THE POSITIVE IMPACT OF MARKET ORIENTATION ON ORGANIZATIONAL PERFORMANCE
THE POSITIVE IMPACT OF MARKET ORIENTATION ON ORGANIZATIONAL PERFORMANCE
Market Intelligence / by Inna Hüessmanns
20. August, 2021
A market-oriented corporate culture and a proper generation, dissemination, and utilization of market intelligence are significant factors in achieving superior sales and business performance.
A growing body of empirical and academic research has analyzed the value of a market orientation for a wide variety of organizational issues, including new product success, customer satisfaction, sales performance, profitability, growth, and innovation. Market orientation has been found to have a positive impact on organizational performance.
Research on market orientation addressed how organizations adapt to their environments and develop competitive advantage and customer centricity. Market-oriented organizations are well positioned to anticipate the changing needs of customers and to respond to them through innovative products, solutions, and processes. Market orientation gives organizations an advantage in the speed and effectiveness of their response to opportunities and threats.
Market orientation supports the value of thorough market intelligence and the necessity of coordinated actions directed at gaining a sustainable competitive advantage.
Market orientation places the highest priority on creation and maintenance of superior customer value while considering the interests of other key stakeholders. It provides norms for behavior regarding the organizational development and responsiveness to market information.
Many organizations often fail to use the market knowledge available to them. Additionally, organizations increasingly have access to the same market information. Research indicates that market oriented organizations are expected to develop superior profitability.
Market Orientation is the ability of organizations to generate, disseminate, and utilize superior intelligence about their markets, customers, and competitors, and the coordinated application of cross-functional resources to the creation of superior customer value.
Key features of market oriented organizations is their expanded focus on market rather than customer intelligence, their emphasis on cross-functional coordination with respect to market intelligence, and their focus on activities related to market intelligence utilization.
Key Components of Market-Oriented Organizations
Three components of a market-oriented organization can be distinguished: customer orientation, competitor orientation, and inter-functional coordination.
- Customer Orientation and Analysis
Customer orientation and customer centricity place the highest priority on continuously analysing customers’ needs and finding ways to provide superior customer value. Customer oriented organizations innovate throughout their entire business system, as opposed to solely in products or services.
- Competitor Orientation and Analysis
Competitor orientation and analysis entail generating intelligence on the following and other questions and facilitate innovations: (1) What is the basis for your organization`s competitive advantage? (2) Who are your competitors? (3) Do they represent an attractive alternative from the perspective of your target customers? (4) What does your organization need to survive competition?
- Cross-functional Coordination and Collaboration
Cross-functional coordination is one of the core components of market orientation. Academic research and empirical evidence indicate that coordinated dissemination of market intelligence among various functions was instrumental in the organization’s responsiveness to customer needs.
Market Intelligence as a Distinctive Capability
Market-oriented organizations have superior market intelligence capabilities, such as market sensing, customer analysis, and competitive intelligence. These capabilities deliver superior market insights that guide spanning capabilities. In contrast, the capabilities of internally oriented organizations are poorly guided by market considerations.
Effective market intelligence generation and dissemination, responsiveness to market intelligence, sales processes, and new product development processes are examples of capabilities that support a valuable market position and permit organizations to deliver superior value to customers in a cost-effective way.
Managing these processes so they cannot be readily matched by competitors is very different from managing vertical functions in a traditional hierarchical organization. Many internal boundaries must be crossed and relevant market intelligence should be readily available to all departments.
Market Intelligence helps achieving a better Sales Performance
Academic research proposes that greater collaboration between sales and marketing has benefits to the organization and improves business performance. Empirical evidence indicates that the reduction of interdepartmental conflict and effective market intelligence systems are important antecedents to effective collaboration between sales and marketing. Both sales and marketing have the goal of selling products and services. The two need to be integrated in order to build customer relationships and to boost revenue.
Market intelligence is a process upon which both sales and marketing should focus to achieve joint success, and it proposed to support collaboration. With the growth of competition in many markets, there is an urgent need to develop the collaboration of sales and marketing to improve business performance. Research indicates that gathering, analysis, and dissemination of market intelligence provides a method of improving organizational learning between sales and marketing.
Benefits of Market Intelligence for Sales and Marketing
Improving market intelligence is beneficial to both marketing and sales, and they should therefore be motivated to develop this area together. However, many organizations fail to develop systems to analyze customer and competitor intelligence. If marketing and sales do not cooperate, the company’s strategy will be inconsistent and execution will be flawed.
In many organizations, market information may be available, but organizational structures and processes fail to facilitate prompt and meaningful market information exchange. Market intelligence is important to all organizations, as it allows them to focus their activities on customers more efficiently.
The Impact of Market Intelligence on Innovation and Performance
A market-oriented culture facilitates organizational innovativeness, and this relationship appears even stronger in turbulent environmental settings. In turbulent environmental settings, organizations with superior market intelligence exhibit superior responsiveness, typically through organizational innovativeness, in dealing with the turbulences in the environment.
Being oriented toward markets provides a source of ideas for change and improvement.
Organizations with a greater capacity to innovate are able to develop a competitive advantage and achieve higher levels of business performance. A market- and learning oriented culture promotes innovation as part of an organization’s culture.
Inputs of market intelligence are essential to successful product and process innovation. They can be expected to have a positive impact on company competitiveness. At the same time, small firms are often unsuccessful as exporters because they depend entirely on incidental and personal market intelligence and fail to invest in systematic or representative methods for understanding new and different markets.
The Importance of Market Intelligence for Export-Oriented Organizations
Export intelligence generation includes all activities which constitute the creation of export market intelligence (e.g., export market research) and which are focused towards export customers, competitors, and the environmental changes in international markets. Export intelligence can be generated by international market research providers as well as organizational departments (e.g., marketing).
There is a strong evidence to show that export market intelligence can lead to superior performance in export markets. For organizations concerned with growing their business in international markets, distance to market is a challenge to be overcome.
For export-oriented organizations, distance to market implies risk, cost and ambiguity. The costs associated with overcoming distance are well known. The international expansion of organizations is constrained by the imposition of learning and coordination costs associated with overcoming geographic, cultural and psychic distance. Market-oriented organizations attempting to understand needs of international customers, measure customer satisfaction, target competitor’s weaknesses, and provide service in international markets will be handicapped to the extent that their customers and competitors speak different languages and conduct their business according to different rules of the game.
While exposure to international customers bring benefits in the form of access to new marketing ideas, the pursuit of multiple international markets inevitably raises the demands placed on managers for doing the things that lead to a market orientation. Organizations operating within large domestic markets will find it easier to generate market intelligence and cultivate market orientation than companies selling to customers scattered across international markets.
Market Intelligence helps to cope with Market Diversity.
In markets characterized by rapid change and low growth, market intelligence generation und utilization will have a greater impact on organization’s performance. Diversity of markets hampers attempts to cultivate a focused market orientation. The market intelligence performance link represents one of the most significant advances in recent marketing research. Three such sources of influence – distance to markets, dependence on international markets, and the diversity of markets served were found to have a significant and negative impact on the level of market orientation among organizations.
Outside Expertise for Market Intelligence Generation
Decision-making is becoming an increasingly complex process. And market intelligence generation becomes more important, since there are ever more unknowns coming into the decision-making process. This puts a great strain on market intelligence generating resources, a need to which organizations must be responsive.
Countless studies have shown that greater competitiveness is associated with the use of outside expertise and information in the form of management services, and information about markets, competitors, and customer needs.
How to Measure the Degree of Market Orientation?
The market orientation measure assesses the degree to which organizations engage in market intelligence generation activities, disseminate this intelligence vertically and horizontally, develop and implement marketing programs on the basis of the intelligence generated. One of the key attributes of this measure includes focus on customers and the forces that drive needs and preferences.
To manage a company well is to manage its future; and to manage the future is to manage information. In proportion as the accuracy of forecasting and market intelligence is improved, in the same proportion will the survival and growth probabilities of the organization be enhanced. Good forecasting and market intelligence require vast amounts of the highest-quality data. The systematic generation and evaluation of such data will greatly improve the quality of forecasting and market data available to organizations.
In summary, a market-oriented corporate culture and a proper generation, dissemination, and utilization of market intelligence are significant factors in achieving superior sales and business performance. The most distinctive features of market-oriented organizations are their mastery of the market intelligence generating capabilities.
Regular and systematic market intelligence generation will help your organization to understand your customers’ needs, analyze your company’s performance against competition, understand your long-term growth opportunities in your domestic and international markets, and develop a high-performing organization.
We help you to understand your customers’ needs in your domestic and international markets, analyze your company’s performance against competition, understand your long-term growth opportunities, train your salesforce in market intelligence, and develop a market-oriented organization.
For market intelligence, market orientation and customer centricity program consulting and implementation enquiries please contact:
Inna Hüessmanns, MBA
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