The past two decades have witnessed a growing understanding and interest in the market orientation concept (Grewal & Tansuhaj, 2001, Hunt & Morgan, 1995, Lee et al., 1997, Narver & Slater, 1991, Pulendran et al., 2003, Ruekert, 1992 and Schlegelmilch & Ram, 2001). While research in this area initially focused on the conceptualization of the market orientation construct (Kohli & Jaworski, 1990 and Narver & Slater, 1991), it has since developed to encompass different contexts, (c.f. Bhuian, 1998, Chang & Chen, 1998, Hooley et al., 1998 and Pelham, 1997) and different antecedents and consequences (c.f. Harris, 2000, Jaworski & Kohli, 1993, Ruekert, 1992 and Siguaw et al., 1994), identifying the market orientation construct with a multitude of factors. One factor that is consistently recognized as significant is organizational structure. Despite these studies having examined a number of important dimensions of organizational structure (such as centralization, formalization, departmentalization), the relationship between market orientation and supply chain configuration has been neglected. For example, while Siguaw, Simpson, and Baker (1998) explore the market orientation typologies within buyer–seller relationships, they do not take a holistic view of the supply chain.
The identification of the need for a holistic view of supply chain configuration is consistent across the economics, strategy, and operations management literatures and is regularly linked with marketing. For example, in the economics literature transaction cost theory has been developed with the key objective of identifying suitable supply chain configurations by understanding their boundaries within markets (Coase & Coy, 1937, Williamson, 1971 and Williamson, 1975). Equally the vertical integration literature suggests supply chain configuration decisions are made with customer needs in mind (Burgelman & Doz, 2001, Harrigan, 1984, Harrigan, 1985a and Harrigan, 1985b), while the supply chain literature observes control of the supply chain is essential in delivering on promises to customers (c.f. Lee et al., 1997 and Pereira, 2001). A common theme is emerging. Supply chain configurations are increasingly disintermediated, adopting partial or quasi-integration rather than pursuing more traditional, full vertical integration. Quasi-integration allows firms to maximize their ability to quickly adapt to changing market/customer demands (c.f. Blois, 1972, Cairncross, 2002, Levitt, 1983 and Porter, 1980). Despite the recognition of the need for a ‘demand’ driven approach to the supply chain (c.f. Levitt, 1983) the implications for market orientation are poorly understood.
The aim of this paper is to focus on supply chain configuration through exploring and describing the strategies and tactics employed by organizations in order to create a market orientated supply chain — more recently labeled the ‘demand chain’. In this regard, the objective is to develop theory through generating insights into how and why market orientated firms organize their supply chain configuration. It is anticipated that such insights will not only contribute to our understanding of the supply chain configuration adopted, but of the processes necessary for its successful implementation.
This paper begins with a brief overview of the supply chain literature. Thereafter, a broader exploration of the literature is undertaken that considers the ways in which market orientation and the supply chain configuration might interact. Following a description of research design, approach, and research methodology within a leading European firm, insights from an in-depth case are presented and discussed. Finally conclusions and implications are presented.
Supply chain configuration is important to managers for a number of reasons. First, the key objective of the firm is to maximize business performance. Both internal and external factors affect business performance. Two internal factors are market orientation and supply chain configuration. Market orientation is the customer focus on achieving business performance, while supply chain configuration is the organizational focus on achieving business performance. Market orientation is about maximizing value to the business as well as maximizing competitive advantage in the marketplace. This requires a detailed understanding of added value; what creates it for the customer and where it exists within the supply chain. The ability of the firm to do this will be partly dependent upon the supply chain configuration it adopts. We believe that where firms adopt QI forms that involve integration downstream, their opportunities to increase market orientation and business performance are improved. Whether firms' foster transactional or supply chain influence approaches upstream will depend on their positioning in the supply chain, the demands they have of their suppliers, and the marketplace. Developing supply chain influence is an important ability when wishing to implement a QI supply chain configuration. We have theorized that relationship focus, channel leadership, channel power, channel communications, and co-ordination technology are all important dimensions of supply chain influence. Finally, we suggest that there is a two-way relationship between the development of supply chain influence and market orientation that together facilitates the creation of a demand chain. These findings have important implications for managers and future research.1
