Market Orientation in Business - Essay Example

 Market Orientation in Business The time we live in can be characterized by not only a high level of globalization, dramatic environmental situation, and global economic crises, but also an extremely competitive market. As a result of a high level of competition, both big companies and small enterprises need to develop and then implement the most effective marketing strategies in order to stay on the market and remain profitable. There are various marketing orientations a company may choose from. Some of them prove to be effective for almost any type of business while other appear to be useful only under certain circumstances. Within a framework of this paper, one of the most effective marketing orientations will be considered, and the examples of its use in business will be provided. The marketing orientation that is going to be considered is linked to profitable and successful business by numerous of experts. This marketing orientation is usually presented as a possible alternative to a traditional marketing concept. The name of this marketing concept is market orientation, and its advantages, disadvantages, and special features are going to be considered. Considering any business term requires a clear understanding of what is meant by its name. Thus, it is necessary to give an explanation of the term ‘market orientation’ before going to its detailed analysis. According to a definition provided by the Business Dictionary, market orientation is ‘a business approach or philosophy that focuses on identifying and meeting the stated or hidden needs or wants of customers’(The Business Dictionary 2015). As stated in the Cambridge Dictionary, by the term ‘market orientation’ one should understand ‘management of a company, product, brand, etc. so that it satisfies the needs of customers’(The Cambridge Dictionary 2015). In the book ‘Changing Market Relationships’ written by Jean-Jacques Lambin, market orientation is defined as ‘a set of capabilities, activities and behaviors needed to implement a strong marketing orientation’ (Lambin 2008). Despite the fact that all the definitions mentioned above reflect the main idea behind market orientation quite clearly, the most comprehensive definition of the term is presented by Morgan and Strong in their work named ‘Market Orientation and dimensions of strategic orientation’. In this work, the two authors define perceive the concept of market orientation as a certain mode of corporate management that is founded on encouraging a permanent gathering and sharing of statistical information regarding customers, appreciation of customer needs as a fundamental aspect of the business (Mitchell, Wooliscroft, and Higham 2010). Speaking of the definition of the term ‘market orientation’ it is necessary to mention the concept of Kohli and Jaworski, who consider market orientation approach an idealistic philosophy that is hardly possible to apply in practice. These two experts identify the three major elements of the market orientation, namely, market intelligence generation, responsiveness, and market intelligence dissemination. As for the market intelligence generation, it should be understood as a broader concept of customer intelligence. It consists of monitoring of such aspects as government regulations, technological innovations, competition on the market, and other factors that influence or might influence customers’ needs in the future. The market intelligence dissemination stands for the involvement of all departments of the organization into the process of responding to the needs of a market. In other words, using a market orientation approach presupposes a dominance of a horizontal communication within virtually all departments of a company. Speaking of responsiveness, Kohli and Jaworski mean actions taken as a response to market intelligence made in a form of selecting particular target segments, or designing the product that cater to the needs of a customer and then promoting it (Lambin 2008). There are four major stages of creating a market orientation. The first stage is called initiation. During this stage, the executive board of a company recognizes a possible external threat to its company and prepares an implementation of market orientation identifying initiatives necessary for the process of transformation. The second stage is known as reconstitution, and it consists of presenting a plan of transformation to the whole organization. The following stage is called institutionalization, and it occurs as soon as a market-oriented behavior of a company becomes officially incorporated within the entire organization. The last stage of the process, the maintenance stage, is characterized by a company’s protection of its already established market-oriented culture. This last stage requires a maximum of attention, because, as it has already been said, a market-oriented strategy based on the wrong data is worse than having no market-oriented strategy at all (Gebhardt, Carpenter & Sherry 2009 ). Speaking of the history and the origins of the concept, one needs to mention that the origins of the concept appear to be a subject of heated discussion among the experts, of the field, including Narver, Slater, Gainer, Lopez, Carr, and so forth. While some were arguing about the market orientation tracing its origins from the general market concepts, others were claiming it to be wrong. It is necessary to point out that the history of the approach is believed to be about 40 years long, but it has already proved to be one the most successful ones within a framework of marketing. All the experts studying the concept of market orientation managed to find a point of agreement, which states that market-oriented approach in marketing products or services leads to a better performance, increases customer’s satisfaction rates, and supports loyalty of both customers and employees (Shcalk 2008). The effectiveness of the market orientation approach can also be described with statistical data. For instance, one study of the recent years managed to found out that those businesses that used market orientation as the main marketing concept appeared to gain 31 percent more profit than their self-centered competitors. At the same time, those companies who did not pay attention to their competitors but still used a market orientation approach resulted in 19 percent more profit than self-centered companies (Day 2012). Proceeding from the information mentioned above, it becomes clear that a type of marketing behavior must contain a list of advantages in order to be as effective as described above. Therefore, one needs to consider the strong points of market orientation. One of the first advantages of market orientation approach is its investment efficiency and superior cost. It can be applied to almost any industry of business that some customers are more profitable than others. As a result, the winners are those companies that manage to identify what segment of customers gives the most of profit and to keep their loyalty for as long as possible. Since the market orientation approach is about paying the most of attention to customer’s needs and wants, it also pays attention to the profitability of customers’ accounts. The next advantage of the approach concerns the level of employees’ satisfaction. Speaking of this advantage, it needs to be pointed out that satisfied employees are usually both a consequence and a cause of customers’ satisfaction. This is an indirect type of profit coming from a small amount of money required for a low level of employee turnover. When the majority of employees are enthusiastic and committed about the firm they work for, they usually appear to be more loyal. As a result, the money that were supposed to be spent on selecting, recruiting, and training of new workers got saved. Another aspect commonly considered to be an advantage of the market orientation is a price premium. According to the opinions of experts, a market orientation approach makes its contribution to a better value proposition. This more powerful value proposition, in its turn, leads to a greater value, which usually results in a price premium. Apart from the advantages mentioned above, there is also a benefit of a revenue growth. Although the evidence regarding this particular fact is not as conclusive as for other advantages of the market orientation, it is commonly believed that due to a superior ability to deal with permanently changing target requirements and market innovations is very likely to result in a revenue growth. The last but not least advantage of a market orientation concept is its competitive preemption. By this needs to be understood that when a customer is highly satisfied with a product or service he or she gets from a particular company, this company automatically erects switching barriers that are hard to break for competitors. This can be explained from either a psychological or economic point of view. On the one hand, a satisfied customer is likely to resist changes on the emotional level, and there is an economic risk of making a switch to another brand, on the other hand. To sum up all the abovem entioned advantages of the market orientation concept, one needs to point out that all the benefits of using this concept are based on a superior ability to analyze and understand a market, as well as to retain and attract customers. Those companies that choose to use a market orientation approach are more successful mostly because there are able to anticipate the moves of competitors, to sense the emerging opportunities, and to make decisions based on actual facts and statistics (Day 2012). Notwithstanding the long list of the advantages, a market orientation approach also has its drawbacks. At the outset, one needs to point out that in order for a market orientation approach to be successful, a company cannot afford to miss the mark. When it happens, a company appears to use an ineffective approach to reaching its customers. Some experts claim that working with wrong data can lead to even worse outcomes than working without any data. Another aspect that needs to be considered when speaking of the weak sides of a market orientation approach is the risk of underestimating the customer. When choosing to rely on a market orientation strategy, it is necessary to keep in mind that today’s customers can easily compare, review and access other customers’ reports in order to choose what fits them best. Proceeding from this, it is possible to make a conclusion that in order to remain effective, a market orientation approach, thus, needs to be adjusted to these new highly informed customers in. One more disadvantage of a market orientation approach is that requires a quick respond to even minor market changes. In other words, under the circumstances of a modern world, it is no longer possible to determine a long-term market orientation strategy and follow it not making any adjustments. New players are entering the market, new technologies affect the need for a certain service or product, and it is necessary to permanently update information responding to numerous external factors. The last disadvantage to mention is that understanding the needs of customers cannot guarantee the desired result, since price and quality are also important factors to consider. On the basis of information provided above, it is possible to make a conclusion that a market orientation approach can be successfully applied to any industry and any kind of business. It is clear that there are many companies, including Dell, Shell, or Merck, which did not rely on a market orientation approach exclusively. Instead, Dell has achieved mastership in customization of personal computers, while Shell has used a strategy of decentralization in order to take its leading place within the industry. However, although these companies might not seem market-driven ones at first glance, they are, in fact, even more market oriented than they think. A great example of a market-oriented company is Apple. Although some might argue that the key aspect of its success is the highest quality of products, in fact, Apple achieved its worldwide triumph by constantly monitoring its markets and adjusting its products in response to the customers’ needs. Another world recognized company that can be a telling example of how efficient a market orientation is the world’s most famous brand of coffee shops called Starbucks. At the beginning of its history, the company positioned itself as a premium class coffee shop for successful businesswomen in thirties as the main target group. It also needs to be pointed out that initially Starbucks did not even have a marketing department at all. The company considered it an insufficient aspect of a business. However, at a certain moment, the rate of customers’ satisfaction started to decline, just like the profit of the corporation. In a response to this, the company requested analytical reports. It has been identified that during a couple of years, a target audience of the brand had shifted from its initial one to younger people with lower income. The board was surprised to learn this, and as soon as the company adjusted its strategy to the newly identified facts, the rate of customers’ satisfaction started to grow again. Moreover, the decision to create a department of marketing had been made. In order to make a conclusion to everything mentioned above, one needs to point out that the high level of competitiveness and extremely informed customers, even the company producing the product of the highest quality and selling it for a reasonable price should not underestimate the importance of using a market-driven approach. Staying alert to the changes that happen on a global market as well being responsive to constantly changing needs of customers are two major aspects that contribute to success in today’s business realities. Therefore, any company willing to be profitable and successful in its industry should seriously reconsider its strategy unless it already works by the principle of market orientation. Reference List Day, JS, 2012. ‪The Market Driven Organization: Attracting And Keeping Valuable Customers‬. New York City: Simon and Schuster. Available from: < https://books.google.com.ua/books?id=8xZiORNX3hIC&pg=PT18&dq=market-driven+orientation&hl=ru&sa=X&redir_esc=y#v=onepage&q=market-driven%20orientation&f=false> [19 October 2015]. Gebhardt, FG, Carpenter, G & Sherry, JF 2009, Walking the walk: creating a market orientation. The Kellogg Insight of the Kellogg School of Management. Available from: < http://insight.kellogg.northwestern.edu/article/walking_the_walk> [19 October 2015]. Lambin, JJ, 2008. 'Changing market relationships in the Internent Age', Louvain: Press Universitaires de Louvain. Available from: < http://books.openedition.org/pucl/1648> [19 October 2015]. Mitchell, R, Woolscroft, B, & Higham, J, 2010. ‘Sustainable Market Orientation: A New Approach to Managing Marketing Strategy’, Journal of Macromarketing (Impact Factor). Available from: < http://www.researchgate.net/publication/235356628_Sustainable_Market_Orientation_A_New_Approach_to_Managing_Marketing_Strategy> [19 October 2015]. Schalk, AP, 2008. ‘Effects of Market Orientation on Business Performance: Empirical Evidence from Iceland’, University of Iceland Publishing. Available from: < https://notendur.hi.is/th/MSritgerdir/ritgerdir/ArtSchalk.pdf> [19 October 2015]. The Business Dictionary, 2015, 'Definition of market orientation', The Business Dictionary. Available from: < http://www.businessdictionary.com/definition/market-orientation.html> [19 October 2015]. The Cambridge Dictionary, 2015, 'Market orientation', The Cambridge Dictionaries Online. Available from: < http://dictionary.cambridge.org/de/worterbuch/englisch/market-orientation> [19 October 2015]. Read More