Market Orientation

Transforming Food and Agribusiness around the Customer

Martin Hingley, Paul Custance, Adam Lindgreen

• Publisher: Routledge
• Year: 2016
• Print ISBN:
  9780566092084
• eBook ISBN:
  9781317100447
• Topic: Business
• Subtopic: Business General
• Index: Business

Marketing orientation is both the key objective of most food producers and their biggest challenge. Connecting food and agricultural production with the changing needs and aspirations of the customer provides the means to ensure competitive advantage, resilience and added value in what you produce. But market orientation is not something that you can just buy in or bolt on to what you do. Market orientation is a matter of changing the culture of your organisation; finding ways of learning more about your customers and understanding their needs; changing your development and reward systems to educate your employees; it may also involve significant changes to your production processes. This comprehensive collection of original research explores the challenges and opportunities associated with market orientation along the food supply chain; from the animal feed industry to meat retailing and from organic foods to old world wines. All the chapters provide exceptional insight into understanding how market orientation can benefit food suppliers and how it is essential for long-term success.

PART IImplementing Market Orientation

CHAPTER 1 Making the Transformation Toward a Market-orientated Organisation: A Review of the Literature

BY ERIK M. VAN RAAIJ*

Keywords

market orientation, implementation theory, organisational learning, literature review, evolution of theory

Abstract

Since its inception 50 years ago, the marketing concept has served as marketing’s implicit theory of the firm by relating performance differentials among firms to their degree of market orientation. Despite significant advances in the development of market orientation theory, a large void remains in the literature when it comes to studies that tackle the implementation of market orientation. This chapter assesses the current status of market orientation literature and reviews the most prominent implementation approaches published since the ‘Rediscovery of the Marketing Concept’ in 1988.

Introduction

Many organisations aspire to become more market oriented. Various developments fuel this drive to instil a more outward orientation in organisations. First of all, increased competition, shorter product life cycles, and more demanding customers drive firms toward establishing a focus on customers, competitors, and the market in general. Examples of such environmental pressures to become market-oriented appear in this book, including Bijman’s review of agricultural cooperatives, Bröring’s assessment of the livestock feed industry, and Santini et al.’s insights into the wine industry. Second, performance that falls short of targets may drive top management to take corrective action, and this unsatisfactory performance may be ascribed to a lack of external focus, as Fotopoulos et al. describe in their chapter in this book. Third, macro-economic developments can be a driving force behind the search for a customer or market focus. Privatisation, deregulation, and cutbacks on government subsidies push organisations toward a more conscious consideration of customer demands and competitive advantages. Examples include the privatisations of railways, postal services, and airports;¹ deregulation in the utilities sector, health care, and the food industry;² and subsidy cutbacks for cultural organisations and charities.³

At the same time, while academics as well as practitioners can easily connect to the market orientation theme, they are often talking about concepts other than what has been defined as a ‘market orientation’ in scholarly literature. As Lear has noted,⁴ if we can use the term market orientation so loosely, we can say a lot about market orientation while in fact doing quite different things.

The market orientation concept has its origin in a management philosophy known as ‘the marketing concept.’ The marketing concept has been a cornerstone of the marketing discipline since Drucker first argued that ‘[t]here is only one valid definition of business purpose: to create a customer’ and described marketing as ‘the whole business seen from the point of view of its final result, that is, from the customer’s point of view.’⁵ Over the years, it has served as marketing’s implicit theory of the firm by relating performance differentials between firms to their degree of market orientation.⁶ The marketing concept has appealed to generations of managers and been one of marketing’s most influential ideas. And yet, formal research into the concept has been lacking until the academic ‘rediscovery’ of the concept,⁷ which led to a stream of recent research papers. This contemporary market orientation literature deals with four issues:

1. The definition issue, focusing on the conceptualisation of the construct. This literature addresses the question: What is a market orientation?⁸

2. The measurement issue, focusing on the development of scales. This literature is concerned with how the market orientation construct can be operationalised and assessed.⁹

3. The model issue, focusing on the antecedents and consequences of a market orientation. This literature deals with the causes and effects of a market orientation.¹⁰

4. The implementation issue, focusing on approaches for managerial action to implement a market orientation. This literature addresses the question: How can firms become more market oriented?¹¹

The emphasis of this chapter is on the fourth issue: implementing a market orientation. I start with a discussion of the historical roots of market orientation. Then, I summarily discuss the definition issue, the measurement issue and the model issue, all with a particular focus on the implementation of a market orientation. Subsequently, I concentrate on the implementation issue itself, presenting the most prominent implementation approaches published to date. The chapter concludes with an evaluation of the current status of the market orientation concept and the outlook of the field.

Historical Roots of the Market Orientation Concept

The literature provides wide support for the idea that the market orientation concept, as it is discussed in today’s marketing journals, originates from the ‘marketing concept.’¹² Drucker defines the central tenet of the marketing concept as ‘marketing is the whole business seen from the customer’s point of view’ and illustrates the marketing concept with the example of General Electric, where a reorganisation in the early 1950s provided marketing with the authority to direct engineering, design and manufacturing on the basis of their market knowledge.¹³ Sachs and Benson trace the central theorems of the marketing concept back to two philosophical strains of the eighteenth century:¹⁴ rationality of man and utilitarianism. Rational consumers seek to maximise utility, and based on this notion, companies should be created in which marketing identifies the consumers’ utility functions and ‘will establish for the engineer, the designer, and the manufacturing man what the consumer wants in a given product, what price he is willing to pay, and where and when it will be wanted.’¹⁵

The advent of the marketing concept has been attributed to the maturing of the United States economy in the 1950s. The transformation from a production economy to a consumption economy was characterised by an abundance of suppliers and brands and an increasingly affluent consumer.¹⁶ Keith, at that time executive vice-president of The Pillsbury Company, describes how a marketing revolution took place in his organisation as a result of the emancipation of consumers and the consequent necessity to align the company with the needs and wants of current and potential customers.¹⁷ According to Webster,¹⁸ the marketing concept was pushed into the background by the advent of financial planning and strategic planning in the 1960s and 1970s, but it was ‘rediscovered’ in the late 1980s. Houston adds that the misapprehension and the misuse of the marketing concept (e.g., the misguided advice that companies should depend on current, expressed needs and wants of customers) also contributed to its temporary decline in popularity.¹⁹

Two influential publications in the Journal of Marketing that emanated from Marketing Science Institute–sponsored research heralded a new era.²⁰ Subsequent works use these publications as a reference point, and in the academic debate, the term ‘marketing concept’ has been replaced by the term ‘market orientation.’ Kohli and Jaworski prompted this replacement by using the term market orientation to mean the implementation of the marketing concept: organisations that implement the marketing concept (a management philosophy) possess a specific trait, which is called market orientation.²¹ The Kohli and Jaworski and Narver and Slater papers made an impressive impact on the marketing literature. They were the first attempts to define market orientation, develop scales for measuring the construct, and formulate propositions that linked market orientation to business performance. A formidable body of literature has been built on the foundations laid by Kohli and Jaworski and Narver and Slater. I first turn this chapter to the way in which ‘market orientation’ is defined in existing literature.

The Definition Issue

In this section, I will focus on definitions of market orientation and thus leave out definitions and descriptions of the marketing concept before 1988. The most influential definitions are undisputedly those of Kohli and Jaworski and Narver and Slater.²² But to put these definitions in perspective, a wider set of definitions is provided here:

• A company is market oriented if ‘information on all important buying influences permeates every corporate function,’ ‘strategic and tactical decisions are made interfunctionally and interdivisionally,’ and ‘divisions and functions make well-coordinated decisions and execute them with a sense of commitment.’²³

• ‘Market orientation is the organisationwide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organisationwide responsiveness to it.’²⁴

• Market orientation is defined as ‘the business culture that most effectively and efficiently creates the necessary behaviors for the creation of superior value for customers.’ Market orientation ‘consists of three behavioral components – customer orientation, competitor orientation, and interfunctional co-ordination – and two decision crit...

Table of contents

• Cover Page
• Half Title Page
• Dedication
• Title Page
• Copyright Page
• Contents
• List of Figures
• List of Tables
• About the Editors
• About the Contributors
• Reviews for Market Orientation
• Foreword and Acknowledgments
• Part I Implementing Market Orientation
• Part II Marketing Agricultural Products
• 6 Production and Marketing Innovation in the Argentine Beef Sector: The Prinex Case
• 7 Agricultural Cooperatives and Market Orientation: A Challenging Combination?
• 8 Can Cooperatives Build and Sustain Brands?
• 9 Role of Market Orientation in Improving Business Performance: Empirical Evidence from Indian Seafood Processing Firms
• Part III Market Orientation in the Downstream Food Chain
• Part IV Market Orientation For Specialty Products
• Index