Market-Orientation During the past decade, market orientation has received considerable attention from both academics and practitioners. This trend reflects both a long standing neglect of construct, (Webster,1988, Kohli and Jaworski 1990) and a widespread acceptance of its importance (Houston, 1986, Webster,1988, Kohli and Jaworski 1990). Building on the initial research by inter alia Kohli and Jaworski (1990), Narver and Slater (1990) Deshpande et al (1993) significant progress has been made in understanding the conceptualisation and measurement of market orientation and evaluating its impact upon business performance.
Definition of market orientation Market orientation can be conceptualised in two different ways. First way, is as a managerial philosophy and strategic orientation or corporate culture. From this approach, market orientation is ‘‘one of the several strategic orientations that an organization may posses’’ (Noble et al. , 2002). Also, market orientation has been defined by Narver and Slater (1990) as well as Day (1994) as a corporate culture. They perceive market orientation as inter-functional coordination of the market information and focus on three components: consumer orientation, competitor orientation and inter-functional coordination.
In this sense, they define it as the coordinated utilisation of company resources in creating superior value for target consumers. Moreover, Slater and Narver (1995) suggested that ‘‘market orientation is the culture that (1) places the highest priority on the profitable creation and maintenance of superior customer value, while considering the interest of other key stakeholders; (2) provides norms for behaviour regarding the organizational development and responsiveness to market information’’.
Market-oriented organizations may be expected to keep abreast of all environmental forces and make every attempt to integrate economic, legal, ethical, and philanthropic responsibilities (Carroll, 1999) into their activities. Secondly, Kohli and Jaworsky (1990) offered a behavioural definition of market orientation. Particularly, they proposed that market orientation consists of three conceptual dimensions: the organization-wide generation of intelligence pertaining to current and future customer needs, dissemination of intelligence across departments, and organization-wide responsiveness to it.
Similarly, Day (1994) refers to market orientation as source of organisational learning. The development of a structure of operation guided by the systematic search of information on consumers and on present and potential competitors, the systematic analysis of such information and the strategic use of all that knowledge. Additionally, according to Kotler and Armstrong (2007) marketing is a social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.
Furthermore, Kotler (2002) states that the marketing-oriented company conducts scientific marketing research to avoid this trap of producing things that consumers no longer want. It is more far-sighted than it is sales force and its distributors and retailers. Sales are about the customer. Marketing is about the customer’s customer. Blois and Dalgic (2000), in their book, refer to market orientation and its implications. They argued that a market orientated company views customers as the most important aspect of their business.
Such companies view the gaining and retaining of customers as their main objective. In order to do this they operate in ways that will satisfy the demands of customers. As each customer may have their own, very individual needs and desires, Blois and Dalgic (2000) argue that a market orientated company must be able to respond to customers on an individual basis, in order to satisfy those needs. They state that these companies put the highest priority on the profitable creation and maintenance of superior customer value.
Alongside, they go on to sub-divide market orientated companies into “A” and “B” types. They define “A” type companies as those who seek to understand and meet the needs and wishes of its customers, and “B” type companies who see market orientation as solely a “quick fix” solution to such problems as falling sales or as increased competition. They state that it is likely that “A” type companies will be small (but developing), with a very strong management style and company philosophy and identity while “B” type companies are usually older, larger, and more conservatively managed.
Kotler (2007) characterize an “A” type company as having stated ideals and corporate philosophy on organizational culture, and, perhaps most importantly, as delivering their marketing concept successfully. This last point is emphasised, as it was previously mentioned, by Kohli and Jaworski (1990) who stated that the concept of marketing is only a philosophy, whereas to be classed as truly market orientated a company has to implement this philosophy. In other words, a market orientated company must not only have the ideals and structures described, but must successfully implement them, hence satisfying the wants and needs of its customers.
They must “walk the walk” as well as “talking the talk”. Measuring Market Orientation Although there have been several studies investigating the market orientation-performance relationship in small businesses. Pelham (1999, 1997)’s study identified several mediating variables, such as firm effectiveness, that influenced the relationship between market orientation and performance in small industrial firms. However, these results are not generalized to small-sized service retailers as the latter differ from industrial firms in terms of having greater firm-wide contact with the customers, competition, and profit margins, among others.
The objective of this study therefore is to investigate the role of market orientation on small-sized service retailer performance. Market orientation has been one of the most important concepts studied in the discipline. Among several available scales for measuring market orientation Wrenn (1997) Wrenn, LaTour, and Calder (1994) Deshpande et al(1993) Churchill (1979), perhaps two closely related frameworks have been the foundation for much of market orientation research. The first framework is offered by Narver and Slater (1990).
After an extensive review of literature on sustainable competitive advantage and marketing strategy, Narver and Slater (1990) operationalized market orientation as consisting of three behavioural dimensions (customer orientation, competitor orientation, and inter-functional coordination) and two decision-making criteria (long-term focus and profit focus). The second framework is suggested by Kohli and Jaworski (1990). They offered a process-driven model that considers the stages of generating, disseminating, and according to Noble, Sinha, and Kumar (2002) responding to market intelligence as the essence of market orientation.
Briefly stated, Kohli and Jaworski (1990) defined market orientation, as “organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization-wide responsiveness to this intelligence. ” Factors of the implementation of market orientation It is worth pointing out the factors of the implementation of market orientation for a company.
Kohli and Jaworski(1990) defined the antecedents to a market orientation as “the organizational factors that enhance or impede the implementation of the business philosophy represented by the marketing concept”. They argued that the choice of an internal perspective is appropriate “because managers have more control over internal antecedents compared to external ones” (Jaworski and Kohli, 1993). As Pulendran et al. (2000) emphasizes there are four antecedent factors such as the top management, the organizational systems, interdepartmental dynamics and a reward system orientation that could subsequently influence market orientation.
However, according to Harris and Ogbonna (2001) leadership style is also a critical antecedent of market orientation, moreover, Guo (2002) adds by arguing that superior customer value is a mediator that connects market orientation to performance. Likewise, Jaworski and Kohli (1993) found several factors as important antecedents of the implementation of a market orientation. One of the factors is top management emphasis on market orientation. Another factor is the calculated risk-taking and willingness to accept occasional failures of new products and services by top management.
The development of interdepartmental dynamics and connectedness, and the elimination of interdepartmental conflicts is the third factor. Besides, the installation of a market-based rewards system as well as less centralization, formalization, and departmentalization within the company are other two factors that are distinguished by Jaworski and Kohli (1993). Alternatively, Narver and Slater (1990) made a major contribution to the development of research on market orientation. Their study did not explicitly identify internal antecedents, although it did note the potential importance of external environmental influences.
Specifically, they adopted a more culture based perspective on market orientation. Thus, Harris (1996) focused his efforts on uncovering the underlying organizational culture and beliefs that support the market oriented activities. He proposed a model of market orientation antecedents incorporating four components including basic assumptions, shared beliefs, organizational antefacts and organizational symbols. Consistent with the marketing concept, customers have traditionally been considered to be the primary focus of a market orientation (Deshpande, 1989).
Other researchers, however, have begun to embrace a broader perspective on the market orientation construct by including exogenous factors that influence customer needs, such as competitors and even government regulation (Kohli and Jaworski 1990, Lusch and Lazniak 1987). Consequently, despite the academic emphasis on customer orientation, practitioners may actually be influenced to operate with a strong focus on competitors. To sum up, clearly there are variations between how different experts and writers define a market orientated company. However, there are some general areas on which most agree.
In particular, a market orientated company should: 1. Know what its customers want and need 2. Actively investigate its market, to establish this 3. Have a culture that allows it to respond to these wants and needs, and 4. Deliver to its customers those goods and services which its customers demand A company which knows what its customer’s demand, but fails to meet those demands, can hardly be considered as successfully market orientated company. The true measure of whether a company is market orientated might be summed up as – do they give the customer what the customer needs and wants?
Case Study Ryanair History review of Ryanair Ryanair is an Irish airline headquartered in Dublin that created in 1985. Its biggest operational base is at London Stansted Airport, it is Europe’s largest low-cost carrier and it is one of the world largest and most successful airlines (whether in terms of profits, number of flights, number of passengers flown). Ryanair operates – at one count – on 460 routes to 25 countries. Ryanair has been characterised by rapid expansion, a result of the deregulation of the air industry in Europe in 1997. Over the years, it as evolved into one of the world’s most profitable airlines (www. telegraph. co. uk/news/main) running at remarkable margins by passing its costs directly to its customers. Ryanair is the third largest airline in Europe in terms of passenger numbers carrying just over 40 million in 2006. However, before we characterize whether Ryanair is a market oriented or not, first we need to critically examine Ryanair’s performance in terms of the four criteria stated above. Identify customer’s wants and needs Ryanair passenger numbers have grown at an astonishing rate, as has profitability.
This should be seen against a background where many airlines, particularly older, established national carriers such as British Airways, Aer Lingus, Air France, Alitalia etc have continually struggled with rising costs, falling passenger numbers, and, in some case, near bankruptcy. The response of some of these industry giants has been to try to emulate Ryanair and other low-cost carriers, by either creating their own subsidiary budget airlines, or in some cases by repositioning themselves, at least partly, within the market, as low or lower cost operators.
Ryanair also takes an individualistic approach to advertising. It uses no outside agencies or consultants, but prepares all its material in-house. Possibly as a result of this they have received many complaints about their publicity work – they have had a series of rulings made against their advertising material by authorities in various countries. Criticisms cover a variety of issues, from adverts being misleading to those deemed offensive. One British court described a Ryanair advert as “vulgar”.
As Kohli and Jaworski (1990) argues an organization that is market oriented not only pertains to monitoring customers’ needs and preferences, but it also includes an analysis of how consumers might be affected by factors such as government regulation, technology, competitors, and other environmental forces. Investigation of its market In utilising competitor analysis as part of strategy formulation, firms are able to adapt or build their own strategies and be able to compete effectively, improve performance and gain market share in their businesses.
In a large number of instances, firms are able to tap new markets or build new niches. For example, after European air travel was deregulated in the mid-1990s, Ryanair focused on the no-frills market and provided low-cost travel across Europe after figuring out through competitor analysis, where the opportunities were emerging (Binggeli and Pompeo, 2002). The authors showed that, at the point in time, Ryanair was performing better than its competitors with operating margins of 26% and 9. % respectively, which was significantly better than the operating margins achieved by the traditional airlines. Among Ryanair’s main low-cost competitors are EasyJet, Monarch Airlines, Bmibaby, Centralwings, Air Berlin, Germanwings, Transavia, Jet2, SkyEurope, Vueling, Wizz Air, Flybe, Thomsonfly and TUIfly. In 2004 approximately 60 new low-cost airlines were formed. Despite traditionally being a full-service airline, Aer Lingus moved to a low-fares strategy from 2002, leading to much more intense competition with Ryanair on Irish routes.
Airlines which attempt to compete directly with Ryanair are treated harshly, with Ryanair reducing fares to significantly undercut their competitors. For example, in response to MyTravelLite, who started to compete with Ryanair on the Birmingham to Dublin route in 2003, Ryanair set up competing flights on some of MyTravelLite’s routes until they pulled out. Go was another airline which attempted to offer services from Ryanair’s hub at Dublin to Glasgow and Edinburgh in Scotland.
A fierce battle ensued, which ended with Go withdrawing its service from Dublin(Quinn,2003). Thus, Ryanair knows its competitors very well and has the ability to withdrawing them from the market through its competitive advantage which is low prices. A culture that allows responding to customers wants and needs Ryanair, and in particular Chief Executive Michael O’Leary also seem to relish confrontation, not only with the regulators and governments, but also at times with news media and even with passengers.
Most notoriously, after being told that it was obligatory to carry passengers with mobility problems, the company responded by introducing a surcharge on all passengers, stating that this was to cover the additional cost of handling wheelchairs etc. More recently, the company introduced charges for handling checked-in baggage, again stating that this reflected the cost of such services. While such a move does little to endear it to customers used to having such services included in its ticket cost, it perhaps worth remembering that this “unbundling” of services is often called for by overnments and regulatory bodies in many industries. Ryanair’s methods of operation are often at odds with conventional business practice. The company created its website for on-line booking in 2000, but initially viewed this as more of a novelty than a genuine service. The prime motivation for offering the service seems to have been to gain publicity, luring passengers to book on line and so eliminating the added costs of booking with travel agents. However, over time that attitude changed considerably.
In the pace of a year the website accounted for half of all bookings made, and now on line booking is the only means offered by the company for passengers to make reservations. Within three months the site is taking over 50,000 bookings a week, and becomes the only source of the lowest airfares in Europe. In addition, ryanair. com allows passengers to avail of the lowest cost car hire, hotel accommodation, travel insurance and rail services. Ryanair perceive that its customers are solely interested in price and it is what they deliver.
However, there is also plenty of evidence to suggest that Ryanair prefers to rely on its own perception of the market. It consistently refers to its “stack” me high, “sell” me cheap” philosophy in its public utterances. Deliver goods and services which customers demand It is important to define if Ryanair delivers to its customers those goods and services which its customers demand as Kotler (2007), Blois and Dalgic (2000) argue to their researches. Ryanair has been criticised for many aspects of its customer service.
It has been reported that some newspapers have columns especially for customer complaints about Ryanair. Ryanair staff has been accused of behaving rudely to passengers. There have been numerous incidents, including the following which have appeared in the press like using foul and offensive language and attempting to grab a boarding card from a passenger, or treating passengers dismissively during a security alert as well as behaving in a menacing manner towards passengers. The airline company, also sometimes makes changes to its flight times at relatively short notice.
However, several factors make this particularly problematic in the case of low-cost carriers in general and Ryanair in particular the company notifies affected passengers by email rather than by telephone, so there is sometimes a delay before the passenger learns of the change (passengers on holiday may not have regular access to email). Also, because Ryanair does not provide connecting flights, many passengers make their own connections by booking separate tickets. If the Ryanair flight time change, makes the connection impossible and the passenger loses the cost of the connecting flight unless this is covered by travel insurance.
Apart from that, the only way for a passenger to contact Ryanair is through a premium rate phone line. The attitude of Ryanair towards its customers comes in contrast with Blois and Dalgic (2000) arguement that a market orientated company must be able to respond to customers on an individual basis, in order to satisfy those needs. Despite the fact that Ryanair had many complaints about its customer service it was awarded, in 1999, as “Best Value Airline” by the UK “Which” Consumer Magazine. In October 2006 many newspapers seemed to relish the results of a survey by TripAdvisor.
The survey reported that flyers with Ryanair complained of poor staff attitudes, delays and little leg-room, and rated Ryanair as the worst airline to travel with. Interestingly though, in 2007 IATA reported that Ryanair is now the worlds most popular airline, at least when evaluated in terms of passenger numbers carried. Also in June 2007 a report by the Association of European Airlines Ryanair’s record on punctuality, baggage handling and flight completion was superior to any other airline in Europe.
In responding to such reports Ryanair continues to stress that the number of passengers being carried shows the “true” popularity of its services. Besides, the company has the youngest fleet in the world with an average aircraft age of just two years. Punctuality is also second to none, and Ryanair was beating Easyjet for punctuality every week for three years solid. The airline carries more passengers in August than British Airways on their entire worldwide network, making Ryanair “The World’s Favourite Airline. Also, the company reiterates the “no fuel surcharge guarantee” as airlines such as British Airways, Air France and Lufthansa continue to supplement their already high fares with fuel surcharges. In conclusion, while Ryanair is undoubtedly a very successful company, especially in terms of profitability and volume of sales as it has risen to start-up to be the world’s largest carrier of international air passengers in 22 years. According to Ryanair’s philosophy the company is market oriented as well as product oriented.
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