The Relationship Between Market Orientation and Business Performance
Numerous research and analytical studies signify that market orientation has a powerful impact on organizations’ performance. According to Kotler and Keller (2012), it is of utmost importance for companies’ productive operation to find a connection with their customers. An integrated marketing orientation presupposes understanding consumers by attaining a holistic view of their everyday needs as well as the transformations they experience in their lives.
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With the help of such an approach, the organization may predict the needs of its clients and market necessary products to the right people in the correct way (Kotler & Keller 2012). Strategic orientation manifests the company’s philosophy of performing business operations through a collection of beliefs that direct behaviors in order to generate a positive economic trend (Ngo & O’Cass 2012). There are several types of orientation that may help managers to develop the most successful operation of their companies.
Production orientation concentrates on adaptability and effectiveness. Innovation orientation focuses on the desire to change that stimulates the introduction of advanced ideas throughout the organization. Selling orientation puts emphasis on the increase of short-term sales (Ngo & O’Cass 2012). Market orientation is particularly significant since it is the core driver of resource ownership and the firm’s capability to redistribute resources.
Market orientation is comprised of two crucial elements: marketing resources and marketing capabilities. Marketing resources are defined as the level at which a company operates knowledge and resources associated with marketing mix schemes such as product, distribution, value, and marketing communication (Ngo & O’Cass 2012). Marketing capabilities are considered as the ability of an organization to carry out marketing routines with the help of which a company converts accessible resources into profitable outputs (Ngo & O’Cass 2012). Therefore, market orientation is considered as a key component of successful business performance within organizations.
Critical Success Factors Related to Achieving Market Orientation
In order to achieve market orientation, the following critical success factors are suggested:
- market conditions (number of clients, long-term market expansion, frequency and amount of ordering, and price development);
- the strategy of the business system and competitive position (market share, the comparison of market share with that of the largest organizations, the growth of price as compared to competitors, quality of the product, level of innovation, and market segmentation);
- elements of the production process (level of vertical integration, productivity, capital intensity, and capacity application);
- budget distribution (budget for promotion and advertising, budget for development and research, and personal sales budget);
- strategy followed by the company (types of adjustments in different factors);
- results (the growth of cash flow and profitability) (Tomczak, Reinecke & Kuss 2017).
The first thing to be considered when pursuing market orientation is analyzing market conditions and planning the organization’s production process in accordance with them. In the case of Sat & Co., McGuire performed the analysis of market conditions when the company was in a threatening situation (Singh 2008). Upon the analysis, the firm’s marketing director found out that Sat & Co. had been offering its customers the features they did not want or need (Singh 2008). Upon his investigation, McGuire was able to identify the major problems in the company’s operation process, and he came up with several ideas on how to eliminate adverse outcomes of those issues. However, despite negative aspects, the company’s strategy was aimed at returning its previous profits and stability, which meant that it would do everything possible to satisfy its customers.
A serious obstacle in the work of Sat & Co. was that it failed to allocate budget costs correctly. The company paid much attention to the development of the computer numerical control (CNC) division and disregarded the improvement of the lathe machines manufacturing process (Singh 2008). As a result, customers who purchased lathe machines did not have to pay much for their products while CNC division consumers were forced to pay more money for products since the company spent a considerable part of its budget on improvements in that sphere.
The Impact of Critical Success Factors on Competitive Advantage
Competitive advantage is one of the most critical constituents of any company’s successful operation. In Sat & Co., there were no significant problems of sustaining a high level of competitive advantage due to the firm’s long-lasting traditions and loyal customers. However, the inability to provide the effective functioning of such factors as the strategy pursued by the company and strategy of the business system undermined the organization’s competitive advantage.
The problem with the strategy of business unit was that it had radically different approaches to the two divisions. The division of lathe machines had not suggested any innovations for a long period of time whereas the CNC division had been renovated for several times. Such a disparity led to losing the competitive advantage in both spheres. One group of customers tended to buy cheaper CNC products from other companies.
Another group of consumers preferred to buy more innovative lathe machines from Sat & Co.’s competitors. There was another crucial aspect common for both groups of clients. The company neglected its customers’ needs and decided to customize some elements without performing the analysis of the clients’ needs (Singh 2008). Thus, they offered three-axis spindles while customers preferred one- or two-axis spindles in most cases (Singh 2008). Such an attitude to formulating a strategy led to adverse outcomes that were reflected in customers’ refusal to continue their cooperation with Sat & Co.
Company’s strategy failure was closely associated with the problems of planning in business unit. Rather than asking its customers what they needed, Sat & Co. decided to improve the elements that were quite satisfactory and neglected the opinions of its loyal clients. According to Hershfield (2013), it is crucial to predict the future situation and see whether the changes introduced will be necessary. In Sat & Co.’s case, no such predictions were made. Because of that, the organization lost many customers and experienced a considerable decrease in profits. The company’s competitive advantage was poor, and clients turned to other firms rather than continue cooperating with Sat & Co.
Strategies Recommended to Sat & Co.
Creating market orientation and increasing competitive advantage are difficult but necessary tasks in the way of saving a company, increasing its profits, and gaining stability. Many ways of reaching market orientation have been suggested, some of which did not prove to be successful. For instance, the company Best Buy employed the approach of separating the customers into good and bad ones, which did not bring any positive results (Elberse, Gourville & Narayandas 2007). A positive approach is sampling products, during which clients can try new options and decide whether they need them or not (Biswas et al. 2014). In every particular case, strategies should be customized for each organization. In the case of Sat & Co., the following solutions seem the most reasonable.
Ways to Achieve Market Orientation
Achieving a market-oriented approach is the most crucial element for returning the former good image of Sat & Co. and making its endeavors productive and profitable. The first suggested strategy to create market orientation at Sat & Co. is changing the organizational culture in the company. Sat & Co. seems to have focused on the production process and neglected the significance of a team of people who have diverse functions and each of whom should take care of different levels of company’s operational process.
The organization has to define its vision and mission and bear in mind the importance of such factors as the environment, customers’ expectations, and integrity of all business decisions made by the company. Apart from hiring a marketing director, Sat & Co. should also introduce a strong team of public relations specialists who will analyze the needs of the clients and report about any inconsistencies between customers’ desires and company’s offers.
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The second approach to achieving market orientation is creating value for customers. Sat & Co. has been focused on profits for some time rather than taking into consideration the requirements of the clients. Moreover, it has been including the features that customers found redundant. As a result, it spent extra money on the implementation of the elements that were not even needed for the clients. Since people did not want to buy such products, Sat & Co. experienced considerable losses. By creating value for customers, these issues will be eliminated. The company will produce the things exactly how people need them, and customers will buy products because of their efficiency characteristics.
Approaches to Increasing the Competitive Advantage
Competitive advantage is no less important for the successful operation than market orientation. Two strategies for creating such advantage are proposed: cost leadership and differentiation strategy. Cost leadership presupposes the possibility of an organization to propose the products of equal quality but at a lower price than its competitors do. In the case of Sat & Co., the analysis performed by McGuire will be of great help when building this strategy. McGuire concluded that some features added by Sat & Co. to their products were unnecessary (Singh 2008). Thus, by removing such features, the company will be able to reduce the cost of their machines. Also, it should eliminate the amount of innovative technology use, which will also result in reduced prices.
The second approach suggested for increasing Sat & Co.’s competitive advantage is the differentiation strategy. This method is more complicated than the first one. Differentiation strategy views lower costs as only one of many ways of being better than the competitors. In this approach, market segmentation should be performed to help Sat & Co. analyze their consumers’ needs and purchasing behavior (Kotler & Keller 2012). The organization will be able to determine the segments that should be targeted. On the basis of the obtained data, Sat & Co. will be able to create a marketing plan that will be followed in order to achieve the most positive outcomes. Upon the implementation of the suggested strategies, the company should arrange regular assessment sessions to analyze the benefits and limitations of the new plan as well as suggest any improvements to it.
Biswas, D, Labrecque, LI, Lehmann, DR & Markos E 2014, ‘Making choices while smelling, tasting, and listening: the role of sensory (dis)similarity when sequentially sampling products’, Journal of Marketing, vol. 78, no. 1, pp. 112-126.
Elberse, A, Gourville, J & Narayandas, D 2007, ‘Angels and devils: Best Buy’s new customer approach (A)’, Harvard Business School, 1 February, pp. 1-5.
Hershfield, H 2013, ‘You make better decisions if you “see” your senior self’, Harvard Business Review, June, pp. 1-3.
Kotler, P & Keller, K 2012, Marketing management, 14th edn, Pearson, New York, NY.
Ngo, LV & O’Cass, A 2012, ‘Performance implications of market orientation, marketing resources, and marketing capabilities’, Journal of Marketing Management, vol. 28, no. 1-2, pp. 173-187.
Singh, S 2008, ‘Sat & Co.: market orientation’, Harvard Business Review, 25 February, pp. 1-10.
Tomczak, T, Reinecke, S & Kuss, A 2017, Strategic marketing: market-oriented corporate and business unit planning, Springer Gabler, Wiesbaden, Germany.