The buyer market conditions that emerged in India following its decision to liberalize the economy in 1991 provided the setting for studying the effect of market orientation on organizational performance. Results from a sample of 162 manufacturing and service firms provided support for a strong positive relationship between market orientation and growth in overall revenue, return on capital, success of new products and services, ability to retain customers, and success in controlling operating expenses. The study found that competitive hostility, suppliers' power, and market turbulence did not moderate the market orientation–performance relationship.
An important stream of research currently being pursued in the fields of marketing strategy and strategic management relates to the concept of market orientation. Kohli and Jaworski (1990, p. 3). defined the construct as “the organization wide generation of market intelligence, dissemination of intelligence across departments and organization wide responsiveness to it.” While the business literature has long underscored the importance of market orientation to organizational performance, only recently efforts have been made to operationalize the construct of market orientation Kohli and Jaworski, 1990 and Narver and Slater, 1990 and establish empirical support for its relationship to performance Ruekert, 1992, Jaworski and Kohli, 1993, Slater and Narver, 1994 and Atuahene-Gima, 1996.
The early studies on market orientation examined the construct and its relationship to business performance using US and, to a lesser extent, UK samples. It is only recently that the focus has shifted to studying the construct in non-Western contexts. The results of the body of empirical literature on the subject, however, are equivocal about the importance of market orientation to business performance. For example, Greenley (1995a) found that the market orientation–performance relationship was not statistically significant in his sample of British companies and that the influence of market orientation on performance was moderated by environmental variables. On the other hand, consistent with the results of US-based studies cited earlier, Bhuian's (1998) study of Saudi Arabian manufacturing companies found support for a positive relationship between market orientation and business performance. The inconsistency in results necessitates further examination of the relationship between the two variables in other contexts before one can conclude that market orientation is important to organizations.
The overall purpose of the current study was to examine the construct of market orientation as it relates to a developing country, namely India, which has recently opened up its economy to foreign competition. The study also sought to identify control variables and moderator variables that are unique to the Indian economy, and could affect the market orientation–performance relationship.
The significance of the study is that it tests a phenomenon observed primarily in Western business cultures to a country that, in the words of one observer, “is the first, massive complex developing country to successfully transit from a socialist to a market economy …” (Bullis, 1998, p. xiii). Thus, it seeks to extend findings generated in one context-specific environment to another context-specific setting. From an academic point of view, the current study contributes to the growing body of empirical literature on the market orientation and organizational performance relationship.
In summary, the results of this study show the robustness of the market orientation–performance relationship in the specific context of a developing economy. It also shows that market orientation's relationship to performance is not affected by the competitive environment. A note of caution, however, is in order here. In time, the economic liberalization efforts may result in the Indian economy's maturation. In a mature economy (akin to those found in many developed economies), it is likely that competitive factors may have a stronger impact on the market orientation–performance relationship.3
While several potential avenues exist for further research on the market orientation phenomenon, two areas suggest themselves logically from the current study. The first is the need to look at the market orientation–performance relationship from a longitudinal perspective. In the context of the current study, this could lead to interesting observations. What happens when the business practices of successful Western companies get diffused into the Indian marketplace over time? Could Indian companies exhibit strong market orientation in light of this learning, thereby making market orientation less of a strong explanatory variable to organizational performance?
The second avenue is to look at market orientation not as a monolithic construct, but one that is made up of five individual dimensions, some of which may be more important than others in specific contexts. In a sample of UK companies, Greenley (1995b) found performance differences among organizations with different forms of market orientation. It would be interesting to see if this holds true in the Indian context too.
The body of knowledge on market orientation is growing. The current study explored this construct in the context of a developing economy. As the above paragraphs point out though, a number of issues remain to be investigated to know more about this salient aspect of organization–environment interface.
