What Is Meant by a Market Orientation and How Important Is It for Organizations to Have one?

What is meant by a market orientation and how important is it for organizations to have one?

According to the latest American Marketing Association definition marketing is defined as "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large."( AMA, 2012)

Marketing deals with customers who are the most essential component of the marketing system Marketing is not just selling and promotion though they are important aspects. The central idea of marketing is the satisfying the customer needs and wants. Selling occurs only after a product is produced. By contrast marketing starts before a company has a product. "Marketing is a homework that managers undertake to asses needs and determine whether the profitable opportunity exists"( Kotler, 2008). Marketing aims to know the customer so well that the product or service sells itself (Ducker) .Market oriented companies perform better than less market oriented companies. They focus on adapting their products and services to the needs and expectations of their customers. This is in contrast to product oriented approach where the business is focused on developing a product or service that is then marketed and hopefully sold (Grönroos, 1989). Most markets are moving towards a more market-orientated approach because customers become more knowledgeable and require more variety and better quality. Different perspectives exist in the definition of marketing orientation

Sometimes market orientation is defined as a degree to which the different management systems of an organization are designed in a market-oriented way" (Becker and Homburg, 1999, p. 20).

Trying to summarize the approaches for market orientation definition M. Harmsen and B. Jensen (2004) express the opinion that the approaches can be divided in two main groups . The first group observes market orientation as a separate way of thinking - philosophy of management that directs the activities of a company towards market. Market orientation is described as a company culture, set of beliefs or set of values. The second group of definitions explains market orientation as a behaviour - set of processes and/or actions that includes acquiring information on the market, spreading the information within the company and response to the market information. Both groups however focus on customers and competitors, i.e. market, and adjustment of a company to the market.

There are two main models of market orientation which are complementary and show different aspects and views of the subject - Kohli and Jaworski model and Narver and Slater's model.

Kohli and Jaworski (1990) use the term " market orientation" to mean the implementation of the marketing concept. They base their discussion on behavioral aspects, i.e. they put action as a central focus of market orientation.

The model is built on the results of interviews with 62 managers in both marketing- and nonmarketing positions in US companies (Shalk, 2008)

The model emphasizes the organization-wide generation of market intelligence related to current and future customer needs , dissemaintation of this inteligence in the organization and organization-wide responsiveness to it (Kohli and Jaworski, 1990)

This definition means that market orientation is the implementation of the market concept and a firm with a high degree of market orientation is one whose actions are consistent with this concept. Market intelligence is the starting point of market orientation, and refers to the collection and assessment of data on customer's current and future needs . The competitor data and government regulations that could influence those

Needs are included as well.

Managers and employees must continually gather, disseminateg and communicateg information around all departments of the company in both a formal and informal manner - i.e. Organizational learning plays a major role in the creation of a market orientation. The information dissemination however is not the exclusive responsibility of the marketing or sales departments only . (Kohli and Jaworski 1990 ). This idea is in line with the importance of interfunctional coordination within firms as recommended by Narver and Slater (1990), Slater and Narver (1993) and Shapiro (1998)

The hypotheses construct proposed in the 1990 were tested and the results in 1993 allowed the be concluded that market orientation is built on three equally important milestones: Customer focus, coordinated marketing and profitability ( Kohli and Jaworski, 1993)

Narver and Slater (1990, p. 21, p.10) and Tijete ( 1998) emphasize on the cultural perspectives in market orientation definition. According to their model the market orientation is the organization culture (i.e., culture and climate, Deshpande and Webster 1989) that effectively and efficiently creates the necessary behaviors for the creation of customer values and superior performance for the business. They develop the definition further stating that market-oriented firms focus not only on customers but equally much on competitors. They make the conclusion that Market orientation has three equally important behavioral dimensions ( components) - customer orientation, competitor orientation, and inter-functional coordination. They add two decision criteria to their model - long-term focus and profitability.

As a whole, the two views ( models) on market orientation are similar and complementary. They both view market orientation as a concept that (if well implemented) leads to a greater competitive advantage for the company. Both agree that :business intelligence about customers and competitors is a key prerequisite to build market orientation and the market orientation is a construct with three equally important components.However, Kohli and Jaworski emphasize more on customers and view market orientation more like the implementation of the market concept .Narver and Slater underline the human role and explain market orientation as a corporate culture..( Schalk, 2008) Evidence shows that both the market concept view and culture view are equally important dimensions when building a market orientation (Hurley and Hult, 1998).Cervera, Molla and Sanchez (2002) agree to this and state that the two views are not mutually exclusive and in fact show different aspects of the same concept.

When combining the Kohli and Jaworski model with Narver and Slate's , a two-dimensional integrated model appears. It shows that the two models suit the definition that a market orientation is the implementation of the marketing concept; a form of organizational