a comprehensive model on market orientation and strategic orientation

6th International Conference on Business, Economics and Management,

Yasar University, Izmir Turkey

A COMPREHENSIVE MODEL ON MARKET ORIENTATION AND STRATEGIC

ORIENTATION

Prof.Shahnaz Nayebzadeh

Assistant Professor of Marketing, Business Management Department, Faculty of

Management, Islamic Azad University (Yazd Branch),

Shohada-e-Ghomnam Road,Safaiieh

Zip code: 89195/155, Yazd, Iran

Tel: ++<98-351-8211391>; Fax: ++<98-351-8214810>

E-mail: <[email protected]>

─ABSTRACT ─

In today‘s global competitive world, the true measure of successful companies is a firm‘s

ability to satisfy customers continually. The marketing concept stipulates that to achieve

sustained success, organizations should identify and satisfy customer needs and wants more

effectively than their competitors. Market orientation , the implementation of the marketing

concept, facilitates a firm‘s ability to anticipate, react to, and capitalize on environmental

changes, thereby leading to superior outcomes .A business can't be market oriented unless it

has undertaking culture in which systematically and in an integrated way create continuous

superior value for customers and in practice all its activities related to the present factors of

the company's market be organized to creating value for the customers.

On the other hand the over increasing complexity of competition and variability of

commercial environment in the world of today would lead the least default of big companies

to the overabundant problems for them; thus to survive in an industry, the necessity for having

scientific guidelines and defined strategies seems indispensable while with no specified,

compiled or scientific locality getting close to unique position is impossible; A competitive or

business strategy specifies how a business intends to compete in the markets it chooses to

serve. This strategy provides the conceptual glue that gives a shared meaning to all the

separate functional activities and programs. A well developed strategy, therefore, serves to

coordinate the competitive actions of the firm.

The current paper focuses on market orientation and competitive strategy and the role of both

of them in accessing superior performance with regard to the important and common factors in

conceptualizing and implementing these tow concept .This article introduces a comprehensive

model in this field that contains a set of internal factors as market orientation‘s antecedents

and also suitable strategic choices as determinants of strategic alignment , the environmental

external factors that affect the company‘s decision making process about market orientation

extent and business strategy type ,and also a comprehensive set of performance measures as

consequence of these appropriate decisions.

Key words: Business strategy, manufacturing strategy, strategic alignment, market

orientation, organizational factors, environmental factors, performance

JEL Classification: MOO

mailto:[email protected]



1. INTRODUCTION In business the word "strategy" is commonly used at three levels:

1) Corporate strategy- what set of businesses should we be in?

2) Business strategy- how should we compete in XYZ business?

3) Functional strategy- how can this function contribute to the competitive

advantage of the business?

Within this hierarchy, marketing and manufacturing strategies can appear as

functional strategies and for achieving higher level of performance it is so important

that these three levels be in a proper alignment.

In providing this paper, two issues have motivated the researcher. The first one is the

importance of alignment between business and functional level strategies. These two

levels of strategic approaches have been studied by the other researchers separately,

but the matter of alignment between these two levels has not been considered

experimentally in many researches. The second issue is the necessity of paying

attention to the performance of companies and the factors that affect it, an issue that

has attracted the attention of many managers and strategists. To the researcher since

protective and reinforcing manufacturing decisions of business strategy and also

suitable orientation in marketing department can result in competitive privilege for

the companies, thus the alignment between decisions made in manufacturing and

marketing departments and business level can be regarded as an important factor for

determining the performance of companies.

2. BUSINESS LEVEL STRATEGY

According to Day (1993) ―A competitive or business strategy specifies how a

business intends to compete in the markets it chooses to serve. This strategy provides

the conceptual glue that gives a shared meaning to all the separate functional

activities and programs‖. A well developed strategy, therefore, serves to coordinate

the competitive actions of the firm (Vorhies et al., 1999).Michael E. Porter (1980)

classified generic competitive strategy as cost leadership strategy, differentiation

strategy, and focus strategy. When the firm has a greater cost and differentiation

advantage, the inner organization of the firm could become market oriented. Cost

advantage strategy could increase net revenue than profitability due to low price

policy. However, differentiation strategy might increase business net profit through

high price using non-price competition (Kim, 2003). According to Porter (1980), low-

cost and differentiation strategies are more important. A firm can achieve high

performance in one of two ways: either by supplying different products or to reducing

the cost. He views cost leadership and differentiation as mutually exclusive.

However, a focus strategy just combines the two types of competitive advantage with



the firm‘s choice of narrow scope (Wu, 2004).

3. OPERATION/ PRODUCTION DEPATRMENT

In this department, some decisions must be adopted in the field of organizational or

internal variables, that is manufacturing priority, manufacturing capability, and

manufacturing practice or in other words manufacturing strategy are supposed to be

codified.

3.1. MANUFACTURING LEVEL STRATEGY

Manufacturing strategy defined as, ―the effective use of manufacturing strengths as a

competitive weapon for the achievement of business and corporate goals‖.

Manufacturing‘s strengths are developed and sustained by a ―pattern of decisions‖

(Hayes & Wheelwright, 1984) as originally proposed by Mintzberg (Mintzberg &

Waters, 1985). These are taken in a set of decision areas which encompass

manufacturing strategy and are aimed at achieving manufacturing goals that align

with business and corporate goals.

To achieve competitive advantage, business strategy and manufacturing strategy

should be interlinked and be incorporated in corporate strategy (Skinner, 1969).

When companies fail to recognize the relationship between manufacturing strategy

and business strategy, they may become saddled with non-competitive production

systems—which are expensive and time consuming. In the current competitive

scenario, manufacturing strategy assumes a significant importance and calls for

serious research attention.

3.2. MANUFACTURING STRATEGY DEFINITION

Manufacturing strategy theory arguably has its origins in Selznick (1957). The

illustration he gives of "distinctive competence'', using the Gar Wood boat company,

showed how the whole organization found it difficult to shift production from high

quality craft to low-cost, mass production. Selznick's emphasis is on the difficulty of

changing the distinctive competence, and less on the competitive advantage or

disadvantage it affords (Spring & Dalrymple, 2000).Of course, Skinner developed

this specifically for the manufacturing function with the theory of the trade-off

(Skinner, 1969). Skinner (1969) is the pioneer in defining manufacturing strategy.

According to him MS refers to exploiting certain properties of the manufacturing

function as a competitive weapon (Olhager & Rudberg, 2003). Since the main

concentration of this paper is on organization strategic hierarchy from corporate

strategic level to business strategy and functional strategies; thus the definitions of the

researchers who considered this issue selected (Hayes & Wheelwright (1985); Fine &

Hax (1985); Swamidass & Newell (1987); Cox & Blackstone (1998); Kathuria et al.

(2003); McCarthy (2004)). And the following definition can be expressed:

Manufacturing strategy is a comprehensive sample in the field of sources and



production facilities that empowers the company in achieving its manufacturing

purposes, business level and corporate strategies and goals.

3.3. MANUFACTURING STRATEGY DIVISIONS

To compartmentalization the discussion, a general model of the domain of

manufacturing strategy research is was provided that broadly divides manufacturing

strategy into the separate domains of process and content. This arrangement follows

the convention adopted by Adam and Swamidass (1989) in which "process" refers to

process of formulating and implementing strategy while "content" refers to the

choices, plans, and actions that make up a development of MS included all the aspects

of manufacturing process and infrastructure, many studies performed to date

concentrate on only one or two of these areas (Dangayach & Deshmukh, 2001).

It is clear from literature review that the content aspects seem to be dominant research

theme and process research on manufacturing strategy seems to have received less

attention from researchers. The content of manufacturing strategy is divided in three

sections of manufacturing capacities, best practices and strategic choices. Current

paper focuses on strategic choices.

3.4. STRATEGIC CHOICES IN MANUFACTURING STRATEGY

Skinner (1969) proposed that the key choice areas manufacturing strategy are plant

and equipment, production planning and control, labor and staffing, product design

and engineering, and organization and management. Hayes and Wheelwright (1985)

added process and infrastructure in the list of strategic choices. Structural issues set

the process and technology for operations whereas infrastructure provides it with

long-term competitive edge by continuously improving upon human resource

policies, quality systems, organization culture arid information technology.

The philosophy of strategic choices is based on need to attain internal and external

consistency. Failure to match with external business, product and customer factors

can lead to a mismatch with the market and consequently erosion of market share

(Chatterjee, 1998).

4. STRATEGIC ALLIGNMENT

In 1992 Tunaly reported a study on 184 Swedish manufacturing businesses which

gave empirical support to the hypothesis ―companies with a formulated

manufacturing strategy, aligned with the business strategy, will achieve higher

business performance than companies without a strategy‖ (Tunaly, 1992). Swamidass

and Newell (1987) in an empirical study of 35 firms found a positive relationship

between the performance of the firm (growth) and the higher the role of

manufacturing managers in the firm‘s strategic decision-making process. The proof of

the value of having a formulated, manufacturing strategy is building, but the case is

yet to be proven. Since the purpose of this study is to consider the relationship



between business and functional strategies and performance, thus in order to evaluate

the strategic alignment, reviewing the literature appears one of the most referred

definition of strategic alignment between manufacturing strategy( strategic choices)

and business strategy( cost leadership and differentiation strategy) shown in table 1.

Table-1: Strategic Alignment Definition

Business strategy

Manufacturing strategy variable Decision category Differentiation

strategy Cost leadership strategy

high low level of employee cross-training

low high level of job specialization Human resource

high low frequency of worker training

high

low

level of Vertical integration(forward) Vertical integration

high

low

level of Vertical integration(backward)

high low variety of final products

high low level of product customization

high low level of production planning complexity Production planning

high low level of production planning modification

high low level of work-in-process inventory Material control

low

high

level of centralization in decision making

high

low

level of communication between

supervisors and subordinates

Organization

low high level of formalization rules, procedures,

and precedents

high

low

Level of capacity slack Capacity

high

low

Frequency of capacity change

high

low

Level of emphasis on process layout

low high Level of emphasis on product layout Facility focus

low high Level of facility focus

high low Level of emphasis on general-purpose



Source: Kassaee: 1992: 60.

The above table shows that strategic alignment is achieved whenever decision

categories in manufacturing strategy are proportionate to the type of firm‘s business

strategy; in other words, there should be an appropriate relationship between these

two levels of strategy. As it was mentioned previously, so many researches support

the direct relationship between strategic alignment and performance. The relations are

summarized as follow:

Figure-1: The Relationship between Manufacturing Variables and Business Strategy

Decision categories in manufacturing strategy are some variables of an organization,

which are under the control, and influence of organization‘s managers. Adopting an

appropriate strategy in order to operationalizing these decision variables in a way that

empowers the organization to achieve competitive advantage is one of the most

important roles of manufacturing department manager. Considering all influencing

aspects of selecting an appropriate strategy such as the determinant business strategy

(flexible) equipment

low high Level of emphasis on special-purpose

(flexible) equipment Production process

low high Level of emphasis on proven

manufacturing processes

high

low

Level of emphasis on innovative

manufacturing processes

high

low

Level of emphasis on superior product

quality Quality assurance

high

low

Level of quality process sophistication

Decision categories in

manufacturing strategy

Performance

Strategic alignment

Business strategy type



of the company will result in some trends in which bring strategic alignment for the

organization and subsequently superior performance in competition world can be

expected. Since decisions in the fields of some variables such as production planning,

vertical integration, and organization are decisions toward operationalizing the

organization manufacturing strategy, thus these variables are truly called

operational/internal variables.

Another noteworthy point is that business strategy is not selected by chance but is

achieved following answering this question: How should we compete in businesses

that selected in corporate level? The term ―how to compete in the market‖ models

other functional decisions i.e. decisions made in marketing department.

5. MARKETING DEPATRMENT

A company which has thorough, exact and timely information about competitors,

customers and the other factors of market and distributes this information among all

its organization units effectively, moreover arranges all its activities based on the

above mentioned data or in other words a market oriented company can be sure of its

choices in the field of business strategy as well as strategic choices in manufacturing

strategy which are in coordination with higher strategic levels, thus facilitate its path

toward gaining competitive advantage and subsequently a superior performance.

Therefore, the current article has selected and studied market orientation as one of the

significance subjects in the field of marketing department.

5.1. MARKET ORIENTATION

The marketing concept was formally introduced in the writings of McKitterick (1957)

and Keith (1960). It defines a distinct organizational culture or business philosophy

that puts the customer at the center of the firm‘s thinking about strategy and

operations (Deshpande et al., 1993; Deshpande and Webster, 1989). The marketing

concept is generally considered to be made up of the following three pillars (Sin et

al., 2003): (1) customer philosophy—identification and satisfaction of the wants and

needs of customers; (2) goal attainment—achievement of an organization‘s goals

while satisfying customer needs; and (3) integrated marketing organization—

integration of all functional areas of the organization to attain corporate goals by

satisfying the wants and needs of customers.Though the marketing concept is central

to the marketing literature, very little research has been done in terms of creating a

valid measurement scale and testing the construct empirically (Tse et al., 2003). Only

recently has empirical research been conducted in this area: behavioral approach by

Kohli and Jaworski in 1990; and cultural approach by Narver and Slater in 1990.

5.1.1. Behavioral Approach In response to the operational problem of the marketing concept, Kohli and Jaworski

(1990) developed the three pillars of the marketing concept into precise aspects



(manifestations) of what they call a ‗‗market orientation‘‘. According to Kohli and

Jaworski (1990), while the marketing concept is commonly defined as a philosophy

or way of thinking that guides the allocation of resources and the formulation of

strategies for an organization, market orientation is considered to be the activities

involved in the implementation of the marketing concept. With this definition, three

sets of activities—intelligence generation, intelligence dissemination, and

responsiveness to market intelligence—represent the operationalization of market

orientation. Figure-2: Antecedents and Consequences of Market Orientation

Source: Kohli and Jaworski: 1990:7.

To measure market orientation from this behavioral perspective, Jaworski and Kohli

(1993) developed a scale which was later labeled MARKOR by Kohli et al. (1993).

This 32-item scale was constructed by using non-linear factor analysis of matched

samples of senior marketing and non-marketing executives from 222 strategic

business units.

5.1.2. Cultural Approach Narver and Slater (1990) hypothesized that market orientation is a one dimensional

Senior

Management

Factors

Interdepartmental

dynamics

Organizational

systems

Market

orientation

Supply-side

moderators

Demand-side

moderators

Customer

responses

Business

performance

Employee

responses

Consequences Moderators Market

orientation Antecedents



construct consisting of three components: customer orientation, competitor

orientation, and inter-functional coordination ( Tse et al.,2003).They introduce the

effects model of relationships between market orientation, business- specific factors,

market level factors and performance.

Figure-3: Independent Effects Model of Relationships between Market Orientation, Business-

Specific Factors, Market- Level Factors, and Performance

Source: Narver and slater :1990:27.

To measure Market Orientation, Narver and Slater (1990) developed a 15-item factor-

weighted scale (MKTOR) which was tested on split samples of 371 self-administered

questionnaires from top managers of 113 strategic business units of a single corporation.

In summary, the conceptualized dimensions of customer orientation, competitor

orientation, and inter-functional coordination (Narver and Slater, 1990) share a

similar nomological network with the dimensions of intelligence generation,

intelligence dissemination, and responsiveness (Kohli and Jaworski, 1990). However,

though similarities in definition, content, and operationalization are evident,

consensus with respect to the importance and positioning of ―information,‖ ―value,‖

and ―competitors‖ has yet to be reached (Webb et al., 2000).

5.1.3. EMO Approach

Business – specific factors:

Relative cost

Relative size

Market orientation:

Customer oriention

Competitor Orientation

Inter – functional

coordination

Market – level factors:

Growth

Concentration

Entry Barriers

Buyer Power

Seller Power

Technological change

Business Performance



Matsuno and Mentzer (2000) argued that whether or not the construct of a market

orientation is equivalent to culture (as defined by Narver and Slater) or a set of

behaviors (as defined by Kohli and Jaworski) is a subject of heated debate

(Deshpande and Farley, 1998a, b; Narver and Slater, 1998; Narver et al., 1998).

Therefore, they conceptually reconcile the current debate by positioning Narver and

Slater‘s cultural construct as an antecedent to the conduct, and also Kohli and

Jaworski‘s behavioral construct as a firm‘s conduct and performance as a set of

consequences of a firm‘s conduct. This approach implies that (1) firms are engaged in

a set of intelligence-related activities at varying degrees (conduct) as a response to the

state of internal and external factors and (2) the extent to which a firm engages in

such conduct determines market consequences(Matsuno et al., 2005). Specifically,

the EMO scale extends the scope of stakeholders and marketplace factors to include

suppliers, regulatory aspects, social and cultural trends and macroeconomic

environment as other authors acknowledge (Jaworski and Kohli, 1996; Kohli et al.,

1993). Therefore, from a theoretical perspective, these authors argued the fact that the

EMO has a greater potential to explain a broader range of the phenomenon is

conceptually consistent with market orientation and provides a more accurate picture

of the relationships between the antecedent environment, the firm‘s conduct and

performance consequences than do behavioral and cultural models (Nayebzadeh and

Heidarzadeh, 2008).After a few years Matsuno et al.(2005) attempted to improve

market orientation conceptualization and measurement by conceptually and

empirically comparing three different scales of market orientation, MARKOR,

MKTOR and EMO scales, and found that EMO scale is a conceptually improved

scale that captures a broader spectrum of market factors than the existing market

orientation scales (Matsuno et al., 2005) . Figure- 4: The EMO Conceptual model

Consequences

-Economic (ROA, ROI, ROS,

Relative Market share, Sales

Growth, New Product sales as % of

sales, Overall performance)

-Organizational (Organizational

commitment, Esprit de corps)

Moderators

-Strategy types

- Supply – side factors

-Demand –side factors

Extended Market Orientation(EMO)

as conduct

-Intelligence generation

- Intelligence dissemination

- Responsiveness to the intelligence

Extended scope of market factors

- customers

- competition

-suppliers

- Regulatory factors

-Social /cultural trends

- Macroeconomic environment

Internal Environment factors

Cultural antecedents(market oriented

culture)

- Organizational structural

antecedents(formalization,

centralization, departmentalization)

- Other organizational

antecedents(senior management,

interdepartmental dynamics,

organizational Systems)

External Environment Factors

- Competitive structural

antecedents(Entry barrier , buyer

power, supplier power)

- Industry/Market

characteristics(Rate of market

growth, Rate of technological

change

- Legal and Regulatory

environment(degree of government

regulation)



Source: Matsuno, Mentzer and Rentz: 2005: 5.

Considering triple approaches and observing the variables of each model which were

evaluated as antecedents, consequences and moderating variables occasionally

represents repetition or contradiction, say EMO model, even though involves both

cultural and behavioral approaches as an undeniable advantage , but regards the

elements of external environment as a prerequisite of market orientation and

simultaneously have put them in the position of moderating variables under the title

of supply side and demand side factors. Thus presenting a comprehensive model

which involves advantages of these three models and is free from defect seems

essential. Nayebzadeh and Heidarzadeh (2008) made an effort to define and

conceptualize a market orientation on the basis of EMO theoretical model, and

contain a comprehensive set of internal factors as antecedents and market,

organizational and financial outcomes as consequences of market orientation, and

analyzed the external environment factors as the moderating variables, and got the

evolved model. (Fig. 5)

Figure-5: Market Orientation: a Comprehensive Model

Source: Nayebzadeh and Heidarzadeh: 2008: 7.

Internal environment factors as

cultural antecedents( market oriented

culture)

- Structural antecedents:

Formalization

Centralization

Departmentalization

- Other organizational: antecedents

Top management

Interdepartmental dynamics

Reward System

External environment factors

- Demand Structure:

Market growth rate

Market turbulence

Buyer power

- Supply Structure:

Supplier power

Technological turbulence

- Competition Structure:

Entry barriers

Competitive intensity

Business performance

-Financial performance :

ROA, ROI, ROS, , Sales

Growth, Asset turnover

-Market performance:

Relative Market share

Organizational consequences

Organizational commitment

Esprit de corps

Business strategy

Cost leadership

Differentiation

Extended Market

Orientation(EMO) as conduct

-Intelligence generation

- Intelligence dissemination

- Responsiveness to the

intelligence

Extended scope of market

factors

- customers

- competition

-suppliers

- Regulatory factors

-Social /cultural trends

- Macroeconomic environment



The above figure illustrates that the level of market orientation utility can be achieved

whenever internal variables are selected; in other words, there should be an

appropriate relationship between organizational variables and the extent of market

orientation. Thus by preparing appropriate antecedent of market orientation reaching

higher levels of performance is expectable. The relations are summarized as follow:

Figure-6: The Relationship between Cultural Variables and Market Orientation

6. Discussion

Some of the variables, which are mentioned in figure 5 such as top management

attitudes, or the extent of his emphasis and obligation in the field of organization

market orientation as well as inter-departmental connectedness and cooperation are

the variables that are not under the control or influence of organizations‘ managers. In

other words, norms, symbols or believes that constitute the culture of an organization

and have been stabilized during the time are hardly or even seldom changeable and

just considering their characteristics and comparing their strong and weakness points

are possible. Some of the organizational variables that are suggested by many of the

researchers in the field of definition, evaluation and operationalization of market

orientation are also of organization‘s cultural variables in which can facilitate or

impede the trend of organization‘s market orientation. Thus, it is sound to call these

variables as cultural/internal variables.

Beside operational/internal variables and cultural variables, review of literature shows

some external variables that are not under the control or the influence of

organizations‘ managers but their effects on organization are undeniable. Some of

these variables that are categorized and named differently in various researches are

shown thoroughly in figure 5. They are considered as the moderator of the

relationship between market orientation and the performance and are called external

environmental factors; what is noteworthy here is that these external or environmental

variables play a significance role in selecting the business strategy of the

organization, in other words, the managers of the organization will not be sure of the

their decisions regarding the appropriate business strategy of the organization unless

Organizational

variables

Performance

Market orientation



not only they recognize the strong and weakness points of the organization about the

environmental factors such as supply structure, demand structure and competitive

structure that can show some symbols of opportunity or threat in the market but also

be able to predict the future trends obviously and precisely.

According to the discussions and models of functional strategies, the following model

is presented which involves the most influencing factors of company‘s performance.

Figure-7: The Relationship between Market Orientation /Strategic Orientation and

Performance

In this model facility focus, capacity, production planning, human resource, vertical

integration, material control, production process, organization, and quality assurance

are the key decision categories or strategic choices in manufacturing strategy that are

proposed as operational/internal variables and will result in strategic alignment if they

be categorized and operationalized proportionate to business strategy; the other

category of organizational variables are top management commitment and treats and

interdepartmental dynamics or in other words cultural/internal variable that success in

market orientation is influenced by these variables, but regarding market orientation

and the performance a series of environmental variables are effective as well and

intensify or weaken this relationship. These variables are as follow: demand structure

(market growth rate, market turbulence and buyer power), supply structure (supplier

power and technological turbulence), and competition structure (entry barriers and

competitive intensity) in which the selection of business strategy is done according to

Operational/ internal

variables

Performance

Strategic alignment

Business strategy type

Market orientation Cultural / internal

variables

External/ environmental

variables



these variables.

7. CONCLUSION

The process of strategic planning in each organization starts with codifying mission

statement by top managers. Business level managers convert dreams, ideals and

preferences of top manager in mission statement to operational strategies.

Nevertheless, in strategic planning process the next step after codifying

organization‘s mission is analyzing the internal and external environment of the

organization and achieving a thorough recognition of all strong and weak points as

well as opportunities and threats. Without passing this process, entering the choice

process of business strategy seems impossible, thus acquiring insight about a series of

factors in which have been called as external environmental variables in this article

and are consisted of demand structure(market growth rate, market turbulence and

buyer power), supply(supplier power and technological turbulence), and competition

structure(entry barriers and competitive intensity) seem necessary in order to adopt

the most appropriate business strategy.

Selecting a business strategy means that how the company should compete with the

competitors in order to achieve organization‘s mission in selected businesses,

following this purpose considering operational/internal variables which are actually

facility focus, capacity, production planning, human resource, vertical integration,

material control, production process, organization, and quality assurance are the key

decision categories or strategic choices in manufacturing strategy which obtain the

possibility of supporting higher level strategy.

Preparing appropriate goals, objectives and programs and successful performance of

following steps of strategic planning process requires concise recognition of

organizational culture in which acts as the bankroll and performance guarantee in

operationalizing corporate and business level; on the other hand in today‘s highly

competitive global markets, managers seek to improve organizational effectiveness

by identifying organizational metrics linked to business performance. Market

orientation is one such metric that has emerged as a significant predictor of

performance and is presumed to contribute to long-term success. Market orientation

the implementation of the marketing concept is the cornerstone of the marketing

management and marketing strategy paradigms. Therefore, reaching a desirable level

of market orientation is possible just by a supportive organizational culture; while

higher levels of market orientation do not lead to achieving superior performance

unless by considering the most important moderating environmental factors which are

called as external environmental variable in this model.

The promotion of the level of market orientation in an organization pertains to the

cultural/ internal variables for example senior management's emphasis on being



market oriented and in case of having achieved a favorable level of market

orientation; an increase in the measures of business performance can be expected. For

examining the relationship between extended market orientation and business

performance, the moderating impact of external variables such as entry barriers,

competitive intensity, technological turbulence, supplier power, market turbulence,

buyer power and market growth rate, each of which has different influence on the

relationship, should be taken into consideration, alike considering these variables in

selecting the type of business strategy.

Michael Porter has also emphasized on this point that during using business strategy

to evaluate ―the cooperation in opportunities‖ by companies and business units, a

style based on cost and benefit analysis can be used as well. Cooperation in

opportunities and resources creates the possibility of using competitive advantages in

order to decrease the expenses or supply different and distinct products and services.

Besides encouraging the companies to cooperate in opportunities, Porter also

emphasized that companies can exchange skills and proficiencies between

independent business units (in an effective way) in order to achieve competitive

advantages. With regard to factors such as the kind of industry, size of the company

and the nature of competition some special advantages are achievable by using

different strategies (cost leadership, product differentiation or concentration on a

small group of consumers).In today's competitive market, concentrating on a single

dimension would lead to no success. No firm would succeed by applying a mere

cultural approach and paying attention to the internal environment and ignoring the

external environment and the firm's decisive measures or by a mere behavioral

approach while paying attention to some activities without preparing the necessary

cultural pre-requisites or by concentrating on just the competitors and the customers

instead of a continuous monitoring of all the external factors. Successful firms

according to the theoretical model of this paper would be competent and perpetual in

obtaining an optimized level of business performance and a systematic approach.

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