Abstract
A great many companies have changed from product orientation to market orientation. The importance of market orientation has been positively advocated and highlighted. This essay explores topic relating market orientation comprehensively. The organizational and managerial characteristics of market-oriented companies are searched, and the antecedents of market orientation of market-oriented companies are investigated. Other issues like market orientation and performance, market orientation measurement and forms of market orientation are all involved. The market orientation of Honda is used as a case. After examining the market-oriented activities of Honda, this essay generally assess the market orientation of Honda and offers some suggestions.
1.Introduction
In the past two decades market orientation has been hotly discussed by academics and practitioners in market field. Kotler (2000) asserts that market orientation is the central concept of marketing. Many academic from other fields also found market orientation relevant to their work (Besanko et al., 2000). Its significant role in companies’ success has been realized as well (Collins & Porras, 1994).
1.1 Concept of Market Orientation
There are various definitions of market orientation, which can be classified into academic perspective and field perspectives (Kohli et al., 1993).
Academic perspectives of market orientation ascribe many meanings to market orientation, including emphasizing more on customer than production or cost ((Kanopa & Calabro, 1971), involving marketing in strategy (Felton, 1959; McNamara 1972), according marketing a leadership role (Viebranz, 1967), to name but a few (additional perspectives can be found in Lavidge 1966 and McKitterick 1957). Although authors mentioned above have different concept for market orientation, they core motifs root in their definitions, coordinated marketing, customer focus and profitability (Kotler, 2000). Kohli and Jaworski (1990) assert that all of the themes have limitations.
Field perspectives of market orientation are derived from working experiences. Interviews with marketing practitioners reveal that market orientation include three elementary factors, intelligence generation, intelligence dissemination and responsiveness (Kohli &Jaworski, 1990).
Integrating both academic perspectives and field perspectives together, Kohli (1993) defines market orientation as the generation of market intelligence fitting to present and future requirements of customers throughput the organization, spread of intelligence with the organization and response to it.
1.2 Market Orientation Measurement
Although many companies are market-oriented, their market orientation levels are different. Insufficient market orientation sometimes is worse than no market orientation at all. So it is important to measure market orientation. Many early studies addressed concerns about measuring market orientation (McNamara 1972; Lawton and Parasuraman 1980), meanwhile their focus were not on measuring development, but adhoc (Churchill 1979; Gerbing and Anderson 1988). Narver and Slater (1990) develop a comprehensive measure with several positive characteristics: not tapping an organization’s speed in generating and disseminating market intelligence; a focused perspective with emphasis on customers and competitions; including several items not tapping behaviors and activities representing market orientation. Kohli et al. (1993) proposed MAROR as a measure of market orientation. They developed a 20-item market orientation scale which is proved to be best represented by the factor structure containing one factor for intelligence generation, one general market orientation factor, one market marketing informant factor one factor for responsiveness and dissemination and one non-marketing informant factor. Deshpandé and Farley (1998) conducted a comprehensive international study to synthesize and retest three measurements of market orientation proposed by three separate groups of researches in 1980s. Their study of managers shows that all the three scale are valid and reliable. They also synthesized a 10-item scale. Gray et al. (1998) replicate and extend the research of both Jaworski and Kohli and Narver and Slater via multi-industry sample of New Zealand companies.
1.3 Consequences of Market Orientation
Organizational performance, customer consequences, employee consequences and innovation consequences are the four consequences of market orientation (Jaworski and Kohli 1996).
The relationship between market orientation and organizational performance is the most concerned topic in market orientation for practitioners and has been explored by hundreds of researchers. The assertion that market orientation can bring better organizational performance has been supported by both marketing academics and practitioners in marketing field (Levitt, 1960; Webster, 1988; Kotler, 2000). Meta-analytic evidence has been used to evaluate the impact of market orientation on organizational (Brown and Peterson, 1993). The view that market orientation is beneficial for organizational performance is predominant (Jaworski and Kohli 1993;
Slater and Narver 1994), however many other researcher have found nonsignificant or negative relationship between market orientation and performance in their own researches (Bhuian 1997; Agarwal, Erramilli, and Dev 2003; Sandvik and Sandvik, 2003). Many other researcher have found their results inconsistent, disparate
findings on of the relationship between market orientation and performance (Grewal and Tansuhaj 2001).
2 Organizational Characteristics of a Market-oriented Company
Every organization has its special characteristics, and has many things in common with others. Companies with different orientation have different organizational characteristics. Cost-oriented companies, product-oriented, sales-oriented companies all have their organizational characteristics. Size, resources, influence and security are four common aspects of organizational characteristics. Market-oriented do have some differences from companies with other orientations. But these are the key characteristics that can generate or maintain market orientation.
Organizational culture is the most important characteristics of market-oriented companies’ organizational characteristic. Christian homburg and Christian Pflesser (2000) apply Schein’s (1992) three-layer organizational culture theory into study of the organizational culture of market-oriented companies. The three layers are basic underlying assumptions, espoused values and artifacts. They conceptualize organizational culture of market-oriented companies as a construct of four components: (1) organization-wide norms of market orientation, (2) organization-wide shared basic values supporting market orientation, (3) the market oriented behaviors, and (4) perceptible artifacts of market orientation. They found that organizations which share basic values of internal communication (Webster 1993) tend to be more market-oriented than other companies. It is because in these companies information is not limited to marketing managers but spread across the organization (Jaworski, 1990). The second result they found is norms can guide market-oriented activities in the organizations. Also they found artifacts in market-oriented companies an important cultural factor affecting market orientation.
3 Managerial Characteristics of Market-oriented Company
Market orientation can only be realized with appropriate management. Market-oriented companies have their special managerial characteristics from other companies too.
Organizational Structure: In market-oriented companies the number of hierarchy levels is usually reduced (Becker and Homburg, 1999). Top executives are required to get closer and more often to customers. Market-oriented companies often set up key account managers (McDonald, Millman and Rogers, 1997). Key account management is viewed as a natural development for market orientation. Senior executives in successful market-oriented firms have a powerful and active role (Hout and Carter, 1995). Market-oriented companies fill key management positions with staff that have strong marketing background (Walter, Huber and Glick, 1995).
Information Management: Market-oriented companies collect actual and accurate information on competitors and customers (Sinkula, Baker and Noordewier, 1997). Collected information should be disseminated to all department within the organization to respond coordinately and effectively to customers’ needs (Kholi and Jaworski, 1990). So to design effective information systems is crucial to market orientation (Kholi and Jaworski, 1990; Naver and Slater, 1990).
Human Resource Management: Only with qualified employees can market orientation be realized. Different employees are more or less prepared to work in market-oriented method (Ruekert, 1992). Market-oriented companies should recruit those who can contribute to market orientation (Schuler, 1996). It is an effective way to improve a company’s market orientation by hiring those who have specific knowledge of competitors. Market-oriented companies tend to improve employees’ market orientation via corresponding development programs (Ruekert, 1992). Market-related performance indicators are widely used to evaluate employees in market-oriented companies (Tosi and Hammer, 1982).
4 Antecedents of Market Orientation
No company is perfectly market-oriented since its birth. All companies gradually become market-oriented out of some reasons. Jaworski and Kohli’s (1993) classify antecedents of market orientation into three types: top management factors, interdepartmental factors, and organizational systems. The values and orientation of an organization are shaped by top managers (Webster 1988). So, an organization’s market orientation is positively influenced by top management emphasis on market orientation (Day 1994; Narver and Slater 1990). Interdepartmental factors encompass both interdepartmental conflict and connectedness. Interdepartmental connectedness enhances market orientation via encouraging greater use and sharing of information (Kennedy, Goolsby, and Arnould 2003). Interdepartmental conflict hinders quick responses to customers’ needs and thus constrains market orientation (Jaworski and Kohli, 1993). Organizational systems, the third set of antecedents, include two structural variables, formalization and centralization. Formalization, the definition of procedures, roles and authority via rules, is oppositely related to market orientation because it stunts a company’s information exploitation and then the development of effective responses to changes in the market (Jaworski and Kohli 1993). Centralization, a limited delegation of decision-making right within the organization, negatively influence market orientation, because it obstacles a firm’s information dissemination and utilization (Matsuno, Mentzer, and Ozsomer 2002).
5 Market Orientations in Honda
5.1 Honda and Its Marketing
Honda, first set up in Hamamatsu in 1946 to produce auxiliary engines for bicycles, has become a world top 10 motor manufacturer. It is now the most international motor manufacturer in the world, being the first Japanese manufacturer to produce in Europe in 1963, the first Japanese automaker in North America in 1982. With a production of 3,012,637, it ranks of all automakers in the world in 2009 [1], the second largest Japanese automaker, following Toyota. Now Honda produces in 29 countries with more than 130 plants, with a portfolio of automobile, internal combustion engines, garden equipment, power generators, robots, aircraft and marine engines and so on.
Honda has long enjoyed fame in its qualified products and capability to meet the demands of customers. Such a success is much due to its excellent marketing. Honda has an outstanding marketing team. They have done a good job in positioning for Honda’s products. Combining price, product, place and promotion to form Honda’s marketing mix. They have made Honda a popular band for middle classes. Honda’s marketing has always been impressive. Dobele et al. (2005) summarize the five important elements in Honda’s marketing campaign: (1) advertising at the right time to gain maximum leverage with a large base of consumers; (2) containing fun and wonder into its message to customers, interesting customers to engage with Honda brand and talk about Honda with others; (3) making full use of technology by marketing besides traditional media like TV, newspaper, creating interactive websites; (4) encouraging customers to spread Honda via word-of-mouth support which can greatly increase the effectiveness of the messages; (5) a real link between brand image and tangible product.
5.2 Market Orientation in Honda
Honda has long been a market-oriented company, eager to meet the needs to auto customers.
Although many people think Honda’s competency exists in its leading technology in engines, it is really a market-oriented company. The motive for Honda to innovate its technologies is to meet the needs of drivers. During 1969-1971, Honda designed CVCC (compound vortex controlled combustion), a technology which can effectively trade off among different pollutants emitted by the engine. Such an innovation greatly satisfies the needs of customers to reduce toxic air emission which harm their health. Its VTEC family, first introduced in 1989, makes a successful trade-off between engine power and fuel economy. VETC meets customers’ desire for more powerful and low fuel-costing automobiles.
Customers always desire new products with some improvement. Honda understands this well. It develops an effective model replacement system to meet market demand. Western automakers change their model with complete change about every ten years and facelift their models about every four years. Different from them, Honda’s new model is neither a completed change nor only facelifts. It officially replaces its model every four years with components which can be seen by drives replaced, other parts unchanged. Then, it changes unseen components two years later every four years. Such a product strategy satisfies customers’ fast-changed needs for new models. Honda changes its model every four year, much faster than its western rivals’ ten years. Another proof of Honda’ market orientation in product is that it develops different products for customer in different markets.
Honda’s market orientation lies in not only the results, but also the process. To meet customers’ fluid demand and requires on fast delivery, Honda develops a small batch production system. Such a system can quickly respond to customers’ needs. To makes such a system efficient, Honda developed free-flow assembly line and learn from Toyota’s just-in-time logistics. More important, it combines product marketing and production planning.
A market-oriented company must adopt homologous management. Honda’s managerial characteristics fit well with the requirements of market orientation. In Honda, there not stiff hierarchy. Members of Honda are like a family. All workers can express his or her different opinions. A collective decision-making style is dominant in Honda. Managers in Honda frequently call together common workers to give their opinions. Workers can be promoted across hierarchies. Although Honda emphasizes cooperation among workers, it also encourages competition among them.
5.3 Evaluating Honda’s Orientation
In general, Honda market orientation is systematic and effective. It pays adequate attention to customers’ behavior and needs and responds quickly to meet them. In this highly competed industry, only those welcomed by customers can survive and succeed. Honda understands the importance of market, of market orientation. To be a really market-oriented and competent company it has adopted market-oriented technology innovation process, product replacement system, product development for different markets, small batch production, just-in-time logistics and many others approaches. At the same time, the traditional collective and harmonious organizational culture of Japanese companies is maintained.
However, Honda also has its weakness in market orientation issues. One obvious weakness is its performance evaluation system in human resource management. Due to the traditional managerial characteristics of Japanese culture in Honda, market-related performance indicators are limitedly used to evaluate its employees. The payment system of Honda, just like other Japanese companies, cannot be market-oriented like western companies. And Honda, bounded by Japanese culture, cannot easily dismiss those employees without strong market orientation.
6.Conclusion
This comprehensively explores issues concerning market orientation. Literature review on the definition of market orientation clarifies the concept and shed light upon the content and importance of market orientation. The discussion on the relationship between market orientation and organizational performance makes us calm about market orientation, not to trust its benefit too much. Measurement of market orientation offers practical and effective scales to measure the market orientation level in a particular organization. Organizational and managerial characteristics of market-oriented companies subscribe the road for companies to turn market-oriented with many useful implications. The antecedents of market orientation show the factors pushing companies to be market-oriented.
In such competitive and information age, many companies especially those international companies have transformed from product-oriented, sales-oriented to market-oriented. Like Honda, many companies are changing their management styles, adopting all possible approaches to satisfy market demand. However, market-orientation is not an easy work to realize market orientation. Relevant materials, financial condition and human resource are needed. And it’s not easy to grasp the essence of market orientation, so companies should act after careful thinking to change their orientation.
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