Market Orientation, Competitive Advantage And Organizational Performance

After more than 20 years' reform and opening, the gap between China and Western countries is narrowing. However, in such an era that information technology developing rapidly, customer preference diversifying day by day, product and service renewal cycle reducing more quickly with the trends of global economy integration, only blend with the international economy can China grasp the opportunities of development, which propose severe challenges for our enterprises: how can enterprises gain competitive advantage in this changing and risky world with uncertainty through deploitation and innovation?Experience of enterprises in western developed countries indicated that only be market-oriented to response to environmental changes can businesses be in an impregnable position in the competition. Therefore and with no doubt, it would be of special important practical significance to measuring the level of market orientation of Chinese enterprises, analyzing the relationship among market orientation, competitive advantage and organizational performance, so as to point out the direction of our enterprises to further raise their market-oriented level and then achieve competitive advantages.On the other hand, despite the popularity of market orientation research for a decade and a further study may be considered as something of drifting with the stream, there are still spaces worthy to be discussed in current literature in that refraining from doing is equivalent to giving up eating for fear of choking. Firstly, empirical findings suggested that there are differences on the casual relationship between market orientation and organizational performance although majority of scholars believe that market orientation can improve organization performance. Secondly, current market orientation literatures concentrate on empirical study while neglect theory construction, which lead to a trivia and a fission, lacking a theoretic explanation mechanism on the relationship between market orientation and organizational performance. Thirdly, few of scholars analyzes the relationship between market orientation from the view of competitive advantage ignoring the fact that marketing and strategic management are closely linked, and "competitive advantage is in the core of organizational performance in a competitive market" (Porter, 1985). Fourthly, for a long time empirical study of the relationship between market orientation of mainland China businesses and their performance was neglected, however, market orientation is a key for our country to establish and consummate socialist marketeconomy and optimize resources allocation. Implementing market orientation to enhance managerial level and strength competitive power has become an urgent matter for China enterprises' survival and development especially after joining WTO and omni-directional opening.In view of this, this article takes the relationship among market orientation, competitive advantage and organizational performance as the theme, attempts to construct a theoretic framework through literature review, theoretic deductive reasoning and exploratory interview with enterprise management, and take Chinese enterprises as the sample of empirical research to confirm the relationships among the concepts in the proposed theoretic framework, according to which to proposes management enlightenment.The paper divides into three parts, the wedge, the theory and literature review, and empirical research. Chapter one constructs the wedge, mainly expounds the theoretic research background and the motive, research goal, scope and research frame of this paper. Chapter two, chapter three and chapter four compose the second part, i.e. theory and literature review. Based on a review of market orientation, and reorganization of views on competitive advantage and organization performance, this paper takes the integration of industry-based view, resource-based view and relational view of the origin of competitive advantage theory as the surface, market orientation as the line, describes the intrinsic logic of market orientation, competitive advantage and organizational achievements. The third part is empirical research, which mainly elaborates the framework of empirical research and research methods, including chapter five, chapter six, and chapter seven, demonstrates the collection, reorganization and analysis of the data, analyze characteristics of the sample, reliability, validity as well as overall framework, and according to the above, the paper proposes conclusions and its management enlightenment and policy implication to Chinese businesses, points out the limitation and gives advice on further research.Chapter one mainly elaborates on the research background and motive of this paper, namely there are still latent potentialities to be tapped in market orientation research. Based on the research potentialities and inspection of relevant theories, this chapter proposes the main research goal of the paper, that is, to deduce and analyze empirically the relationship among market orientation, competitive advantage and organizational performance as well as diagnose the effect of environment characteristics and strategic type on market orientation. At the same time, Chapter one also remarks the research scope, methods, content and creative ideas.Review on existing literature constructs the foundation of further research. However, a complete and mature integrity has not formed yet, nor have agreementachieved on many issues for market orientation research. To trace the origins of market orientation so as to deepen our understanding, in the first instance, chapter two briefly elaborates the philosophic foundation of market orientation, namely marketing concept from its germination to formal proposition, till deduction and development, fusing relevant expatiation of both western countries and ancient China. And points out that marketing concept emphasizes the key for enterprises to succeed lies in effective understanding and meeting customer's needs and wants comparing to their competitor, constructing customer relationships from a long-term viewpoint. Afterwards, in order to describe a complete picture of current market orientation research and the vein of its development, the paper takes the time as a criteria, divides the evolutionary process of market orientation into five stages from concepts, scales and analysis techniques. Namely, introduction (1950's -1960's), barrier discussion and rectification (mid 1960's - mid 1980's), generalization and operationalization (mid 1980's -1990), climax (1990 -2000) and deepening (2000- ). Laid the above as the foundation, the paper discriminates and integrates the definition of market orientation from four angles of view, that is, behavioral perspective, cultural perspective, system-based perspective and relational perspective, and form a concept frame for market orientation through cultural, system-based and relational aspects. The paper believes that market orientation is s one kind of organization culture containing behavioral elements in essence. Under the market-oriented cultural atmosphere, business is urged to enhanced the level of market orientation of its managerial systems by taking measures on process-reengineering, structure-flatting and so on to cultivate and consolidate the relationship between organization and its customers and partners, thus ram foundation for enterprise's profit and sustainable development. To get a clearer understanding of market orientation, the paper briefly analyzes the difference between market orientation and customer orientation as well as marketing orientation. After that, antecedents and consequence of market orientation discussed in existing literatures are inducted and reorganized, so as to lay a foundation for later analytical framework. In addition, chapter two also comments on domestic market orientation research by dividing them into literature review, empirical research and theoretic application.Since rarely has scholars to analyze the relationship between market orientation and organizational performance from the perspective of competitive advantage, the paper uses a chapter of length to inspect the concepts, definition and classification of strategy, competitive advantage, organizational performance and relevant empirical results relating to market orientation so as to provide empirical support before the theoretic explanation mechanism is established. In the first place, chapter three discusses the evolution and definition of strategy, analyzes different annotation ofdifferent scholars to strategy, enumerates the representative classification, and explains in detail why the paper adopts the classification by Miles & Snow(1978), who divide strategy into four types, namely defender, prospector, analyzer and reactor. The purpose of strategy development lies in successful attainment of competitive advantage, based on Drucker's insights on business that "it is customer who define business", the paper divide competitive advantage into differentiating advantage and low cost advantage, defines from customer's perspective that competitive advantage means that an enterprise is in the place to provide customers superior compared to its competitors, hold dominative power for a certain period and obtain profits above average level. Review on strategy and competitive advantage constitutes section one of chapter three. Section two analyzes the implication and classification of organizational performance, from three different angles, the performance indicators can be divided into uni-indicator and multi-indicators, financial indicators and non-financial indicators, subjective indicators and objective indicators, furthermore, advantages and disadvantages of different kind of performance indictors are anatomized. Section three comments on the empirical research of the relationship between two of the three, that is, market orientation, competitive advantage, organizational performance, while section four compiles related literature on the effect of environment characteristic and strategic types on market orientation, thus provide empirical support for the research frame of the paper.Chapter four constructs an integrative analysis frame from which competitive advantage originates, based on comments on the different explanation to the source of competitive advantage, i.e. the industrial-based viewpoint, the resource-based viewpoint and the relation-based viewpoint, and discussion of the compatibility and complementarity of the three viewpoints. In conformity with the frame, the paper carries on the analysis of the relationship between market orientation and competitive advantage so as to deduct the intrinsic logic among market direction, competitive advantage and organizational performance. From the industrial-based viewpoint, market orientation may powerfully consolidated enterprises' basic strategy, redound to attaining competitive advantage based on outstanding customer value; from the resource-based viewpoint, as one kind of unique resources deeply rooted in the cultural stratification, market orientation has the characteristics of strategic resources, such as rareness, specificity, casual ambiguity, path-dependency, which would be helpful for businesses to construct isolative mechanism, gain and cultivate strategic resources and capabilities, thus can effectively promotes the establishment and consolidation of competitive advantage; from the relational viewpoint, to implement market orientation would make for enhancement of relationship quality between enterprise and its network partner, advancement and strengthening ofrelationship management, making trust, satisfaction and commitment accumulated in relation network sources of competitive advantage. According to the above, market -oriented level is positively related to competitive advantage, and competitive advantage is closely correlated with organizational performance. Therefore, we can infer that there is causal relation among market orientation, competitive advantage and organizational performance.In chapter five, a research framework on the relationship among market orientation, competitive advantage and organizational performance is established with competitive advantage as an intermediary variable grounded on review in the fore-cited literature review and deduction and a series of research hypothesis are proposed. Measurement issues of market orientation, competitive advantage, organizational performance, environment characteristics and strategic types are discussed. The paper takes subsidiaries of nation-wide enterprises and enterprises located in Central China as samples, of which the valid samples count for 221. T-test, correlation analysis, Cronbach's alpha reliability analysis, exploratory factor analysis, confirmatory factor analysis, structural equation model analysis are used to confirm each hypothesis respectively.Quantitative methods such as describable analysis, reliability and validity analysis and LISREL analysis are used in chapter six to test hypothesis proposed. The major empirical finding shows that: (l)overall, the theoretic model fit is acceptable, which indicates that casual relationships among market orientation, competitive advantage and organizational performance are truly existing in that the research framework gains empirical support; (2) three constructs of market orientation, i.e. customer orientation, competitor orientation and inter-functional coordination have positive impact on both differentiating advantage and low cost advantage; (3) competitive advantage has direct influence on organizational performance, among them, differentiating advantage has more impact than low cost advantage; (4) environment characteristics and strategic types do mediate the impact of market orientation on the competitive advantage.Chapter seven analyzes and discusses research conclusion, research limitation and advice on further study. At the same time, the paper combines the managerial practice with research findings to elaborate the enlightenment for both Chinese enterprises and government. The paper suggests that the market-oriented levels of our enterprises are still in the low position in that market liberalization is in process and system hindrances are also remained, but competition is becoming more and more cut-throat while our businesses managerial abilities are not ideal, which urges our enterprises to be market-oriented to construct competitive advantage. Only then hasthe possibility to realize the sustainable development of our enterprises. In order to enhance the overall market-oriented level, Chinese enterprises should build corporate culture with distinct Chinese characteristics, enhance the market-oriented level of the organization system, the information system, the plan system, the control system, and the human resources management system, as well as take market orientation as guidance strengthening relations management, improving relationship quality to comprehensive advancement of market orientation implementation. On the other hand, the government should play a positive role in the promoting market orientation through speeding up market liberalization, building a fair and competitive market, reorganizing the market order and perfecting legal system for market economy to urge Chinese enterprise to enhance their level of market orientation and strengthen their competitive power.Comparatively, the innovations of this paper mainly manifests in the following five aspects. Firstly, the selected topic has already grasped existing questions and deliberating margin in current market orientation research, as well as combined the research with the needs for Chinese enterprises to be market-oriented and leverage competitive advantages in transition economy. The overall research construct of the paper has not yet been mentioned in the past literature, which makes the paper a pioneer in related domestic research. Secondly, the vein of market orientation research has been systematically described in the paper, related literature has been discriminate and integrate to construct a concept framework for market orientation, which would be helpful to identify the definition of market orientation and deepen our understanding to the essences of market orientation. Thirdly, the paper has synthesized industrial organization theory, resource-base view, transaction cost theory, strategic management theories and marketing theories, from three angels of view, i.e. outside-in, inside-out and enterprise-stakeholder to induce and summarize the originating explanation of competitive advantages. Furthermore, an integrative analysis frame has been proposed to lay the rationale for us to grasp the origin of competitive advantage and instruct the building of competitive advantages. Fourthly, the paper has not followed the way of the past research to propose a research framework only based on discussion of the relationships among variables, but has blended theories of various disciplines as foundation to build a theoretic explanatory mechanism for the relationship between market orientation and organizational performance from the angle of competitive advantage, thus has made up a blank for current market orientation research. Fifthly, based on empirical results and combined with practice, the paper has analyzed why the average market orientation of Chinese enterprises remains at a low level, making the concept framework of market orientation as a platform, systematically elaborated how our enterprises take a seriesof measures to enhance market-oriented level as well as the related action that government should take to promoting market orientation, which would be of certain guiding sense to Chinese business managerial practice.In brief, this paper has provided an evidence which proving that market orientation has positive effect on organizational performance in a transition economy, embodying management theory and economic theory, research on market orientation and theories relating to competitive advantage, integrating normative study and empirical research. The paper also demonstrates how market-oriented management should apply to Chinese enterprises. I do hope this paper would be of help for Chinese enterprises to implement market orientation, as well as the explanatory mechanism between market orientation and organizational performance, and even the market orientation studies.