marketing communications.

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Graham J. Hooley Graham J. Hooley is Professor of Marketing and Deputy Head of the Aston Business School, Aston University, Birmingham, UK. His research interests include marketing strategy, market orientation and corporate culture. Rod B. McNaughton Rod B. McNaughton holds the Eyton Chair in Entrepreneurship in the Department of Management Sciences, University of Waterloo, Waterloo, Ontario, Canada. His speciality is international marketing strategy with a focus on the internationalisation of small knowledge-intensive firms. He has published widely on choosing international channels of distribution, exporting and export policy, market orientation and value creation, strategic alliances, foreign direct investment, and the venture capital industry. He previously held a Chair in Marketing at the University of Otago School of Business. Phil Osborne Phil Osborne is a Lecturer in Marketing in the School of Business, University of Otago, Dunedin, New Zealand. His research interests include market orientation, Internet marketing, and firm performance. Brian C. Imrie Brian C. Imrie is a Lecturer in Marketing in the School of Business, University of Otago, Dunedin, New Zealand. His research interests include services marketing and management, marketing orientation, cross-cultural marketing research and methodological aspects of international marketing research. He has published in the Journal of Service Quality Management and Advances in International Marketing. ´ gueda Esteban A ´ Agueda Esteban, PhD Complutense University, is a Professor of Marketing at Castilla-La Mancha University at Toledo where she also is Head of the Marketing Department. She is a member of the Academy of Marketing Science.

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Her research interests are the Marketing of Tourist Services, Market Orientation, and Relationship Marketing. She has published numerous journal articles, conference papers and books, including Principios de Marketing (Esic, 1997) (Marketing Principles), and La investigacio´n de Marketing en Espan ˜a (Civitas, 2000) (Marketing Research in Spain).

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´ ngel Milla´n A ´ Angel Milla´n is an Associate Professor at Facultad de Ciencias Jurı´dicas y Sociales, Castilla-La Mancha University, Toledo. He received his PhD from the University of Castilla-La Mancha. His research interests are in the areas of Tourist Channel Distributors and Market Orientation. He has published numerous journal articles and papers for international and national conferences. Arturo Molina Arturo Molina is an Assistant Professor at Facultad de Ciencias Jurı´dicas y Sociales, Castilla-La Mancha University, Toledo. His research interests are in the areas of Tourist Communication and Relationship Marketing of services firms. He has published several journal articles and papers for international and national conferences. He has spent research periods at the Umea School of Business and Economics (Umea University of Sweden) and at the Zicklin School of Business at Baruch College (The City University of New York). David Martı´n-Consuegra David Martı´n-Consuegra is an Assistant Professor at Facultad de Derecho y Ciencias Sociales, Castilla-La Mancha University, Ciudad Real. His research interests are in the areas of Market Orientation and Relationship Marketing of tourist firms. He has published several journal articles and papers for international and national conferences. He has spent research periods at the Umea School of Business and Economics (Umea University of Sweden) and at the Zicklin School of Business at Baruch College (The City University of New York). Rodolfo Va´zquez Rodolfo Va´zquez is a Professor of Marketing, Department of Marketing, Oviedo University (Spain). His research includes distribution marketing, services marketing and strategic marketing. He is the author and co-author of several marketing books and he has published in journals such as the Journal of Marketing Channels, the Journal of Retailing and Consumer Services, the Journal of Services Marketing and the Journal of Strategic Marketing. ´ lvarez Luis Ignacio A ´ Luis Ignacio Alvarez has obtained his PhD in Marketing from the University of Oviedo. Currently, he is an Associate Professor at the Department of Marketing. His research interest is mainly centered on the study of the market orientation concept in the private non-profit organisation domain. He has published in journals such as the Journal of Strategic Marketing.

Marı´a Leticia Santos Marı´a Leticia Santos is a Lecturer in the Marketing Department of the University of Oviedo. Her current research interest focuses on product innovation, marketing orientation, relationship marketing and marketing strategy. She has published several articles and books on these topics. She has also participated in various co-operation projects with both private and public sector organisations. Hans Kasper Hans Kasper is Professor of Services and Retail Management, Faculty of Economics and Business Administration, University of Maastricht, Maastricht, The Netherlands and managing director of ETIL bv, a Maastricht-based international consultancy and research firm focusing on ‘‘quality of life’’ studies. Sheelagh Matear Sheelagh Matear is Associate Professor of Marketing at the University of Otago, Dunedin, New Zealand. She is a member of the Marketing Performance Centre at the University of Otago. Her research interests include service firm performance, market orientation, innovation and international channels. Tony Garrett Tony Garrett is a Lecturer in Marketing at the University of Otago, New Zealand. He is a member of the Marketing Performance Centre, with his primary focus being new service development and innovation. His research interests include the contextual aspects of new product development performance, the functional integration within new product development organisation and new service development. John W. Cadogan John W. Cadogan is a Lecturer and Director of Research Studies in Marketing at Aston Business School, Aston University. His research interests span marketing strategy, international marketing and sales management issues. He has published articles on these topics in a variety of academic outlets, including the International Journal of Research in Marketing, Journal of International Business Studies, Industrial Marketing Management, Journal of Marketing Management and Journal of Strategic Marketing, among others. Sanna Sundqvist Sanna Sundqvist is a Project Manager and Postgraduate student at the Telecom Business Research Center, Lappeenranta University of Technology, Finland. She graduated as MSc in Technology from the Lappeenranta University of Technology, and she has published in the fields of export market orientation and diffusion of innovations in the International Journal of Research in Marketing and Australasian Marketing Journal.

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Risto T. Salminen Risto T. Salminen is a Professor of Industrial Marketing in the Department of Industrial Engineering and Management at Lappeenranta University of Technology, Finland. His research interests are centered on market orientation, customer relationships in industrial marketing, and pedagogical issues in marketing education. His work has been published in International Journal of Research in Marketing, Journal of Business & Industrial Marketing and Australasian Marketing Journal. Kaisu Puumalainen Kaisu Puumalainen is a Professor of Marketing at the Lappeenranta University of Technology, Finland. She holds a Licentiate in Technology degree from the Lappeenranta University of Technology. Her previous publications are in the fields of entrepreneurship, export market orientation, customer need assessment, internationalisation, knowledge management, and diffusion of innovations. Muris Cicic Muris Cicic, PhD, is Professor of Marketing at the Faculty of Economics, the University of Sarajevo. Before that, he taught at the University of Wollongong, Australia, and was Visiting Professor at Virginia Politechnic Institute and State University, Czech Management School, and John Carroll University. He has published in the Journal of International Marketing, Journal of Global Marketing, Journal of Advertising, Social Indicators Research, and other journals. He has presented papers at numerous international conferences, including the American Marketing Association Conference, European Academy of Marketing Conference, and World Marketing Congress. Paul Patterson Paul Patterson, PhD, is Professor in the School of Marketing at the University of New South Wales, Sydney, Australia, as well as Director of the Centre for Applied Marketing. His research, teaching and consulting interests revolve around marketing in service industries, more specifically modeling customer satisfaction and service quality, positioning of professional service firms, relationship marketing, and the internationalisation of service firms. His research has appeared in the International Journal for Research in Marketing, Journal of the Academy of Marketing Science, Industrial Marketing Management, Journal of Service Research, International Business Review, International Journal of Service Industry Management, European Journal of Marketing, Journal of Services Marketing, Journal of Business-to-Business Marketing, Psychology & Marketing, R&D Management, Journal of Global Marketing, Journal of International Marketing and others. Further, he is an author of the book of text, readings and cases, Services Marketing: A Southeast Asian Perspective, 2nd edition.

Aviv Shoham Aviv Shoham, PhD, University of Oregon, is a Senior Lecturer of Marketing at the Graduate School of Business, University of Haifa, Haifa, Israel. His research focuses on international marketing and international consumer behavior. His research has been published in journals such as the Journal of the Academy of Marketing Science, Journal of International Marketing, Journal of Business Research, Journal of Advertising Research, International Business Review, Journal of International Consumer Marketing and Journal of Global Marketing. Gabriele Helfert Gabriele Helfert is Marketing Director at the Marketforce, a business-tobusiness marketing service provider located in Frankfurt, Germany. She received her PhD from the University of Karlsruhe, Germany, for her work on relationship marketing teams. Her professional and research interest lies in the areas of organizational buying behavior, customer relationship management and sales lead management in business-to-business industries. Her work has been published in various journals and books. Thomas Ritter Thomas Ritter is Associate Professor at the Copenhagen Business School, Denmark, after holding positions at the University of Karlsruhe, Germany, and the School of Management at the University of Bath, UK. His research interests focus on the management of inter-organizational relationships and networks, particularly on network competence as well as value management and IT in relationships. His work has been published in books and journals including the International Journal of Research in Marketing and Journal of Business Research. Achim Walter Achim Walter is Assistant Professor at the University of Karlsruhe, Institute of Corporate Strategy and Innovation Management, where he also received his PhD. His most recent research projects deal with technology transfer, entrepreneurship and relationship management. His work has been widely published, including the Journal of Business Research and Journal of Industrial Marketing Management. Monica L. Perry Monica L. Perry earned her PhD in Marketing with an Information Systems/ Logistics minor from the University of Maryland, her MBA from Penn State University, and her BS in Psychology from the College of William and Mary. Her teaching and research focus on Internet Marketing and some current research topics include Web site marketing strategy for entrepreneurial and Fortune 500 firms, and Internet strategy in global advertising agencies. She consults for profit and non-profit organizations and has worked in business-tobusiness marketing at Nortel, marketing research at 3M, and product management at CBS Educational and Professional Publishing.

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Alan T. Shao Alan T. Shao earned his PhD from the University of Alabama with a major in marketing and minor in statistics. He earned his MBA and BS from Old Dominion University. His major interests are in marketing research and the global business arena. He serves on the board of directors of the North Carolina World Trade Association and the Charlotte World Trade Association. He has written extensively about East Asia and the advertising industry worldwide and recently completed the second edition of Marketing Research: An Aid to Decision Making. He is an active member of the Academy of International Business and has been a research consultant to many domestic and multinational businesses. He teaches global marketing, marketing research and marketing management. Chiquan Guo Chiquan Guo is an Assistant Professor of Marketing and International Business at the University of Texas-Pan American, USA. He has a wide range of research interests, but the main focus lies in market orientation, marketing strategy and management, and e-commerce.