Market Orientation, Product Innovation and Market Performance: the Case of Small Independent Companies

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Table of Contents

Introduction
Literature Review
Methods
Analysis
Conclusions
Critique
Works Cited

Introduction

The article selected for this critique is titled, Market Orientation, Product Innovation and Market Performance: the Case of Small Independent Companies. The 23-page article has been authored by Frans Verhees. By writing this article, the author intends to provide a brief review of the available literature on market orientation.

Further, the author also intends to propose a market orientation measure that can find application in small independent firms. In order to achieve this, the author has deemed it necessary to develop a conceptual framework that will facilitate the assessment of how innovation among the small independent firms has been impacted on by the issue of market orientation.

There are two identifiable contributions of the study in question: to start with, the author has in his study endeavored to extend the concept of market orientation theory to the small independent firms. In addition, the author also attempts to investigate how the levels of innovations among the small independent firms have been impacted on by market orientation.

The rest of the article has been structure in the following manner. Section two of the article is concerned with the review of mainstream research with respect to the issue of market orientation.

Still in this section, the author has also endeavored to provide a proposal for assessing a measure of the issue of market orientation, as it impacts on the small independent firms.

In the third section of the article, an analysis model and a conceptual framework for the association between product innovation and market orientation with respect to the small independent firms has been provided.

Further, the article has also sought to explore a number of hypotheses regarding this relationship. Between sections 4 and 7, the author seeks to put to the test the proposed model, along with the associated hypotheses, with the specialized growers of roses in the Netherlands.

The managerial implication associated with the results of testing the hypothesis and the proposed model has been provided in section 8 of the article. Finally, the author provides recommendations for further research into the topic in future studies in section 9.

Literature Review

In this section, the author has examined how the incorporation of the concept of market orientation to the small independent firms could benefit enormously from the already established body of knowledge on this particular concept, along with its general application.

The article provides concrete definition of such important concepts as market orientation. In this case, the author has used the definition provided by the works of Kohli and Joworski and Narver and Slater. The article has also further provided a discussion on the market orientation measures and provided these measures for a number of purposes.

Prior to utilizing items from diverse measures of the concept of market orientation with a view to developing novel market orientation measures, the author of this article has deemed it appropriate to first ensure that these items so chosen cover similar constructs.

In this regard, the intention of the authors was to decide on the most appropriate items from a list of classic market orientation measures in order to facilitate in the identification of marketing orientation measurers that would be suitable for application in small independent firms.

In a bid to achieve this purpose, the author deems it necessary to categorize the classic review items on market orientation measures. To start with, the author has provided a review of the market orientation elements as recognized in the classic market orientation measures.

In addition, the author has also proposed an ideal categorization scheme that could be adopted for this particular study. Secondly, the author has then attempted to match the identified classes with the classic market orientation measures.

The definition of market orientation as provided by Narver and Slater in 1990, and which has been used by this particular study, recognizes the following market orientation elements: competitor orientation, customer orientation, long-term focus, interfunctional co-ordination, and profitability.

Regarding the issue of the market orientation classic measures, the author opines that these elements refer to either a process or an object that is very vital for market orientation.

By referring to the classic market orientation measures as provided by Jaworski and Kohli, Narver and Slater, and Ruekert during the early 1990s, and which the author of this article has deemed it necessary to cite, the article has in effect recognized two objects that are quite vital in as far as the issue of market orientation is concerned: the customer, and the competitor.

Further, the author also recognizes there categorize of associated process that are quite significant in market orientation: processes that are aimed at enhancing the amount of available market know within a given firm, that is the generation of intelligence; those processes aimed at efforts co-ordination within a firm, that is, the dissemination of intelligence, strategy development, and interfunctional co-ordination; and process with a demonstratable market impact, that is, market-oriented strategy implementation, and responsiveness.

The author has also further made reference to a number of influential authors in as far as the theory of market orientation is concerned for purposes of providing additional knowledge to those individuals who may wish to gain additional knowledge on the impact of market orientation on a business.

The article has also provided a literature review on the market orientation characteristics that defines small independent firms. In this regard, the author reveals how these characteristics could in fact make a number of the items or elements in the classic market orientation measures less applicable or relevant.

In line with this, the article starts by first comparing the medium-sized or large firms with the small independent firms in as far as the issue of market orientation is concerned.

In order to facilitate in a proper structuring of the discussion, the author of this article has also deemed it appropriate to make use of the processes and objects that are quiet significant in market orientation.

Thereafter, the article seeks to discuss the implications of the identifiable differences for purposes of facilitating an assessment of the elements of market orientation that may find a useful application in the small independent firms.

Further, the literature review by this particular article has also endeavored to provide a proposal for an assessment of those components of market orientation that if applied, could best fit the small independent firms.

At this point, the author reminds us that one of the aims of the study is to facilitate in the development of measures that can be applied to the small independent firms.

Towards this end, the authors confide that he is only aware of an article by Pelham and Wilson that was published in 1996, as the only study that they could identify as having applied in its methodology the issue of market orientation with respect to the small firms.

These authors made use of a market orientation measures that relied on the measures of what actually constitutes a small company as revealed by Narver and Salter, in 1990. In this case, a firm that has an average workforce of 21.5 employees is often regarded as a small firm.

On the other hand, the author is quick to note that the elements that Narver and Slaters used in their measure failed to match the sample of the small independent firms that have been used in this particular article as a sample.

Another area of the literature review that the author of this article has sought to examine is the impact that market orientation has had on the innovation of products. At this section of the literature review, the author also endeavors to examine the model and conceptual framework that the study shall be based on.

The author argues that upon a successful identification of market orientation measures, this in effect allows a researchers to assess the existing relationship between on the one hand, product innovations in small firms and on the other hand, market orientation.

The available literature has also provided an argument to the effect that when we endeavor to emphasizes more on changing the markets, this in effect leads to a sensitization of organizations, and a generation of ideas, so that they can now realize the need to come up with innovative solutions.

The author has also provided an opposing argument to this issue by suggesting that when we attempt to emphasize more on our competitors and customers, this in fact acts as a way of inflicting on ourselves mental blinks, thereby discouraging the development of frame-breaking innovations. The author is also quick to recognize that the available literature on this particular issue is quite limited.

The model for this particular study emphasizes on product innovation since the term marketing, as defined from the conventional marketing point of view, is largely related to the product. Besides, the author argues that there is still the need to undertake further research into this area seeing that we now have a low rate of success in as far as the innovation of new products is concerned, further pointing out the low rates of improvements in the innovation of products, in the last two decades.

Prior to proposing a model needed to aid in the exploration of the relationship between on the one hand, market orientation and on the other hand, innovation, the author has firms seen it fit to first discuses a number of the specific concepts of this particular relationship as experienced in organizations.

To start with, the author has explored the available tools to a manager to enable him/her shape the companys desirable final product. Afterwards, the author examines a managers decision process within the setting of a small independent firm. On the basis of this lien of reasoning, the author has arrived at the following study hypotheses:

H1: There exists a positive correlation between product innovation and a market orientations behavioral component
H2: A positive relationship exist between the performance of the market and product innovation
H3: The performance of the market and a market orientations behavioral component are both positively related
H4: A market orientations behavioral component is related positively to the size of a firm
H5: There exists a positive relationship between on the one hand, a market orientations behavioral component and on the other hand, its attitudinal competent
H6: The existence of a positive relationship between a market orientations attitudinal and behavioral components leads to a positive impact on a market orientations attitudinal component, as it relates to product innovation.
H7: The existence of a positive interaction between market orientations behavioral and attitudinal components results in a positive impact on a firms market performance.

Methods

Growers of roses within the Netherlands were identified by this study as the sample with which to test the hypotheses. The reason behind the choice was that in the Netherlands, all growers of roses happen to be small independent firms.

During the development process of the market orientation measure with respect to the small independent companies under study, the researcher conducted a pre-test by utilizing the market orientation scale with a view to removing difficult to answer or ambiguous questions.

The administration of the market orientation items to company executives took place in person, and the modification their comments formed the basis for the modification or deletion of items that had raised concerns with the respondents. Eventually, only 44 items remained.

In terms of the operationalization of the model, the researchers made use of the average annual prices for the different varieties of the roses, along with their exact dates of introduction for cultivation in the Netherlands from various databases.

The operationalization of company size was on the basis of the size of the land under the cultivation of roses, by a single rose grower.

On the other hand, the operationalization of market performance, company size, and product innovation utilize different methods of measurement from those utilized by market orientation. As such, variance in shared method has little or no impact on the implications of overestimating market orientation.

The researchers also deemed it necessary to conduct separate regression assessment for individual classes of the roses (that is, small head roses and big head roses). In order to facilitate in hypotheses testing, the OLS regression analyses found use in conducting a path analysis.

This was necessary, in order to assess the indirect and direct implications of market orientations attitudinal component on market performance and product innovation.

Analysis

Items with increasing knowledge of the market by the company and those that were mainly interested in the customer impacted greatly on the market orientations behavioral component.

On the other hand, those items that had a customer and end-user orientation as the central focal points, and those that recorded an enhanced knowledge of the market appeared to impact greatly on the attitudinal component, as it impacted on the market orientation factor.

As a result, an assessment of the most important elements of each factor revealed that neither the behavioral element of market orientation, nor its attitudinal component could have been regarded as a uni-dimensional construct.

When a confirmatory factor analysis was carried out, it revealed that the classes of the items that shared similar object of interest or process enjoyed enhanced positive standardized residuals on the one hand and on the other hand, they possessed enhanced negative standardized residuals when compared with other items, a further indication that this was a separate factor that distinguished the two items.

Although there was a clear resemblance of the market orientations attitudinal component for all the items with those identified by Narver and Slaters measure, nevertheless, it is important to note that in this particular study, all the items identified had been newly generated.

Items contained within this particular construct also bore a much closer resemblance with the market orientations elements, in comparison with those from the behavioral component.

Items were also seen as a reflection of the held attitudes towards the market orientation elements, such as customer orientation, end-user orientation, and intelligence generation.

On the other hand, the researchers opted to preserves both the responsiveness and competitor orientation as inconsequential components, in a single item of the attitudinal component measures of market orientation.

When a confirmatory factor analysis had been conducted, it helped to reveal the uni-dimensional state of the final measures. In addition, the study also yielded construct reliabilities for the market orientations attitudinal and behavioral components of 0.94 and 0.82, respectively.

To achieve this, the researchers made use of the formulas that Hail and colleagues had suggested in 1992. Further, the researchers also calculated factor scores, and these found application in subsequent analyses.

A conduction of separate regression analyses for firms with small flowers and firms with small flowers, to facilitate in testing the study hypotheses.

Conclusions

The study revealed that the small independent firms can also successful apply the concept of market orientation and that product innovation is often stimulated by a market orientations behavioral component.

On the other hand, product innovation can only be stimulated by a market orientations attitudinal component by the impact that the latter (attitudinal component) has on the behavioral component.

Besides, the positive impact that market-oriented behavior has on the performance of the market is only partially impacted on by innovation. Although there is also an additional reason why the market performance could be impacted on positively by the market-oriented behavior, however, these have not been addressed by the model for the current study.

Critique

The topic of the article is a case study on how market orientation, market performance and product innovation interact in the small independent firms. The topic in question suits the definition of strategic marketing and the advancement of organizational effectiveness in the UAE.

This is because as a developing economy, there is a higher likelihood for the establishment of an increased number of small independent firms. Accordingly, a sound assessment and comprehension of the issue of market orientation, market performance and product innovation with respect to the small firms in Netherlands would also enable their counterparts in the UAE to overcome the pitfalls that they could have been faced with.

In addition, by definition, strategic management is the recognition by a firm of one or more of its sustainable competitive advantage that such a firm possesses in its market of operation, along with the allocation of the necessary resources to facilitate an exploitation of such competitive advantage (s).

In this case, product innovation and market orientation are perfect examples of the sustainable competitive advantages of a firm. As such, the topic of the article gives the reader a further insight into the practical application of the concept of strategic marketing at a firm level.

With regard to the issue of market orientation, the article has provided sufficient definitions of this term. In addition, the author has also proposed market orientation measures for adoption by the small independent firms.

At this point, the article fails to define the term product innovation, even as it constitutes a vital component of the topic in question. Moreover the article lacks a clear definition of the term market performance.

On the other hand, the authors of the present study have provided a clear and detailed model and conceptual framework to facilitate the examination of the relationship between on the one hand, product innovation and on the other hand, market orientation in the small companies.

Although the entire sources used y the author of the article are credible, nonetheless, the author could; have attempted to use more-up-to-date references.

For example, although the article was published in 2004, however, none of the sources used had been published between 2000 and 2004, and the most current source cited by the article was published in 1999.

Considering the high rate of dynamism in the field of academic research, perhaps the use of more up-to-date sources would have helped to provide useful insights into the research questions under study.

One of the strengths of the article is a clear definition of the problem. The various sections of the article have also been categorized into individual chapters and this makes it easier for the reader to transit into the successive section of the article.

On the other hand, the article has failed to identify the possible limitations that the researchers could have been faced with while undertaking the study. The study was also limited in scope in terms of the dimensions of market orientation. In this case, only two dimensions namely, behavioral and attitudinal components were utilized.

An adoption of additional components of market orientation to the current study could have perhaps helped to shed morel light on the study objectives.

The questionnaire used by the researchers has also failed to capture information on how the adoption of novel innovations in additional fields related to the current studs could have had an impact on the desired final product. Examples here include quality revolutions on the basis of process innovations and innovations in packaging.

The present article is plays a vital role in contributing to the wider body of knowledge in the area of strategic management. This is because it has helped to reveal how the application of the concepts of product innovation and market orientation could impact on the market performance of small independent firms.

In addition, the research findings are not generally known because not many similar studies have previously been carried out. Most of the previous studies have targeted the large firms and as such, the research findings of the present study are quite valuable in providing the much-needed information.

The article is written in a coherent and understandable language. The author has also endeavored to define terms such as market orientation. The use of logical explanations and practical examples that a reader can identify with also helps to alleviate any prior perception regarding its difficulty.

To those in the academic world, the article provides useful insights as a point of reference while undertaking future related studies. To the practitioners, the article offers practical ideas for adoption and replication into different economic and geographic settings.

Works Cited

Narver, John and Slater, Stanley. The Effect of a Market Orientation on Business Profitability. Journal of Marketing, 54(1990): 20-35

Kohli, Ajay and Jaworski, Bernard. Market Orientation: The Construct, Research Proposition, and Managerial Implications. Journal of Marketing, 54(1990: 1-18.

Verhees, Frans. Market Orientation, Product Innovation and Market Performance: the Case of Small Independent Companies. Journal of Small Business Management, 42. 2(2004):1-23

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