Entrepreneurial Orientation and Marketing Orientation - Essay Example

Entrepreneurial Orientation and Marketing Orientation Introduction Profit has all along been the oxygen to any business, be it big, medium orsmall. Any commercial venture which failed to make sufficient profit had to, sooner than later, face the inevitability of downing its shutters. Various businesses employed their own methods of netting this profit. There were so many variations as there was the number of business enterprises. This prompted management scholars to delve deep into the matter to find out how many ways are there to make a business flourish. Their search has not been without success. In fact they have come out with some rare insights into the dynamics of profit generation and maximization. While large organizations could afford to experiment with any or all of these methods, the small and medium enterprises, the SME’s, have to be very choosy in their selection of modus operandi because of resource limitations. However, they also have a fairly wide choice to select from, like the Entrepreneurial Orientation, Marketing Orientation, Operation Reasearch, Brand Boosting and the likes. Right now we would be interested in two of these most significant methods, viz. Entrepreneurial Orientation and Marketing Orientation. What is Entrepreneurial Orientation : The term “entrepreneurial orientation” has been used to refer to the strategy-making processes and styles of firms that engage in entrepreneurial activities. A popular model of entrepreneurial orientation (EO) suggests that there are five dimensions of EO—autonomy, innovativeness, risk taking, proactiveness, and competitive aggressiveness (Lumpkin and Dess 1996). Autonomy refers to the entrepreneur’s freedom to choose his own line of business, range of products and the market segment he wants to operate in. This reflects his entrepreneurial genius and his analytical ability and his resourcefulness to meet challenges. Innovativeness is an essential element in any business as much as we want variety even in the daily food we eat. Without innovation even big conglomerates would be made to bite dust, one day or the other. Risk taking is an essential aspect of any growth –oriented d business and if an entrepreneur hesitates to take risk at the appropriate time junctures, the error could prove to be very costly, and so alert entrepreneurs are always willing to take reasonable risks in the interest of their business. “ Proactiveness refers to how firms relate to market opportunities by seizing initiative in the marketplace; competitive aggressiveness refers to how firms react to competitive trends and demands that already exist in the marketplace(G. T. Lumpkin and Gregory G. Dess, 2001 ) 1. What are the benefits of Entrepreneurial Orientation : Recognition of the economic significance of small firms, and high-tech small firms in particular grew during the last quarter of the 20th century (Loveman, and Sengenberger 1991, Acs and Audretsch, 1993).2 In particular increasing attention has been paid to ‘entrepreneurial orientation’ seen as process reflected in recurring organizational behaviour (Covin and Slevin 1991) 3 rather than the actions of individuals possessing certain attributes or characteristics. Behaviour important in both policy and organisational theory contexts includes willingness to take risk, innovativeness, technological leadership and a proactive stance toward competition. (Khandwalla, 1977; Covin and Slevin, 1991; Lumpkins and Dess, 1996; DTI, 2001).4 In a study involving the interaction with a group of 153 high-tech CEOs, first surveyed in 1998 and again subsequently surveyed early in 2001, it was observed that both pro-activeness and innovativeness were weakly positively related to employment growth and innovativeness was positively related to turnover growth. In particular over half of the firms judged to have shown relatively low levels of innovativeness had experienced no growth in turnover between 1999 and 2001 compared to about a third of their more innovative counterparts. CEOs of businesses demonstrating higher levels of EO were also more likely to give higher levels of support for financial objectives. Businesses which had been more innovative, pro-active and more open to risk appeared to be headed by CEOs more committed to advancing science and technology. The personal characteristics and experiences of CEOs appeared to have little impact on how their businesses behaved but their intentions and objectives did. The findings were generally stronger in respect of innovative and pro-active than risk-taking behaviour. (Thelma Quince and Hugh Whittaker, 2003 ) 5 The performance of firms in the early stages of industry development was stronger when their strategy making was proactively oriented. In contrast, a competitively aggressive frame of mind was helpful to firms in more mature stages of industry development. These findings were supported by other tests of the business environment. In dynamic environments, characterized by rapid change and uncertainty, proactive firms had higher performance relative to competitively aggressive firms. In hostile environments, where competition is intense and resources are constrained, competitively aggressive firms had stronger performance. The findings suggest that these two different approaches to entrepreneurial decision making may have different effects on firm performance. The differences were particularly apparent in the way firms relate to their external environment. Proactiveness—a response to opportunities—is an appropriate mode for firms in dynamic environments or in growth stage industries where conditions are rapidly changing and opportunities for advancement are numerous. But such environments may not favor the kind of combative posturing typical of competitive aggressiveness. Firms in hostile environments, or in mature industries where competition for customers and resources is intense, are more likely to benefit from competitive aggressiveness—a response to threats. ( G. T. Lumpkin and Gregory G. Dess )1 “ Research evidence indicates that entrepreneurs who exhibit a need for unique, path-breaking accomplishments (pioneering) and transforming the status quo (innovative) are quite different from other entrepreneurs. This is called the PI motive, Pioneering-Innovative motive, initiating novel outputs, and technological sophistication. PI entrepreneurs showed greater networking behavior. Sixty-seven cases of small-scale entrepreneurs published in two Indian business journals constituted the data. It was found that entrepreneurs with high PI scores resorted to networking to raise critical resources more than those with low PI scores. High PI entrepreneurs did not merely adopt the suggestions or ideas acquired from their networks but synthesized them in a way that resulted in substantial learning. Networks, especially with inner circle contacts, provided hard resources such as capital and technology. The search for excellence of PI entrepreneurs goes beyond their firms into the large communities with which they deal. For them the goals/visions of their business do not seem to be limited to considerations of survival or even money making; they would like to be change agents and bring about transformations in the industry and economy. Because of their emphasis on new products, markets, technology and so on, PI entrepreneurs tended to scan the environment constantly, collaborated with customers and consultants, and focused on enhancing professionalism in organizations. They provide leadership in addressing industry/community issues, and thereby develop a distinct identity. ( Ramachandran,K and Ramanarayan,S. 1993 )6 What is Marketing Orientation : One of the shortest definition of marketing is “ meeting needs profitably”. The society at large and individuals in particular have different needs, some of them basic and others sophisticated. Whichever organization recognizes their needs and offers products or services to satisfy such needs have successfully served their purpose. “Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders,” ( American Management Association, 2004 )7 . Marketing management is the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering, and communicating superior customer value. (Kotler, et al. 2007)8 “ Marketing-orientation is a cognitive, behavioral, and cultural aspect of a firms marketing concept that puts the customer at the center of the organization “ ( Deshpande and Webster, 1989)9, and its development usually follows as a matter of course. Market orientation is also defined as the organization-wide generation of market intelligence regarding customer needs and demands, and competitive information, the dissemination of intelligence in the whole organization, and responsiveness throughout the organization (Kohli and Jaworski, 1990). It is a business culture that produces superior performance through its commitment to creating outstanding value for customers (Slater and Narver, 2000). One of the most studied factors, which has synergy with market-orientation, is learning-orientation. Many researchers (e.g. Baker and Sinkula10, 1999; Farrell11, 2000; Slater and Narver12, 1995;), have found out that market-orientation only enhances performance when it is combined with a learning-orientation. “ Learning-orientation, embracing the commitment to learning, shared vision, open-mindedness and interorganizational knowledge sharing, fosters a set of knowledge-questioning and knowledge-enhancing values that leads to the development of breakthrough products, services, and technologies, and the exploration of new markets (Farrell11, 2000; Slater and Narver12, 1995) which are very essential to keep the SME’s in the competitive markets where larger organisations have other privileges like a sumptuous capital, brand value, goodwill and a relatively larger, if not, a smarter manpower. Market-orientation provides small firms with a potential competitive advantage over large firms, because SMEs: - are closer to customers and able to exploit their needs and wants quickly and more flexibly; - are able to transfer customer intelligence quickly, with less deterioration, due to their reduced organizational layers and bureaucracy; and - can implement the marketing plan fast, because it is less formal. ( Halit Keskin, 2006 )13 What are the benefits of Marketing Orientation ,especially for SME’s: Though common people understand marketing mainly as a kind of selling activity, but Peter Drucker, the leading management guru has this to say about real marketing : “ The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.” (Peter Drucker,1973 )14. Market Orientation helps organizations to move closer to customers to study their needs and to design products to satisfy such needs, instead of manufacturing products and then trying to persuade customers to accept them. To find out “ The interrelationships among a firms market-orientation, learning-orientation, and innovativeness “ which ultimately contributed to a firm’s performance, a study involving a questionnaire-based survey of managers from small-sized-firms operating in Turkey was undertaken. A total of 157 usable questionnaires were received from managers. These were subjected to a structural equation modeling (SEM) analysis. It tested the combined effect of market-orientation and learning-orientation on firm innovativeness and performance in SMEs. The results showed that learning-orientation is eminent for firm innovativeness and performance. At the same time, market-orientation is needed for an effective learning-orientation in SMEs. In essence, it was found that market-orientation is appropriated with learning-orientation for firm innovativeness and firm performance. ( Halit Keskin, 2006 )13. This underscores the importance of marketing orientation as an important strategic management tool. With a research study, using the samples of SMEs in Thailand, an attempt was made to find out the relationship between Market orientation and competitiveness. The researcher observed that “Generally, SMEs with more marketing strategies have achieved high performance, competitiveness, and growth. Even though SMEs have limited resources and capabilities, the ability of SMEs to effectively manage resources and outstandingly improve capabilities is a challenge for business executives. It was also observed that market orientation that involved three important factors, namely, customer orientation, competitor orientation, and interfunctional orientation all of which directly promote an SME’s competitiveness. So SMEs with stronger customer orientation will potentially achieve greater competitiveness” (Phapruke Ussahawanitchakit, 2007)15 and ultimate business success. SMEs should be innovative to get a competitive advantage due to their limited resources, vulnerability to uncertainty, turbulence in business environments, and the extensive powers of customers and suppliers. (Keizer et al.16 , 2002; Motwani et al17. , 1999). However, the situation is not as hopeless as it might appear. In fact, ”SMEs can achieve leadership positions by applying aggressive innovation strategies in niche industries. High-tech SMEs, e.g. electronics, software, and biotechnology, for instance, demonstrate improved performance by generating new markets and industries due to their innovativeness (Romijn and Albaladejo18, 2002). “Farrell (2000)11 investigated 200 organizations in Australia and found that market-orientation is related positively to a learning-orientation and that a learning-orientation has a stronger significant effect on business performance than does market-orientation.” However, the initial impetus for learning-orientation itself will have to come from market-orientation . That’s why in another study undertaken by, Farrell and Oczkowski (2002)19, they found by investigating 340 organizations, that market-orientation is able to encompass learning-orientation, but learning-orientation is not able to encompass market-orientation. Also, by investigating 304 state-owned enterprises in China, Liu et al. (2002) 20 found that learning-orientation mediates market-orientation and short-term outcomes - i.e. marketing program dynamism refers to the frequency with which an organization changes its mix of products/brands, sales, and promotion strategy. Therefore, in an SME context, market-orientation will positively lead to firm development, by firm innovativeness which results from Learning-Orientation which is originally nurtured by market-orientation. The general opinion amongst writers is that SME’s are typically poor at marketing and that this acts as a constraint to their development (Carson et al, 1995,)21 but this need not be so. Many SME’s have shown their real mettle by coming up with innovative, cost-saving and daily-use products and have been a real challenge to the customary market leaders. This has been possible only because of their willingness to accept market challenges, adapt their policies to suit market needs and, more than anything else, their readiness to stretch themselves to please and satisfy their customers and keep them in their loop. They don’t cringe to accept latest technology to fortify their strategies. Zahra and Covin (1993)22 expressed this as the firm’s “commitment to acquiring, developing and employing technology.” “The modern marketing activities include: the production concept, product concept, selling concept, marketing concept and holistic marketing concept. The first three have only limited use today.” ( Kotler, et al. 2007)8 . The demands of the present day market can only be met by banking on marketing orientation characterised by excellent customer service. However competitive or depressive the market is, if the organization is willing to come up to the expectation of the consumer by understanding his latent as well as manifest needs, such an organization has truly learnt the art of marketing orientation and naturally it will always play a significant role model’s role. From this it clearly follows that marketing orientation plays a pivotal role in the outstanding performance of the SME”s. Conclusion : As the national economies as well as the world economy are growing at a rapid pace, newer challenges for organizations are an unavoidable fallout. If organizations want to maintain their market share and keep growing, then an alert watch over market trends to keep track of the changing tendencies of customers and market segments is the minimum prescription to stay afloat even in stormy weather. Entrepreneurial Orientation (EO) and Market Orientation (MO) are considered key factors in ensuring firm longevity in the new competitive landscape. In a study undertaken to empirically investigate the relationship between MO and EO on a sample of 2500 Swedish SMEs, the findings suggest that MO is the main determinant of EO in SMEs. (Salvatore Sciascia, Lucia Naldi and Erik Hunter, 2006 )23. In this context, any organisation which systematically and sincerely adopts entrepreneurial and marketing orientation has significantly insulated itself against market shocks and economic crashes against which today there seems to be no other reliable remedy. Without a sharp entrepreneurial acumen and a reasonably sound aggression, no SME can have a worthwhile take-off. After the initiation, it is sound marketing orientation that is going to ensure smooth sailing. If EO can take the firm halfway through the bridge, surely, it is only MO that can see it through the rest of the journey. They are complementary to each other and perfect companions for the comfortable corporate journey. * * * * * * * * * * * * * * * References : 1. G. T. Lumpkin, , a and Gregory G. Dessb,2001 ) 1 Journal of Business Venturing, Volume 16, Issue 5, September 2001, Pages 429-451 ) 2. Loveman, G. and Sengenberger, W, 1991, ‘The Re-emergence of Small Scale Production: An International Comparison’ Small Business Economics, 3 (1) 1-39. 3. Covin, J. G., Slevin, D. P. and Schultz, R. L. 1994, ‘implementing strategic missions: Effective strategic, structural and tactical choices.’ Journal of Management Studies,31 (3) 481-505. 4. Khandwalla, P.N., 1977 The Design of Organizations, Harcourt Brace Jovanovich, New York. 5. Thelma Quince and Hugh Whittaker ENTREPRENEURIAL ORIENTATION AND ENTREPRENEURS’ INTENTIONS AND OBJECTIVES ESRC Centre for Business Research, University of Cambridge Working Paper No. 271 This Working Paper forms part of CBR Research Programme 3 on Small and Medium-sized Enterprises. September 2003 ( A version of this paper was presented at the 11th High Tech Small Firms conference, Manchester, June 2003. Further information about the ESRC Centre for Business Research can be found on the Internet at the following address: www.cbr.cam.ac.uk ) 6. Ramachandran,K and Ramanarayan, S. 1993 , Indian Institute of Management, Ahmedabad, India - 380 015. Journal of Business Venturing Volume 8, Issue 6, November 1993, Pages 513-524. 7. American Management Association, 2004. 8. Kotler,Philip., Keller,Kevin., Koshy,Abraham., and Jha,Mithileshwar. 2007. Marketing Management, Twelfth Edition, Pearson-Prentice Hall. ( A South Asian Perspective ). 9. Deshpande, R. and Webster, F.E. (1989), "Organizational culture and marketing: defining the research agenda", Journal of Marketing, Vol. 53, pp. 3-15. 10. Baker, W.E. and Sinkula, J.M. (1999), "The synergistic effect of market orientation on organizational performance", Journal of the Academy of Marketing Science, Vol. 27, pp. 411-27. 11. Farrell, M. (2000), "Developing a market-oriented learning organization", Australian Journal of Management, Vol. 25, pp. 201-22. 12. Slater, F.S. and Narver, J.C. (1995), "Market orientation and the learning organization", Journal of Marketing, Vol. 59, pp. 63-74. 13. Halit Keskin, 2006 , Title: “Market orientation, learning orientation, and innovation capabilities in SMEs: An extended model .“ Publisher: Emerald Group Publishing Limited. Journal: European Journal of Innovation Management Year: 2006 Volume: 9 Issue: 4 Page: 396 – 417. ISSN: 1460-1060. ( DOI: 10.1108/14601060610707849 ) 14. Peter Drucker,1973 “ Management: Tasks, Responsibilities Practices “ ( New York: Harper and Row), pp.64-65 15. Phapruke Ussahawanitchakit,2007. Mahasarakham University, THAILAND MARKET ORIENTATION AND COMPETITIVENESS: AN EMPIRICAL INVESTIGATION OF THAI SMEs - JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS, Volume VII, Number 3, 2007 16. Keizer, J.A., Dijkstra, L. and Halman, J. (2002), "Explaining innovative efforts of SMEs: an exploratory survey among SMEs in the mechanical and electrical engineering sector in The Netherlands", Technovation, Vol. 22, pp. 1-13. 17. Motwani, J., Dandridge, T., Jiang, J. and Soderquist, K. (1999), "Managing innovation in French small and medium sized enterprises", International Small Business Journal, Vol. 37, pp. 106-14. 18. Romijn, H. and Albaladejo, M. (2002), "Determinants of innovation capabilities in small electronics and software firms in southeast England", Research Policy, Vol. 31, pp. 1053-67. 19. Farrell, M.A. and Oczkowski, E. (2002), "Are market orientation and learning orientation necessary for superior organizational performance?", Journal of Market Focused Management, Vol. 5, pp. 197-217. 20. Liu, S.S., Luo, X. and Shi, Y. (2002), "Integrating customer orientation, corporate entrepreneurship and learning orientation in organizations-in-transition: an empirical study", International Journal of Research in Marketing, Vol. 19, pp. 367-82. 21.  Carson, D., Cromie, S., McGowan, P. & Hill, J. (1995) Marketing and Entrepreneurship in SMEs An Innovative Approach. Hertfordshire: Prentice Hall 22. Zahra, S. A., and Covin, J. G., 1993, ‘Business strategy, technology policy and firm performance’, Strategic Management Journal,14, 451-478. 23. Salvatore Sciascia1 , Lucia Naldi2  and Erik Hunter2  “Market orientation as determinant of entrepreneurship: An empirical investigation on SMEs “ International Entrepreneurship and Management Journal Issue Volume 2, Number 1 / March, 2006, Pages 21-38 , Publisher Springer Boston, DOI 10.1007/s11365-006-7087-6 Subject Collection Business and Economics, SpringerLink Date Tuesday, March 28, 2006 Authors’ contact Details: (1)  ERDC—Entrepreneurship and Regional Development Center, Università Carlo Cattaneo Castellanza—LIUC, Corso Matteotti, 22, I—21053 Castellanza, Italy (2)  Jönköping International Business School, Jönköping University, Gjuterigatan 5, Box 1026, 551 11 Jönköping, Sweden * * * * * * * * * * * * * * * * * * Read More