Market Orientation: Term Definition

The present market scenario is very demanding and market orientation is proving itself a great challenge for the progress of any company. This essay tells about the concept and definition of market orientation first and then gradually moves on the points like historical background of market orientation. It further reviews the literature on organizational and managerial characteristics of market oriented companies and then investigates the application of this literature on a market oriented company. We have taken the example of Audi- an automotive company and presented the company’s organizational and managerial structure with the application of literature discussed prior to this example.

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Organizational and managerial characteristics of a market-oriented company

Introduction

The implementation of marketing concept is considered as market orientation. Becoming a market oriented is more important than to become just a customer-led. An organization’s full support is always needed to implement this theory which requires full change in the culture of an organization (Market Orientation and its Implication, n.d.). This desire of cultural change is strong at organizational level (Miklós Dobák, n.d.).

In this paper we will focus on organizational and managerial characteristics of market orientated companies. We will review the literature on market orientation and then will analyze these characteristics in a particular market oriented company. This study has twofold: First, the literature on these characteristics and antecedents of this orientation is reviewed; secondly, application of this literature on a specific company is investigated.

This essay adopts the methodical approach to present its relevance with the subject. It enables the students to make systematic search of the relevant data to find out organizational and managerial characteristics of a market oriented company and discover its proficiency in measuring these characteristics to be applied on such type of company. The purpose of this study ensures to review the whole market oriented literature and its application in a particular market oriented company.

The coherent idea of this study is based on various arguments and investigations. It gradually develops after understanding the meaning of market orientation and then presents its background. To support this study some databases have been searched, that strongly maintain the rational idea related to the topic that focuses on the investigation of organizational and managerial characteristics of market orientated companies. The research helps us to better understand the definition of market orientation. Before going further, we have to understand the concept of this term first.

The Concept

The need of market orientation has been identified from the past few years (Rodrigo Luiz Goecks Santos, 2009). Day indicates (1999: ix): “The growth of market turmoil and escalating competition in this era requires a strategy, which is a vigorous market orientation. The superior skills like understanding, attracting and keeping customers can develop strategies that will distribute superior customer and will bring this strategy into line of changing market requirements.”Hooley et al (1998) argues that market oriented companies do better than the companies which are not market oriented.

Day (1994, 1999) points out the prospective of market driven organizations: market relating and strategic thinking. All these are related to the fundamental values of the company which is its culture. The company’s culture can be like its strategies; vision; role model; rewarding the employees and the qualitative information system (Hans Kasper, 1990).

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New marketing and business philosophies like market orientation and organizational flexibility have been encouraged by managers and entrepreneurs to live in this competitive market (Weinstein, Art, 1998).

Understanding market Orientation

Piercy (1997) clarifies that ‘marketing’ is for marketing specialists but ‘going to market’ is that activity which is done by everyone in the organization. Piercy’s this approach is concerned to actually an exchange process in which commercial organizations, services and products are negotiated for money and resources. The above figure highlights this exchange process.

People think for being more market oriented you go from one extreme to other and you do not give importance to the skills like engineering and production which are supposed to be main skills for market orientation (Laura Mazor et al., 1905).

Defining Market Orientation

It is the form of organizational culture and the implementation of the marketing concept.

Kasper (1990:16) defines market orientation as “It is the degree to which an organization having its all thinking is guided by some factors that decide the market behavior of the organization and its customers.” Narver and Slater (1990) describe that market orientation comprises three behavioral elements, customer orientation; competitor orientation and inter-functional coordination, long term focus, two decision criteria and profitability.

Kohli and Jaworski (1990) understand the importance of customer focus in but they give more value to market intelligence while describing market orientation: ‘market orientation is the organization of market intelligence which is concerned with the current and future requirements of the customers, distribution of this intelligence among departments and receptiveness to it.’

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Historical development of market orientation

The growth of market orientation goes through stages, production, sales and market. It can be associated with demand and supply relationships and aggressive conditions. The growth of market orientation has been different between the USA and Europe. By the end of 1950 the USA started understanding the importance of putting the customers first and Europe due to two world wars the development of marketing started later than USA. In Europe market integration, public sector involvement, heavy regulations, language differences, local business tendencies everything got delayed (Market Orientation and its Implication, n.d.).

In the late 1960s the main concept of marketing orientation came into existence. The concept of sales orientation which was prevailing between the mid 1950s and the early 1970s was substituted with it. Since then this concept has been modified and renamed as ‘customer focus’, market driven, customer intimacy, ‘customer focus’ and the ‘marketing concept’ (Marketing Orientation, 2005).

While reviewing Organizational and managerial characteristics of market orientated companies, we find that the needs of an organization and the customer should be investigated. Research tells about two types of organizations and market orientation: A Type and B Type. It also have been explored that the management of a company has vital role in market orientation. A strong relationship between market orientation and the learning organization has also been found out (Market Orientation and its Implication, n.d.).

Large numbers of comparisons and discussions have been done to measure market orientation for many purposes. Tuominen and Moller (1996) recognize and evaluate schools of thought while researching market orientation. Okzkowski and Farrel (1998) differentiate between Kohli, Jaworski and Kumar’s (1993) and Narver and Slater’s (1990) to evaluate measures of construct for market orientation.

In Narver and Slater’s (1990) definition the elements of market orientation are clear. Those are competitor orientation, customer orientation, inter-functional coordination, profitability and long term focus. Kohli and Jaworski (1990) focus on three elements in market orientation: intelligence dissemination, intelligence generation and responsiveness. They think profitability is the result of market orientation. Van Bruggen and Smidts (1995) identify that there should be a difference between a range of group of customers.

It is important to check the degree of transformation between the company and the customer group. In a company’s marketing channel a customer group is only important for the company’s market orientation when the company can respond to this customer group. This customer group becomes more important in the company’s marketing channel, if it transforms or arguments the product more (Frans Verhees, n.d.).

After measuring the elements of market orientation, some important differences between the large and small companies can be discussed for knowing better organizational and managerial characteristics of such type of companies individually. Large companies have more specialization than the small companies. In small companies one manager does all managerial tasks himself. Small companies do not have much financial resources as large companies have.

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For marketing large companies are bestowed with more financial sources in comparison to small companies. Small companies have limited financial resources and their market intelligence is based upon secondary data like cooperation of the colleagues or personal contacts with the customers. On the other hand large companies try to adopt competitive attitude by producing market intelligence independently which becomes exceptional and state-of-the-art. It’s been observed that organizational activities are well maintained by a single person in a small independent company. That’s why the coordination which is the main factor in market orientation becomes easier in such type of company (Frans Verhees, n.d.).

Carson et al. (1995) identify that small companies generally concentrate in local market and they have limited customer base. They further argue that for market orientation customer and competitors are considered the interesting objects in these market segments which should be protected against direct competition from large companies and for this the focus should be on approaching the specific sector of the market. Nooteboom (1994) further adds that large companies are more resourceful to serve these market segments and have good scope for their potential customers and competitors.

A company’s organizational characteristics include reporting, co-ordination and styles of communication. In the presence of organizational form it becomes very efficient to make marketing plans. A conscious managerial decision making and action are necessary to handle the problem related to organization of marketing functions of departments so they can meet the requirements of market orientation. It’s felt that the each firm must be organized in an appropriate manner. If a company is lacking its coordinating influence in sales management, marketing research management product and brand management and in advertising administration, it is difficult to say that the company is executing the marketing concept. The following graph shows the proper coordination in all the departments (Gordon R. Foxall, 1981:39).

Top management

It highlights the necessity of all of the managerial operations to execute the market oriented management, which is actually performed by the specialist marketing managers or the personnel who are answerable to senior marketing executives and report them.

If a newly market oriented company truly want to take the benefits of market orientation, it becomes essential that marketing management should be directly responsible to top management like the seniors of the company’s technical research, personnel and financial department, production so the advertising, sales, product development, public relations, marketing research and pricing functions are supervised. These all functional areas take the responsibility of doing appropriate functions and they are organized by marketing management (Gordon R. Foxall, 1981:39).

The sub department of sales management should take the responsibility of sales administration, sales staff and sales records. A separate department should conduct the market research. The company’s product development and selection should be given to a separate department. Hanan argues that instead of following the organizational designs like functional or product, it is better that companies should have some different characteristics to reorganize the market around them.

For being market oriented it is necessary to design the companies’ organizational structure. Hanan uses the term ‘market centered’ and further explains that market-centered tells about such type of organization which is decentralized by markets- markets means the business. Market centered organizations believe in customer orientation and division of company’s operation into natural profit centers. The managers of these organizations are responsible to achieve profit targets (Gordon R. Foxall, 1981:39-41).

Application

After analyzing the organizational and managerial characteristics, we will investigate their application on a market oriented company. Hanan gives two examples of market centered organization. Reorganization of NCR is based upon the use of differential marketing efforts that targets many of its individual customers like commercial and industrial buyers, retailers, financial institutions, governmental, medical, educational buyers of computers.

It does not give chance to its salesmen to trouble the customers with their several questions, instead it has a product or the group of products where the company has the facility of a single salesman who satisfies the customer’s needs and promote the company’s whole product range (Gordon R. Foxall, 1981:41).

A British agricultural marketing cooperative company also has this form of organization, which understood the requirement of allowing its people to control its operations to organize its businesses in such a way that it could be customer centered. In doing so the group had the provision for the representative management as well as for market centered organization to make five divisional boards to control the dominant profit centers. The following figure shows the same structure (Gordon R. Foxall, 1981:41):

The same structure

Hanan gives another example of an American company, General Foods whose prior organizational system was difficult to do effective supply. It had different divisions for different product categories like frozen food was marketed by Birds Eye; Powdered mixes was through the Kool Aid division; breakfast drinks were through Post but consumer beverage needs could not be centralized. These interdivisional problems resulted in regrouping the company’s operation and turned into ‘strategic business units’. Now each unit has the responsibility of particular market segment. The company is now concentrating on customer oriented marketing management (Gordon R. Foxall, 1981:42).

British Airways is the example of a market led or market oriented company as it understands the needs of its markets before implementing any plan. Its marketing focus is changed. It has made lots of changes in its planning from the marketing department to an organization wide involvement to understand the greater value of its customers. Slater (1990) investigates that market led can be linked to profitability in profit based organizations and it is survival in non profit organizations. Three elements of market led have been understood of greater importance: Customer orientation; competitor orientation; inter functional coordination (The Market Led Organization, n.d.)

The market-led organization

An international marketing consultancy, BBDO group has selected Audi as the best market oriented company in the automotive industry. Overall 282 companies from all sectors participated and Audi took second place among them. The marketing experts have appreciated Audi’s innovation strategies a lot which have high standard and are customer oriented (Audi: Best Market-Oriented Company in the Automotive Industry, 2008).

BBDO management consultancy’s researches which are based on market orientation and in cooperation with the innovative brand management of the University of Bremen, decided the level of success of all types of sectors’ marketing strategies. Audi has 100 markets all over the world. In 2007 it sold total 964,151 cars. It is the brand with four rings and invests approximately € 2 billion per year. By 2015 it is planning to introduce new models in the market from the 26 to 40 by offer (Audi: Best Market-Oriented Company in the Automotive Industry, 2008).

Michael Renz, the marketing head of Audi understands that market orientation is necessary of a company’s success. According to him the company which understands its customer’s needs can have successful brands and products that stay for a longer period (Audi: Best Market-Oriented Company in the Automotive Industry, 2008).

Audi believes in analyzing complex behavior and buying, therefore, it uses the methods of classic market research like wide surveys and deep interviews. This brand analyzes the current demands and needs of the customers and also researches on future trends which will be helpful in changing the life styles of the target group all over the world and that will be according to their expectations from the cars.

The internal programs like ‘Audi Experience” has verified the results of this kind and confirm that managers from all sections from Audi AG visit Audi’s target group families. Renz knows how effective is this programs as he has personally attended this program. That’s why he says that ‘these kinds of field studies show that the theoretical findings are being put into practice and are necessary for classic market research’ (Audi: Best Market-Oriented Company in the Automotive Industry, 2008).

Piercy (1997) recognizes four relationships which are necessary in managing market oriented organization. They occur in both business and manufacturing organizations. It has network of business system, supply chain and virtual networks. These all cooperate to each other for making the significant plan for the customer (The Market Led Organization, n.d.).

Key relationships

Audi seems to be having relationship marketing technique which focuses on customer retention, long timescales, oriented to customer value, high customer commitment, and high customer contact and taking care of quality. Audi’s success depends on its highest quality. Audi is setting a trend among other automotive companies by doing best in product development and customer service for which it follows the customer’s demands. Strong market orientation, warm cooperation between the marketing, sales, research and development departments have made Audi the world’s leading premier car.

Its sales and service network is credited for high customer satisfaction and loyalty (Audi: Best Market-Oriented Company in the Automotive Industry, 2008). Piercy (2002) discovers that customer’s profitability becomes more important than their loyalty as they generally are loyal to us. The following figure describes the evolution of value based marketing:

Customer Loyalty

Customer Loyalty

Audi believes in sharing its decision in its all team members. According to Dr. Horst Neumann, Board Member for Human Resources at AUDI AG, Audi has got the leading position due to its each employee’s entrepreneurial thinking. He adds that employees still need some customer focus and alertness to quality and cost. They need bold attitude and innovative spirit (Inside Audi, n.d.).

Audi’s organizational structure gives a range of tools to its employees for participating in decision making. It depends on the capabilities, initiatives, qualifications, specialist knowledge and sense of responsibility. Dr. Horst Neumann, Board Member for Human Resources at AUDI AG further says that cooperation brings commitment in employees and determination, regular staff orientation programs and personal development programs expand their capabilities. Audi is turning in to a ‘breathing factory’ by modern flexible working time models. It is good for the company and also for the people who want secure jobs (Inside Audi, n.d.).

Audi Ideas Program is planned to observe the employees improvement suggestions. It shows that the employees have new thinking in their hearts and minds. This program was introduced 10 years ago and has been very successful. Approximately 50,000 ideas are being submitted to the Audi Ideas Agency every year. According to Thomas Neuhaus, the agency manager that the agency wants to support the employees so they get engaged in the program and make use of their ideas to go through the company’s process and products. Till now employees ideas have really worked out and have saved the company’s C100 million. Each captivating idea is rewarded and gets bonus and it does not have any direct economic advantage (Inside Audi, n.d.).

According to Jochen Schulz, a line manager and a workgroup spokesman one can feel himself a valued and important member of Audi team. One is not counted just like a number of staff in the company. One feels himself as a member of it. Training opportunities, individual responsibility and growth, interesting work, promotion opportunities are the factors which encourage the people to work for this organization. Alfred Quenzler, head of Personnel Marketing further adds that this four ring brand plays an important role and has achieved its reputation in the market as sporty, progressive and high quality brand and working with this company enhance the employees’ image (Inside Audi, n.d.).

Erwin Wittmaier, National Manager of Kuehne + Nagel Korea comments on the performance of Audi Volkswagen that it has established the trust in the company due o its services and has become the global market leader. It has confirmed the integration and industry specific services (Build-To-Suit Logistics Centre for Audi Volkswagen in Korea, 2009).

Reinhold Carl, the Managing Director of Audi Singapore thinks that Audi’s future is bright. In the market oriented crisis Audi is obtaining record breaking figures for deliveries, production, revenue and profit. Facing the challenging market situation its growth is 9% more in the 2008 fiscal year. Good preparation and planning have brought exceptional success to the company in which customers are also involved. It is the success for all- cars, customers, staff and business (A Beacon of Success, 2009).

References

A Beacon of Success, 2009. Web.

Audi: Best Market-Oriented Company in the Automotive Industry, 2008. Web.

Build-To-Suit Logistics Centre for Audi Volkswagen in Korea, 2009, Kuehne + Nagel News, ASIA PACIFIC ISSUE 1.

Dobák, Miklós, Managerial and Organization Constituents of Competitiveness, Society and Economy, Volume XX, Number 3. Web.

Foxall, Gordon R., 1981 Strategic Marketing Management, Croom Helm London, John Wiley & Sons, New York, Toronto, p.273.

Inside Audi. Web.

Kasper, Hans, 1990, The innovation and learning perspective in market oriented service organizations, University of Maastricht, The Netherlands. Web.

Marketing Orientation, 2005. Web.

MARKET ORIENTATION AND ITS IMPLICATIONS. Web.

Mazur, Laura et al., 1905, Marketing Challenge, University Press, p.289.

Piercy, Nigel F, 2002, Market Led Strategic Change- New Marketing For new Realities, The Marketing Review, Cranfield School of Management, p. 385-404.

The Market Led Organization, The Open University. Web.

Rodrigo Luiz Goecks Santos, 2009, CHANGING MANAGEMENT: BUILDING A MARKET ORIENTED INDUSTRY. Web.

Verhees, Frans, n.d., Market Orientation, Product Innovation and Market Performance: the Case of Small Independent Companies. Web.

Weinstein, Art, 1998, The effect of market orientation and organizational flexibility on corporate entrepreneurship, Publication: Entrepreneurship: Theory and Practice.

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