Minerva Access is the Institutional Repository of The University of Melbourne
Author/s:
Ngansathil, Wichitra
Title:
Market orientation and business performance: empirical evidence from Thailand
Date:
2001
Citation:
Ngansathil, W. (2001). Market orientation and business performance: empirical evidence
from Thailand. PhD thesis, Department of Management, The University of Melbourne.
Publication Status:
Unpublished
Persistent Link:
http://hdl.handle.net/11343/39434
File Description:
Ch. 1-10
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Chapter One
Introduction
1.1
Objectives and Structure of the Chapter
This thesis studies the business performance of Thai firms in both domestic and
export markets by using the market orientation theoretical framework to explain why
some firms are more successful than others. It also investigates how firms become
more market-oriented and whether the relationship between market orientation and
business performance is moderated by the business environment. Specifically, the
study will provide a model of market orientation for both export and domestic
markets.
The purpose of this chapter is to provide an overview of the thesis and its
organisation. It begins by a discussion of origins of the research, followed by the
research questions and objectives. Next, the importance of the thesis topic is
discussed. The chapter concludes with an outline of the organisation of the thesis.
1.2
Origins of the Research
A substantial body of literature on export performance has been published over the
past three decades (see Bilkey 1978; Madsen 1987; Aaby and Slater 1989;
Matthyssens and Pauwels 1996). However, what stands out in the export performance
literature is the multiplicity of views with respect to the determinants of export
performance and the nature of relationships between these factors and export
performance (Aaby and Slater 1989; Cavusgil and Zou 1994). Researchers in this
field have argued that this is partly due to the poor conceptualisation of the nature of
export performance (Lee and Yang 1991); and the weak theoretical foundation of the
export performance literature (Zou and Stan 1998). Thus far, there is no model of
export performance which is generally favoured in the literature.
1
On the other hand, the notion that market orientation is a crucial variable related to
business performance has been widely acknowledged for almost a decade (eg, Kohli
and Jaworski 1990; Narver and Slater 1990). In the domestic setting there has been
strong empirical support suggesting a positive relationship between market
orientation and various indicators of business performance (Jaworski and Kohli 1993;
Pitt, Caruana and Berthon 1996; Deshpande and Farley 1999; Slater and Narver
2000). However, the focus of the market orientation literature so far has been within
a domestic setting. Only in the last few years have researchers explored issues
relating to market orientation in an international context (Dalgic, 1994;
Diamantopoulos and Cadogan 1996; Cadogen, Diamantopoulos and Mortanges 1999;
Kwon and Hu 2000; Sundqvist, et al 2000). However, knowledge of how market
orientation help firms to increase export performance is still limited. Moreover, none
of the extant studies provide a comparison of market orientation of the same
companies in both domestic and export markets. This study aims to apply market
orientation theory in both markets.
1.3
Research Questions and Objectives
This study seeks to answer the following five research questions, which apply to both
domestic and export markets as follows:
1. How does market orientation affect business performance in a Thai business
context?
2. How does management commitment to export operations and management
perceptions of export profitability and growth affect the level of export market
orientation? (Note that this question is relevant to the export market only).
3. How do the antecedents proposed by Jaworski and Kohli (1993), such as
management emphasis on market orientation, top management risk aversion,
interdepartmental conflict, interdepartmental connectedness, formalisation,
centralisation and reward system, affect the level of market orientation in Thai
organisations?
4. Do environmental moderators, such as market turbulence, competitive
intensity, technological turbulence, and buyer power strengthen or weaken the
relationship between market orientation and performance in Thai firms?
2
5. Does market orientation help management to make a better decision about
whether and to what extent they should modify their marketing strategies in
foreign markets?
In answering these questions, the thesis seeks to achieve two principal research
objectives.
The first is to replicate the market orientation framework of Narver and Slater (1990)
and the antecedents and moderator effects of Jaworski and Kohli (1993). Market
orientation, according to Narver and Slater (1990), consists of three components:
consumer orientation, competitor orientation, and inter-departmental coordination.
The model identifies nine sets of variables as antecedents to export market orientation,
and seven antecedents to domestic market orientation. The antecedents to domestic
market orientation are top management emphasis on market orientation, top
management
risk
aversion,
interdepartmental
conflict,
interdepartmental
connectedness, formalisation, centralisation, and reward system. Antecedents to
export market orientation share the same variables as those of the domestic market.
However, two new variables have been added in this study: management commitment
towards export operations and management perceptions of export profitability and
growth.
Market orientation is postulated to have a positive impact on business performance in
both domestic and export markets. In addition, environmental factors such as market
turbulence, competitive intensity, technological turbulence and buyer power are
hypothesised to moderate the relationship between market orientation and
performance in both markets. A conceptual model of market orientation is discussed
in full detail in chapter Four.
Finally, market orientation is also expected to help management make better decisions
about whether and to what extent they should modify their marketing strategies in
foreign markets.
3
The second objective is to extend the existing literature regarding the antecedents to
export market orientation by including two new variables, which arise from the export
performance literature. The details are discussed in Chapters Three and Four.
1.4
The Importance of the Topic
The proposed research questions are important for at least three reasons. First, the
topic represents the intersection of two research streams: that on market orientation
and that on export performance. For the most part, the two have progressed
independently of each other. The export performance literature suggests that there are
at least three major determinants that contribute to the export success of a firm:
organisational factors, management factors, and strategies. The interest of this study is
not to challenge such findings but to ask, in the view of the research showing that
business performance is affected by the extent to which an organisation is market
oriented, whether export performance is also affected by an organisation’s market
orientation. More specifically, the thesis introduces the concept of export market
orientation and examines the relationship between it and export performance. This
piece of work will contribute to the bodies of knowledge of both export performance
and market orientation. In the export performance field, the thesis will offer a new
explanation why some firms are more successful than others. To the marketing field,
this research will add value to the theory that market orientation not only relates to
business performance in a domestic context but also in an international business
context.
The second significant aspect of this research topic relates to the country to be
studied. Most of the studies of both export performance and market orientation have
been carried out in the United States or other Western countries such as England,
Canada, Australia and other European countries. There is very little research
conducted on the export performance of firms from Asian countries, especially from
Thailand. Thus, this study examines whether market orientation yields the same
results in Thailand as it does in Western countries. The research presented here may
serve as the catalyst for other researchers to examine other Asian countries to
determine whether the results are peculiar only to Thailand or whether it is common
amongst other Asian countries as well. Thailand has been chosen not only because it
4
is the author’s country of origin but also because its economy is heavily reliant on
exports. Its economic future will depend partly on the nature and extent of its export
performance.
The third crucial aspect of this research topic relates to its research objective:
replication. Although, replication in marketing is rare, it is encouraged (Uncles et al
1994). Replication helps to identify results that are valid and those that are not
(Campbell and Jackson 1979). Replication also helps to promote confidence in the
reliability of existing results and theories, and creates a flow of knowledge that allows
academic research to progress (Rosenthal and Rosenow 1984; Mittelstaedt and Zorn
1984; Hubbard and Armstrong 1994).
1.5
The Organisation of the Thesis
The organisation of this thesis is as follows:
Chapter Two provides an overview of Thailand, the export history of Thai firms, and
the characteristics of the firms participating in this survey.
Chapter Three summarises the two main streams of literature, export performance and
market orientation, which are central to the research topic.
Chapter Four discusses the conceptualisation framework and model, which arise from
the literature surveyed in chapter Three. This chapter also focuses on developing
research questions and hypotheses drawn from the model.
Chapter Five describes the research methodology employed in this study, which
includes research design, data collection procedures, questionnaire development,
measures used, data preparation procedures, and the proposed statistical analysis.
Chapter Six examines reliability and validity of the constructs used in this study and
presents the basic correlation analysis.
5
Chapter Seven reports on the empirical results of market orientation in an export
context.
Chapter Eight also reports on the empirical results of market orientation but in the
domestic context.
Chapter Nine discusses the principal findings. This chapter also addresses limitations
of the study and future research directions.
The final Chapter identifies the contributions made by this study to the export
performance and market orientation literatures. This chapter also draws some
conclusions for managerial practice.
6
Chapter Two
Thai Exporters: The Survey Sample in Context
2.1 Objectives and Structure of the Chapter
The objectives of this chapter are to provide a general background to Thailand, the
country under study. Secondly, it aims to provide an overview of the characteristics of
those Thai firms and their management participating in the survey.
The chapter is divided into three major sections. Section 2.2 provides a brief country
profile including geography, population, and economy. Section 2.3 describes the
economic development and export history of Thailand from 1850s up until now.
Section 2.4 reports on the characteristics of firms participating in this survey
including their management characteristics.
2.2 Country Profile: Thailand
Geography
Thailand is located in the heart of Southeast Asia. Her neighbours are Laos in the
north and north east, Myanmar (or previously known as Burma) in the West,
Cambodia in the east and Malaysia in the south.
Thailand has an area of 513,115 square kilometres or approximately the same size as
France. Its longest north-to-south distance is about 1620 kilometres, and 750
kilometres from east to west.
The topography of Thailand varies and can be divided into four main regions: the
north, the central, the northeast, and the south region. The north consists mainly of
mountainous areas. The central region, the basin of the Chao Phraya River, is a fertile
valley. It is the richest and most extensive rice-producing area in the country. The
north-east, or the Korat Plateau, is the country’s poorest region due to the dry soil and
the occasional droughts and floods. The last region, the southern peninsular, is
7
predominantly rain forests. The southern region receives the most annual rainfall. It
is, therefore, the centre for the production of rubber and the cultivation of other
tropical crops. It is also richest in deposits of minerals, especially tin.
Thailand’s climate is ruled by monsoons, resulting in three seasons: rainy (June to
October), cool and dry (November to February), and hot (March to May). The
geographic and climatic conditions make the country suitable for the cultivation of a
wide range of tropical and semi-tropical agricultural crops such as rice, corn, tapioca,
tropical fruits, etc.
Population
The country had a population of approximately 61.5 million in 1998, with
approximately 10 million living in the capital city, Bangkok. Although the majority
are Thai, there are a few ethnic minority groups scattered around the country. The
most important are the Chinese groups who dominate local business enterprises in
Thailand. Other minority groups include Malays (in the south), Kampucheans and
Lao (in the east), Mon (in the west) and various hill tribes (in the north).
Economy
The World Bank considers the Thai economy as a lower middle income group
economy (Dixon 1999). Her per capita GDP was approximately 2000 USD in 1998,
close to those of Indonesia and the Philippines. During a boom period in the early
1990s, Thailand enjoyed a double-digit growth rate. However, in 1997 Thailand
experienced a severe economic crisis. The growth rate turned from positive to
negative. The Thai currency was devalued by 30-40 per cent. The economy has been
slowly recovering since then. It is important to note that this survey was conducted
when Thai companies were in the midst of the crisis, for it was a time when the
performance of Thai companies was, by previous standards, poor.
Exports have been a major contributor to the economic development of Thailand. The
value of exports is approximately 40-45 per cent of the country’s GDP. General
economic indicators are shown in Table 2.1.
8
Table 2.1
Thailand Key Economic Indicators
1990
1991
1992
1993
1994
1995
1996
1997
1998
56.30
56.96
57.79
58.34
59.10
59.46
60.12
60.82
61.47
2,183.5
2,506.6
2,830.9
3,170.3
3,630.8
4,188.9
4,598.3
4,724.0
4,650.5
(17.6)
(14.8)
(12.9)
(12.0)
(14.5)
(15.3)
(9.7)
(2.5)
(-1.6)
38,613
43,665
48,311
53,593
60,612
69,047
74,585
75,938
73,022
6.0
5.7
4.1
3.3
5.0
5.8
5.9
5.6
8.1
22.9
28.3
32.2
36.6
44.7
55.7
54.7
56.7
52.9
(15.1)
(23.8)
(13.8)
(13.4)
(22.5)
(24.8)
(-1.9)
(3.8)
(-6.8)
32.7
37.8
40.1
45.1
53.4
70.4
70.8
61.3
40.6
(29.8)
(15.7)
(6.0)
(12.4)
(18.1)
(31.9)
(0.6)
(-13.4)
(-33.8)
Trade balance
-9.8
-9.5
-7.9
-8.5
-8.7
-14.7
-16.1
- 4.6
12.3
Exchange rate
25.59
25.52
25.40
25.32
25.15
24.92
25.34
41.37
37.22
Population
(millions)
GDP
(billion bath;
percent
change)
GNP per
capita (baht)
CPI
(percent
change)
Export
(billions of
USD; percent
change)
Import
(billions of
USD; percent
change)
Source: Bank of Thailand Annual Economic Report, various issues
9
2.3 Economic Development and Export History of Thailand
The Thai economy, like other developing countries, has relied heavily on export
income. Exports not only play an important role as a source of foreign exchange
earnings but also act as a source of growth and overall economic development for
Thailand.
The economic development and export history of Thailand can be divided into three
periods: 1850–1949, 1950–89, and 1990 to the present. Each of these is discussed in
turn.
1850–1949
Few scholars have studied the economic development of Thailand in the period 18501959 (a time when Thailand was known as Siam). Among those frequently cited are
James C. Ingram, Hong Lysa, and Muscat (Manarungsan 1989).
Ingram (1971) believed that the Thai economy before the eighteenth century was a
self-sufficient economy. Siam grew its own rice, vegetables and manufactured its own
clothes. There were plenty of fish in the sea, inland streams and ponds. Hence, there
was little pressure to rely on trading with overseas countries (Ingram 1971:16).
Nevertheless, there was evidence that Siam had already had some trading with
neighbour countries including China and India (Ingram 1971; Reungsilp 1998).
However, the earliest contact with the west began in 16th century, during the reign of
King Narai. The Portuguese were the first group to have contact with Siam. The
Dutch, English, and French followed. After the reign of King Narai, from 1688 to
about 1850, the other kings of Siam seemed to discourage commercial and diplomatic
contacts with the west (Muscat, 1966). Hong (1984) suggested that Siamese kings
preferred to trade with migrant Chinese or Sino-Siamese rather than Westerners due
to cultural differences and problems with trust. The Siamese felt that the British
attitude towards them was one of arrogance.
10
Prince Damrong crystallised the reasons for the unfavourable
sentiments that the Siamese held against the British when he noted
that the foreign trade of the country at that time was mostly
conducted by the Chinese whose sole motivation was to seek profit
from commerce. They were suppliant and sought the patronage of
the great and the powerful in the kingdom. They did all they could
to please the masters of the country in order to make money as
conveniently as possible. The Chinese thus got along well with the
Siamese. But the Westerners were different. They wanted profit
from trading with Siam, but at the same time were puffed with the
importance that they attached to their ranks and office, such that
they were disposed to browbeating the Siamese. It was difficult to
live harmoniously with them, and naturally, the Siamese were not
pleased with their behaviour (Hong 1984: 60).
Ingram (1971) believed that trade with Western countries started again when King
Rama IV (or known as King Mongkut) of the Charki dynasty assumed the throne in
1851. The reasons for reopening the country were partly due to the pressures of the
colonialism pursued by some Western countries at that time, and partly due to King
Mongkut himself, who recognised that Siam’s progress and independence depended
on commercial and cultural contact with the West. Hong (1984), by contrast, argued
that the Siamese started to produce (rice, sugar, etc) for export earlier than that
suggested by Ingram, in the reign of King Rama III (1824-50). She also argued that
the market economy developed during this earlier period.
Nevertheless, all parties agree that the most significant turning point in Thailand’s
international trade in the nineteenth century occurred in 1855 when King Mongkut
signed a treaty with Sir John Bowring from Britain. Prior to the treaty, international
trade was monopolised by the King and his officials. Westerners were not permitted
to buy or sell direct to Thai peasants. Export and import taxes were varied according
to the King’s command. Hong (1984) reported that the Imperial court’s revenues
partly relied on taxes from export and import, and profit from trading. However, the
Bowring Treaty changed the trading rules. It permitted free trade both in Bangkok and
up country, which was not allowed in the past. Moreover, it specified fixed low
import and export duties, which were not subject to change by the Siamese
11
government except as part of a revision of the treaty. The treaty also put an end to
state trading and trading monopolies (Muscat 1966; Hong 1984). In other words, it
forced Thailand to open her country to free trade for the first time in her history.
The Bowring Treaty was followed by similar treaties with other Western countries.
These agreements introduced Thailand to greater trading with Western countries and
resulted in significant export growth (Manarungsan 1989). However, the treaties had a
negative effect as well. They deprived the Thai government of its fiscal autonomy at a
time when it needed revenue for the development of the country (Hong 1984).
The exports of Siam (Thailand) during the 1850-1950 period were composed
predominantly of agricultural and natural resource products such as rice, rubber, teak,
fish and tin. These accounted for 80-90 per cent of total exports. Imports included a
wide variety of manufactured goods (Manarungsan 1989; Dixon 1999). As Ingram
(1971) pointed out, the Siamese tended to specialise more and more in the production
of rice and other primary products and sold these to buy their requirements of other
goods.
The exporting record from 1867 to 1951, compiled by Ingram (1971), is presented in
Table 2.2.
12
Table 2.2: Percentage of Total Exports Accounted for by Four Commodities
from 1867-1951
Period
Percentage
of Rice
Percentage
of Rubber
Percentage
of Tin
Percentage
of Teak
Percentage
of All Four
1867
41.1
15.6
1890
69.7
11.1
5.5
86.4
1903
71.3
6.4
10.4
88.2
1906
69.1
11.0
11.2
91.3
1909/10
77.6
7.8
6.4
91.9
1915/16
70.1
15.9
3.9
89.9
1920/24
68.2
0.8
8.6
4.5
82.1
1925/29
68.9
2.3
9.0
3.7
83.9
1930/34
65.4
2.0
13.8
3.9
85.1
1935/39
53.5
12.9
18.6
4.2
89.2
1940/44
60.5
12.1
11.6
1.6
85.9
1947
35.3
7.0
11.8
5.1
59.2
1948
50.5
13.4
5.9
3.4
73.2
1949
62.7
8.3
5.3
3.7
80.0
1950
50.8
21.8
6.7
3.8
83.1
1951
48.0
30.1
5.1
3.3
86.5
56.7
Source: Ingram (1971: 94), Table VIII
1950–1989
The Thai economy in the early 1950s was still described as a rice economy. Rice
exports remained the primary source of the country’s income. After the Second World
War, the Thai economy began to grow more rapidly. There was an increase in world
13
demand for Thailand’s major commodities, notably rice, rubber, tin and maize. The
main structural change of the Thai economy in the period 1950-57 was still limited to
the agricultural sector (Manarungsan 1989).
Significant economic change began again when Marshal Sarit Thanarat became Prime
Minister of Thailand in 1958. Part of Sarit’s plan was to modernise the country. A
Board of Investment (BOI) was established in 1959. The role of BOI was to promote
both domestic and foreign investment in Thailand. The investment promotion
included guarantees against nationalisation, the right to own land, and the right to
repatriate profits and capital (Ingram 1971). These incentives induced a flow of
foreign direct investment, especially in the 1960s and 1970s.
Investment in the late 1950s and 1960s was driven by an import substitution
industrialisation policy (ISI). This was a common strategy among developing
countries (Yukio 1988; Tambunlertchai in Warr 1993). The outcome of this policy
was the establishment of many manufacturing industries, whose primary aim was to
supply the domestic market (Muscat 1994). The early stages of Thai industrialisation
in the late 1950s and 1960s were based on raw material processing and production of
simple consumer goods. The spill over effect from the ISI policy helped boost some
exports of manufactured products, but government policy at the time did explicitly
support exporting (Muscat 1994; Akrasanee, Dapice, Flatters 1991).
By the late 1960s, doubts were raised over the desirability of continuing the ISI
policy. Some of its pitfalls became evident, including the high level of dependence on
imported capital equipment, raw materials, and the deteriorating balance of payments
situation (Muscat, 1994). On top of that, in 1970 the World Bank, Thailand’s biggest
creditor, heavily criticised Thai industrial policy and recommended that Thailand
adopt an export-oriented policy instead.
The Bank suggested that Thai government move to adjust the country’s economic
structure. Its recommendations included removing all export restrictions and taxes,
reducing import taxes, substantially reducing foreign exchange controls, ending the
import substitution policy for industry, and placing emphasis on export-oriented
industry (Dixon in Parnwell 1996).
14
The suggestions were taken seriously. In the 1970s Thailand adopted an exportoriented policy. The government introduced export promotion policies. At the same
time, the domestic markets for some of the early import substitution products began to
decline. The initial manufacturing exports in this period were labour-intensive
products such as food processing, machinery, chemical and textiles industries (Simon
in Parnwell 1996).
Alongside the industrialisation process, Thailand continued to emphasise her
agricultural base. Siamwalla (1997) noted that the cultivated land was expanded
during the 1970s, resulting in a continuous growth of agricultural exports. At the end
of the decade, the economic growth of Thailand still relied on primary export
products, although Thailand’s industrialised process was certainly expanding from a
very low base. As shown in Table 2.3, manufactured exports at the end of the 1970s
accounted only for 25 per cent of total export value.
In the 1980s, Thailand’s manufactured exports had become more diversified but
remained essentially labour-intensive products. Export products in this period
included canned foods, textiles and textile products, clothing, shoes, leather products,
automobiles and parts, electronics, toys, jewellery, and plastic products (Akrasanee et
al 1991; Pongpaichit and Baker 1995).
One of the most important factors contributing to export growth in the 1980s was the
increase in FDI from countries, notably Japan, Korea, and Taiwan, searching for lowcost production sites. Thailand was an attractive place for investment at that time not
only because of its low labour costs but also its steady political climate, its careful
fiscal management, its openness to foreign investment and its free market attitude
(Sakurai 1992; Dixon in Parnwell 1996). The major industries were textiles, toys,
jewellery and food processing. As before, these were labour-intensive industries.
Thailand was also very successful in deriving export income from tourism. In 1987,
the government promoted “Visit Thailand Year”, boosting income from around 30
billion baht in 1985 to 110 million baht in 1990 (Phongpaichit and Baker 1995).
During the 1980s, Thailand was converted from an exporter of agricultural products
15
to an exporter of manufactured goods and tourism. In fact, Muscat (1994:197)
suggested that tourism was the single most important export policy success of 19801988.
The export-oriented policy resulted in a tremendous change in export structure.
Manufactured goods, which accounted for only 10 per cent of merchandise exports in
1970, was raised to around 60-70 per cent (in value terms) in the late 1980s. On the
other hand, the share of agricultural products fell from 88 per cent in 1970 to 34 per
cent in 1990 (see Table 2.3). In fact, in 1987, the value of manufactured products
exceeded that of agricultural products. The export-led policy had a profound effect on
economic growth. Real GDP grew after 1985 at double-digit rates until the end of the
decade (Phongpaichit and Baker 1996).
16
Table 2.3:
Year
Key Features of the Thai Economy (1970-1990)
Foreign Direct
Investment
(US$m)
Exports
(US$m)
Manufactured
Exports
(US$m)
Primary
Export
(US$m)
1970
48
710
76
629
1971
39
827
113
706
1972
68
1039
190
863
1973
77
1527
343
1201
1974
189
2402
422
2002
1975
22
2162
397
1784
1976
79
2950
572
2398
1977
106
3451
683
2803
1978
50
3996
1039
3042
1979
51
5207
1402
3879
1980
187
6369
1886
4579
1981
288
6849
2019
4978
1982
189
6797
2014
4914
1983
348
6275
2058
4284
1984
400
7279
2583
4780
1985
162
7056
2800
4221
1986
261
8786
3944
4820
1987
182
11629
6125
5446
1988
1081
15902
8192
7068
1989
1726
19976
11453
8377
1990
2303
23002
14796
8014
Source: Dixon (1999:114) Table 4.1b
17
1990 – present
In the 1990s, FDI still played a major role in the rapid expansion of the Thai
manufacturing sector. In fact, since 1987, Thailand has experienced an influx of
investment from Japan, and other New Industrialised Countries (NICs). As a result,
the export emphasis in the 1990s shifted toward higher technological products such as
computers and parts, and electrical appliances. Taiwan and US firms used Thailand as
a base for their computer parts (Pongpaichit and Baker1995). Since there are many
emerging countries in Asia such as Vietnam and China that are able to offer lower
labour costs, many firms, which rely heavily on intensive labour, have moved or
relocated their plants to these new locations away from Thailand.
Overall, the Thai economy in the period 1990-1995 continued to enjoy double-digit
growth rates. Siamwalla (1997) explained that this was due to the export boom and to
increases in foreign direct investment. At that time, it was speculated that Thailand
would become the “fifth tiger” of Asia. Unfortunately, the boom period did not
continue. In 1996, the world economy slowed down, which in turn affected the Thai
economy. More importantly, in 1997 the Thai economy experienced a crisis when its
currency dropped dramatically from 25.34 baht per one US dollar to 41.37 baht per
dollar. The crisis had severe repercussions. Many companies went bankrupt. Many
factories closed. Although the crisis started from mismanagement in financial and real
estate sector, it had an effect on exports as well. Export value dropped 6.8 per cent
from 56.7 billion baht in 1997 to 52.9 billion baht in 1998.
Since the 1997 crisis, there has been a great effort from both public and private sector
to push for more income from exports and from tourism to help pay foreign debts.
The following sections summarise Thailand’s current major export markets, export
structure and top ten export products.
Major Export Market
As presented in Table 2.4, Thailand’s major export markets are the United States of
America, ASEAN, the European Union, and Japan.
18
Table 2.4: Major Export Market Shares
USA
Value
(billion
baht)
Share
(percent)
JAPAN
Share
Value
(per(billion
cent)
baht)
ASEAN
Share
Value
(per(billion
cent)
baht)
EU
Share
Value
(per(billion
cent)
baht)
OTHERS
Share
Value
(per(billion
cent)
baht)
1994
239.1
18.2
194.2
17.1
206.9
18.2
177.7
15.1
319.5
28.1
1995
250.6
17.8
236.1
16.8
279.8
19.9
212.2
15.1
427.4
30.4
1996
253.8
18.0
237.5
16.8
279.0
19.8
224.9
15.9
415.7
29.5
1997
354.5
19.6
270.7
15.0
356.4
19.7
290.4
29.1
534.7
29.6
1998
500.7
22.3
308.4
13.7
408.9
18.2
401.2
17.8
628.8
28.0
Note: Figures in the table are value and shares to total export
Source: Department of Business Economics, Ministry of Commerce
Export Structure
By the late 1990s, agricultural products were no longer a primary source of revenue
for Thailand. On the other hand, share of manufacturing products has increased from
approximately 10 per cent in 1970s to 70 per cent in 1990s (see Table 2.5).
19
Table 2.5: Export Structure
AGRICULTURAL
PRODUCTS
AGROINDUSTRIAL
PRODUCTS
PRINCIPAL
MANUFACTURING
PRODUCTS
MINING AND
FUEL
PRODUCTS
OTHERS
Value
(billion
baht)
Share
(percent)
Value
(billion
baht)
Share
(percent)
Value
(billion
baht)
Share
(percent)
Value
(billion
baht)
Share
(percent)
Value
(billion
baht)
Share
(percent)
1994
196.0
17.2
107.4
9.4
813.8
71.5
12.4
1.1
7.8
0.7
1995
231.4
16.5
132.1
9.4
1016.4
72.3
14.3
1.0
11.9
0.9
1996
230.6
16.3
142.0
10.1
993.9
70.4
28.2
2.0
16.1
1.1
1997
257.5
14.3
170.5
9.4
1280.0
70.9
50.5
2.8
48.0
2.7
1998
304.4
13.5
202.6
9.0
1624.6
72.3
44.3
2.0
72.0
3.2
Note: Figures in the table are value and shares to total export
Source: Department of Business Economics, Ministry of Commerce
Top Ten Exporting Products from Thailand
Table 2.6 shows top the ten export products from 1994 to 1998. It can be observed
that computers and parts, garments, and integrated circuits are the top three export
products. Among primary products, rice, frozen shrimp, canned seafood, and rubber
remain in the top ten.
20
Table 2.6: Top Ten of Export Products from Thailand from 1994-1998
Unit = Billion baht
RANK
1994
1995
1996
1997
1998
1
Garments
Computers
and parts
131.2
Computers
and parts
167.7
Computers
and Parts
220.3
Computers
and Parts
320.5
Computers
and parts
94.6
Garments
Garments
Garments
Garments
102.0
79.9
97.1
123.1
Frozen
Shrimp
49.2
Rubber
Rubber
61.3
63.4
Integrated
circuits
75.8
Integrated
circuits
93.8
Jewellery
Integrated
Circuits
58.2
Integrated
Circuits
58.5
Rice
Rice
65.1
86.8
Integrated
Circuits
45.3
Footwear
Jewellery
Rubber
53.8
54.3
57.5
Canned
Seafood
68.0
Rubber
Jewellery
Rice
Jewellery
41.8
52.5
50.7
55.6
Motor Cars
and parts
66.3
Footwear
Frozen
Shrimp
50.3
Frozen
Shrimp
43.4
Canned
Seafood
43.4
Frozen
Shrimp
58.3
Plastic
products
50.1
TV and radio
TV and radio
34.6
Motor Cars
and parts
48.4
Motor Cars
and parts
33.3
Rice
Canned
Seafood
34.2
Frozen
Shrimp
47.2
Jewellery
Canned
Seafood
32.0
Canned
Seafood
33.3
Footwear
TV and radio
Rubber
33.5
43.6
55.4
100.7
2
3
4
47.1
5
6
7
39.3
8
Rice
39.2
9
10
48.6
58.1
57.4
Note: Figure shown in this table is an export value (billion baht)
Source: Department of Business Economics, Ministry of Commerce
21
2.4 Exporters Participating in the Survey
Having provided a brief guide to the evolving nature of the Thai economy, and briefly
outlined Thailand’s export history, we can now turn our attention specifically to the
nature of the exporters who participated in this study. This section gives an overview
of the characteristics of the exporting firms and of their top management. Where
appropriate, observations are offered about the apparent relationship between these
characteristics but no attempt is made here to offer a formal statistical analysis. Our
principal concern is to provide factual data on the participating firms, not to present
specific hypotheses.
2.4.1 Facts about Firms Participating in the Survey
Industries
The purpose of this survey is to study the export performance of the firms across
different industries. Firms participating in this study, therefore, are varied. In fact,
there are more than 20 industries represented in this survey. As shown in Table 2.7,
most of the firms responding to the survey were from industries such as agricultural
products (14 per cent), followed by food processing (13 per cent), plastic products
(9.6 per cent), and textiles (8 per cent).
22
Table 2.7: Industries of Thai Firms Participating in the Survey
Industries
Frequency
Percentage
Cumulative
Percentage
Food
Clothing and textile
Jewellery
Ceramics and decorating items
Plastic products
Household products
Electrical goods and parts
Shoes
Furniture
Automotive and parts
Agricultural products
Construction material
Machinery and parts
Leather goods
Others
Total
19
12
3
6
14
7
8
8
9
11
20
8
2
4
15
146
13
8.2
2.1
4.1
9.6
4.8
5.5
5.4
6.2
7.5
13.7
5.5
1.4
2.7
10.3
100.0
13
21.2
23.3
27.4
37.0
41.8
47.3
52.7
58.9
66.4
80.1
85.6
87
89.7
100.0
Company Size
In this survey, we measure company size by the number of employees. Table 2.8
reveals that 40 per cent of firms can be considered medium-sized companies (101-250
employees), 32 per cent are large companies (more than 500 employees), and 28 per
cent are small companies (100 employees or less).
Table 2.8: Number of Employees
Number of Employees
Less than 50
50 – 100
101 – 250
251 – 500
501 – 1000
More than 1000
Total
Frequency
Percentage
Cumulative Percentage
23
18
32
27
21
26
147
15.6
12.2
21.8
18.4
14.3
17.7
100.0
15.6
27.9
49.7
68.0
82.3
100.0
23
Company Age
The information from Table 2.9 implies that a large number of the companies were set
up in 1980s (39 per cent). Twenty-two per cent started their business in 1990s.
Around 35 per cent of firms have existed since the 1960s-70s.
The data from this survey is in line with the nature of Thailand economic history
presented earlier in this chapter. As noted, in the 1970s the Thai government
promoted an import substitution industrialisation policy. Many manufacturing firms
were established. Some of the products were exported, although not many. The
majority of export products in this era still remained rice and other agricultural
products.
In the 1980s the Thai government incorporated an export-led policy in the Fifth
National Plan. As a result, many firms were set up for export purposes. Many of them
were joint venture projects (Pongpaichit and Baker 1995).
Table 2.9: Company’s Age
Frequency
Less than 10 years old
10 – 20 years old
21 – 30 years old
More than 30 years old
No response
Total
33
57
32
21
4
147
Percentage
22.4
38.8
21.8
14.3
2.7
100.0
Cumulative Percentage
22.4
61.2
83.0
97.3
100.0
How Many Years of Operations before Exporting?
As mentioned before, many firms were set up for export purposes. It is not surprising,
therefore, to see many “born-global” companies in the internationalisation process. By
“born global”, we mean firms which have an international outlook from inception
(McKinsey & Company 1993). Alternative terms include “international new venture”
and “infant multinationals” (Burgel and Murray 2000). As seen in Table 2.10, 38 per
cent of firms in this survey exported within 3 years of beginning operations. Some
firms (22 per cent) took 12 years or more before they started to export. Again, this is
24
in line with Thai economic history. Firms established in the 1960s-70s produced for
local consumption rather than export (Muscat 1994).
Thai “born-global” companies are different from the “born-global” companies in the
West. The majority of the Thai born-global firms in 1980s were labour intensive in
nature such as textiles, food processing, shoes, and leather products, while “bornglobal” firms in the West tend to be small and technology-oriented companies
(Rennie 1993).
Table 2.10: Number of Years of Operations before Exporting
Frequency
0 – 3 years
4 – 6 years
7 – 9 years
10 – 12 years
More than 12 years
Total
56
23
19
16
32
146
Percentage
Cumulative Percentage
38.4
15.8
13.0
11.0
21.8
100.0
38.4
54.1
67.1
78.1
100.0
Export Department
Most of the companies participating in this survey indicated that they have an export
department (86 per cent) and an export manager in charge (79 per cent). For those
firms that do not have an export manager, the top management (eg, Managing
Director, or General Manager) was responsible for it (82 per cent).
Table 2.11 presents the numbers of firms, which have an export department and those,
which do not have. Table 2.12 shows the numbers of firms that have an export
manager, and those that do not. Table 2.13 reveals the persons in charge of export
activities for those firms that do not have an export manager or director in charge of
export ventures directly.
25
Table 2.11: Export Department
Frequency
Percentage
Cumulative
Percentage
126
20
146
85.7
14.3
100.0
85.7
100.0
Have export department
Do not have export department
Total
Table 2.12: Export Manager
Frequency
Percentage
Cumulative
Percentage
115
31
146
78.8
21.2
100.0
78.8
100.0
Have export manager
Do not have export manager
Total
Table 2.13: Who Handles Export Activities in Firms without Export Managers?
Managing director/ general manager
Marketing/sales manager
Others
Total
Frequency
Percentage
Cumulative
Percentage
28
5
1
34
82.4
14.7
2.9
100.0
82.4
97.1
100.0
How Do They Export?
Only 40 per cent of firms reported that they export 100 per cent directly; 60 per cent
of the surveyed firms had a mixture of exporting directly and exporting via buying
agents or trading companies. This confirmed the important and significant roles of
intermediaries such as buying agents and trading companies.
26
2.4.2 Where Do They Export? Top Four Popular Exporting Destinations out of
Thailand
Table 2.14 shows that the majority of Thai products were exported to Asia, North
America, Japan, and Western Europe. Data in this survey is in line with official data
(see Table 2.4).
Table 2.14: Export Destinations
Destinations
Asia
North America and Canada
Japan
Western Europe
Middle East
Australia and New Zealand
Others
No Response
Total
Frequency
Percent
Valid
Percentage
42
39
30
20
7
4
4
1
147
28.6
26.5
20.4
13.6
4.8
2.7
2.7
0.7
100.0
28.7
26.7
20.5
13.7
4.8
2.7
2.7
100.0
2.4.3 What Factors Motivate Firms to Initiate in their Export Operations?
Firms participating in this survey revealed that the most important factors which
motivated them to initiate export operations was ‘company future growth’, followed
by ‘market expansion purpose’ and ‘managerial urge’. Surprisingly, profit incentive
was not even in the top three reasons (see Table 2.15).
27
Table 2.15: Factors which Motivate Firms to Initiate Export Operations
Motivation Factors
N
Mean
Std. Deviation
Profit incentive
147
3.73
1.06
Tax benefit
147
3.27
1.15
Managerial urge
146
3.77
1.12
Excess production capacity
147
3.00
1.36
Market expansion purpose
146
4.25
.88
Receive unsolicited order
147
2.90
1.32
Company’s future growth
147
4.30
0.91
Competitive pressure from domestic market
146
3.27
1.39
2.4.4
How Did They Find Their First Market?
The data shown in Table 2.16 suggest that the survey firms believed that the best way
to get export customers was to participate in trade shows or exhibitions, followed by
sending company staff to visit foreign markets. The survey data also indicated that
exporting firms received little help from government agencies. It is noteworthy too
that advertisements were assumed to provide little help in securing customers.
28
Table 2.16: How Firms Get their Early Export Customers
How Firms Get their Early Export
Customers
Customers approached firms directly
N
Mean
Std. Deviation
146
2.83
1.36
Through government assistance
145
2.10
1.20
Through affiliated company
145
2.54
1.42
Sent company staff to visit foreign markets
146
3.04
1.40
Advertisement
146
2.36
1.21
Participate in trade show or exhibition
147
3.14
1.51
2.4.5 What were their Competitive Advantages in Exporting?
The Thai export companies opined that their competitive advantages were principally
‘product quality’, ‘delivery time’ and ‘production capacity’. Psychological distance
did not have an impact on their performance; proximity to customers was not a major
issue (see Table 2.17).
Table 2.17: Competitive Advantages of Exporting Firms from Thailand
Competitive Advantages
N
Mean
Std. Deviation
Cost
147
3.39
1.04
Product quality
147
4.16
0.73
Product uniqueness
147
3.44
1.07
Technology
146
3.21
1.03
Production capacity
146
3.70
0.87
Marketing capacity
145
3.56
0.96
After sales services
146
3.40
1.04
Delivery time
146
4.08
0.84
Proximity to customers
146
3.08
1.21
29
2.4.6 Management Characteristics
Educational Level
As shown in Table 2.18, the majority of the top managers of the Thai firms had at
least a university degree (82 per cent), of which almost half of them had a higher
degree. (Note: the term ‘top manager’ refers to the individual in charge of the
company. The top manager may be referred to variously as ‘CEO’, ‘general manager’,
‘managing director’, or ‘president’.) Generally, firms where a top manager had a
postgraduate degree performed better than firms whose top manager had only a basic
degree. Surprisingly, firms with a top manager who only finished high school
performed better than the rest.
Table 2.18: Educational Level and Export Performance
EDUCATIONAL
LEVEL
FREQUENCY
PERCENTAGE
EXPORT PERFORMANCE
N
Mean
SD
Finished primary
school
6
4.1
6
3.5714
0.5570
Finished secondary
school
10
6.9
10
3.7571
0.6461
Finished vocational
school
6
4.1
5
3.3714
0.2785
Some university
degree
4
2.8
4
2.7143
0.4666
University degree
65
44.8
64
3.4673
0.5163
Graduate diploma
1
0.7
1
3.4286
-
Some postgraduate
7
4.8
6
3.5476
0.4900
Postgraduate
46
31.7
44
3.6964
0.5325
Total
145
100.0
140
3.5427
0.5447
30
Top Manager’s Expertise
Most of top managers in this survey came from sales and marketing background (40
per cent), followed by engineering or production (21 per cent), and accounting or
finance (12 per cent).
Generally, there was not much difference between the means of each group.
Therefore, it cannot be said that export performance depends on the top manager’s
expertise. Table 2.19 presents area of top manager’s expertise and export
performance.
Table 2.19: Area of Top Manager’s Expertise and Export Performance
AREAS OF EXPERTISE
FREQUENCY
PERCENTAGE
EXPORT PERFORMANCE
N
Mean
SD
Engineering/ production
31
21.1
30
3.5984
0.5918
Human resource
3
2.1
3
3.3333
0.2182
Accounting/ finance
17
12.0
17
3.6050
0.3962
Science/ technology
3
2.1
3
3.4762
0.3595
Marketing/ sales
58
40.8
57
3.5543
0.5969
Economics/ business
analysis
8
5.6
6
3.5238
0.4577
Others
22
15.5
21
3.4830
0.5335
Total
142
100.0
137
3.5514
0.5429
Top Manager Lived or Studied Overseas
Interestingly, more than 50 per cent of the top managers of the firms had lived or
studied overseas.
31
Results in Table 2.20 show that the mean of the group whose top managers lived or
studied overseas was higher than the mean of the other group.
Thus, it can be said that firms whose top manager had overseas experiences tended to
enjoy better performance than those firms whose top manager had no overseas
experience.
Table 2.20: Top Manager Lived or Studied Overseas and Export Performance
LIVED OR STUDIED
OVERSEAS
FREQUENCY
Never
Yes
Total
63
81
144
EXPORT PERFORMANCE
PERCENTAGE
43.8
56.3
100.0
N
Mean
SD
62
77
139
3.4455
3.6187
3.5414
0.5789
0.5096
0.5464
How Often Did Top Manager Travel Abroad?
More than 95 per cent of firms participating in the survey indicated that their top
managers travelled abroad at least once a year. In fact, 34 per cent said that they
travelled abroad very often.
The results in Table 2.21 suggest that firms whose top manager travelled abroad very
often tend to have a higher performance than the rest.
Table 2.21: How Often Top Manager Travelled Abroad
TRAVELLED ABROAD
Never
Seldom
Sometimes
Often
Very often
Total
FREQUENCY
5
12
35
43
49
144
PERCENTAGE
3.5
8.3
24.3
29.9
34.0
100.0
EXPORT PERFORMANCE
N
Mean
SD
5
12
34
41
47
139
3.3429
3.3254
3.4741
3.4739
3.7285
3.5425
0.5496
0.5372
0.4990
0.5682
0.5312
0.5466
32
Number of Languages Spoken
Only 6 per cent of the firms reported that their top managers could speak only Thai.
Most of top managers could speak at least two or three languages (85 per cent). Only
a small percentage of firms report that their top managers could speak more than three
languages (9 per cent).
The results in Tables 2.22 indicate that there was not much difference in export
performance among firms whose top manager speaks two or more languages.
However, there is a difference in export performance between firms whose top
manager speaks only one language and those firms whose top manager can speak at
least two languages.
Firms whose top manager can speak other language(s) show a better performance than
those firms, whose top manager can speak only Thai.
Table 2.22: Number of Languages Spoken
NUMBER OF LANGUAGES
SPOKEN
FREQUENCY
Only one
Two
Three
More than three
Total
8
79
45
13
145
PERCENTAGE
5.4
54.5
31.0
9.0
100.0
EXPORT PERFORMANCE
N
Mean
SD
8
78
43
11
140
3.3571
3.5433
3.5753
3.5455
3.5427
0.5506
0.5797
0.4671
0.6122
0.5447
Experience in Export Activities
Despite the fact that exporting firms in Thailand are quite young, more than 50 per
cent of the participating firms have top managers who have had experiences in export
activities for more than 10 years.
The results in Table 2.23 show that there was not much difference between the means
of each group. Therefore, it can be concluded that experience in export activities of
top manager was of no relevance to the export performance of firms.
33
Table 2.23: Experience in Export Activities and Export Performance
NO. OF YEARS
0-5 years
6-10 years
11-15 years
More than 15 years
Total
FREQUENCY
26
41
28
50
145
PERCENTAGE
17.7
28.3
19.3
34.5
100.0
EXPORT PERFORMANCE
N
Mean
SD
26
40
27
47
140
3.4441
3.5833
3.4974
3.5887
3.5427
0.5800
0.4850
0.5788
0.5609
0.5447
Proportion of Top Manager’s Time Spent on Export Operations
Obviously, the more time the top manager spent on export activity, the higher the
export performance. However, it is not always true, especially for those firms whose
top manager spent more than 60 per cent of his time concentrated on export
operations. The results in Table 2.24 shows that those firms whose top manager spent
41-60 per cent of his or her time performed even better than those firms whose top
manager spent more than 60 per cent of his or her time in export operations.
Table 2.24: Proportion of the Top Manager’s Time Spent on Export Operations
and Export Performance
PERCENTAGE OF TIME
SPENT ON EXPORT
OPERATIONS
FREQUENCY
0-20 per cent
21-40 per cent
41-60 per cent
More than 60 per cent
Total
22
35
26
62
145
PERCENTAGE
15.2
24.1
17.9
42.8
100.0
EXPORT PERFORMANCE
N
Mean
SD
21
32
26
61
140
3.3594
3.5506
3.6410
3.5597
3.5427
0.4267
0.5557
0.5131
0.5840
0.5447
34
Top Manager’s Age
Most commonly, the top managers of the survey firms were in their 40s (40 per cent),
followed by the 50-59 age group (32 per cent), and the 30 –39 age group (23 per
cent).
The results presented in Table 2.25 indicate that there was not much difference
between the means of each group, although the mean of firms whose top managers
were ‘50-59 year old’ show the highest performance. Overall, the data from this
survey suggested that export performance does not depend on the top manager’s age.
Table 2.25: Top Manager’s Age and Export Performance
AGE
30-39 years old
40-49 years old
50-59 years old
60-69 years old
Total
FREQUENCY
34
58
47
5
144
PERCENTAGE
23.6
40.3
32.6
3.5
100.0
EXPORT PERFORMANCE
N
Mean
SD
34
55
45
5
139
3.4664
3.5160
3.6418
3.4571
3.5427
0.5825
0.5918
0.4793
0.2748
0.5447
To sum up, most of the 147 exporting companies participating in this survey were
relatively young. The majority were in their teens (10-20 years). In addition, there was
a large number of “born-global” firms set up explicitly for export purposes.
Most of the firms had an export department and a manager in charge. In many cases,
the top manager was in charge of export activities. A large number of the firms relied
on buying agents and trading companies, confirming the important role of
intermediaries. It was a common view that the best way to secure export customers
was to participate in trade shows or exhibitions. Also important was to send company
staff to visit foreign markets.
35
Those firms whose top manager had lived or studies overseas, travelled abroad often,
and could speak another language apart from Thai, showed better export performance
than their counterparts. The result suggests that in order to do well in export business,
top manager needs to come out of his or her own “comfort zone” and learn other
language(s) and cultures.
2.5 Chapter Summary
This chapter presented an overview of the country under study, Thailand. It also
described companies participating in this survey. Additionally, their management
characteristics were analysed.
The next chapter reviews the relevant literature to identify the research problems.
36
Chapter Three
Literature Review
3.1 Objectives and Structure of the Chapter
As mentioned in Chapter One, this study brings together two important research
streams. The first one deals with export performance, the other with market
orientation. These two streams have progressed independently of each other. The
major objective of this research is not to dispute the findings from either stream of
literature but to try to combine them in a search for a new explanation of superior
export performance.
The objective of this chapter is to review the existing marketing literature to show the
relevance and significance of the research questions outlined in Chapter One. The
chapter also seeks to show that other researchers have not yet adequately explored
these issues. The discussion begins with a review of the export performance literature
including determinants of export performance, the issues of measurement in export
performance and forging links between export performance and market orientation.
Next, a review of the market orientation literature is presented. Specifically, the
relationship between market orientation and business performance is explored.
Questions such as what kinds of business environment moderate the relationship
between market orientation and business performance, and what makes some firms
become more market oriented than others, are discussed.
3.2 Review of the Export Performance Literature
Export performance has been a subject of much interest in the last three decades
(Bilkey 1978; Madsen 1987; Aaby and Slater 1989; Chetty and Hamilton 1993;
Cavusgil and Zou 1994; Matthyssens and Pauwels 1996). In fact, research in this field
has drawn much attention from both public and private enterprises. The export
performance literature potentially helps government agencies understand how to help
exporting firms (Zou, Tayor, and Osland 1998). The more successful the exporting
37
companies in a country, the better the overall economic growth of that country. This
motivates governments to become interested in export promotion and improving the
export performance of firms (Czinkota and Ronkainen 1995).
For private enterprises, exporting is an attractive choice if firms want to expand their
market base overseas. In fact, exporting is the easiest mode of entry to foreign
markets, compared to other kinds of international operations, such as joint ventures or
overseas manufacturing. This is due to lower commitment requirements of the firm’s
resources and lower risks involved (Katskikeas 1994). Besides, there is wide
recognition that success in the domestic market does not guarantee success in foreign
markets and that unique strategies are needed to succeed in export markets (Zou,
Tayor, and Osland 1998: 37). Therefore, the export performance literature should
provide some useful guidelines for export success.
The purpose of the following section is to demonstrate that, despite a considerable
amount of literature available, the export performance literature is still lacking a
strong theoretical foundation (Zou and Stan 1998). Most of the research thus far has
been of an exploratory nature (Aaby and Slater 1989). There has been a lack of
consolidated effort (Zou and Stan 1998, Leonidou and Katsikeas 1996). Many of the
studies of the success factors in exporting are characterised by a fragmented collection
of contradictory findings (Zou and Stan 1998; Cavusgil and Zou 1994; Aaby and
Slater 1989). This is evidenced by the multitude of factors that are proposed to
influence export performance, the variety of ways they are measured, and the
differing nature of their links to export performance (Madsen 1989; Louter,
Ouwerkerk, and Bakker 1991; Cavusgil and Zou 1994).
3.2.1 Determinants of Export Performance
The current literature on export performance can be divided into two main streams of
research. The first focuses on grouping firms into two categories: exporters and nonexporters (eg, Cavusgil and Nevin 1981; Christensen, Da Rocha, and Gertner 1987).
The underlying logic behind this idea is that the ability to export is sufficient to
ascribe success to a firm. However, this approach receives much criticism in terms of
its limited ability to explain long-term export development and ongoing export
38
activities (Aaby and Slater 1989; Katsikeas 1994; Katsikeas, Deng, and Wortzel
1997).
The second stream emerged to overcome the weakness in exporter/non-exporter
classification studies. This group focuses only on exporting firms and tries to explain
the differences in the performance of these exporters (Madsen 1987). A substantial
number of empirical export performance studies have been conducted (eg, Cooper and
Kleinschmidt 1985; Beamish, Craig, and Kerry 1993; Evangelista 1994; Cavusgil and
Zou 1994; Axinn, Noordewier, and Sinkula 1996). However, the conclusions of each
individual export performance study have typically been rather weak (Madsen 1987).
Aaby and Slater (1989) found that, after their extensive review of the literature, few
solid conclusions were available. They also found that the outcomes were fragmented
and contradictory.
It is, therefore, not surprising that various reviews of the export marketing literature
have identified a wide range of variables as potentially significant factors in
influencing the export performance of firms. Madsen’s (1987) review alone indicated
that there are approximately 350 independent variables in just 17 review studies.
Moreover, he found that some of these variables were unique to single studies. Zou
and Stan (1998) argued that there are hundreds of names used in past research to label
a diverse set of explanatory variables. They said that this is partly due to a large
number of different conceptualisations used in the export performance literature. In
addition, a review by Zou and Stan (1998) showed that a majority of studies in this
field did not build upon an explicit theoretical basis. In fact, half of their reviewed
studies did not contain theoretical reasoning in developing the research questions or
hypotheses. The result was a plethora of independent variables.
The various determinants of the export performance can be broadly classified into two
areas: external environment factors over which firms have little control, and the
internal factors which are at firm level (Zou and Stan 1998). The external
environmental level includes macroeconomic, cultural, political, legal, and financial
factors that may influence export performance (Evangelista 1994). However, the
external environmental factors have received little attention from researchers due to
their uncontrollable nature (Zou and Stan 1998). The majority of studies are restricted
39
to the internal or firm level. Here the relevant factors can be organised into three
principal areas: organisational factors, management factors, and strategies.
Organisational Factors
A number of studies attributed export performance to organisational factors (eg, Aaby
and Slater 1989; Madsen 1989; Axinn 1988; Evangelista 1994). Several
characteristics of the organisation such as firm size, export experience, technology
intensiveness, presence of an export department/manager, and organisational systems
have been linked to export success.
Firm Size
Firm size is one of the most popular variables in explaining differences in export
performance. The common argument is that larger firms have size-related advantages
that enable them to engage in export operations more effectively than smaller firms.
Larger firms have more financial and human resources. These size-related advantages
enhance the ability of larger firms to identify and explore attractive export market
opportunities, facilitate export activities, and cope with potential problems better than
smaller firms (Katsikeas et al 1997).
However, researchers reported mixed outcomes. Some findings concluded that firm
size has a positive relationship with export performance (eg, Christensen et al 1987;
Bijmolt and Zwart 1994), whilst others found no significant relationship (Axinn 1988;
Evangelista 1994) or even a negative relationship (Cooper and Klienschmidt 1985).
Aaby and Slater (1989) explained that the results were contradictory due to the lack of
a conceptual base for predicting the relationship between organisation size and export
performance.
Export Experience
Export experience is often seen as a vital factor for firms engaging in foreign markets,
where competitive practices are generally more sophisticated than those employed
domestically (Katsikeas, Piercy and Ioannidis 1995). Firms with more years of
40
experience in exporting are most likely to perceive less uncertainty in their export
activities, possess a better understanding of foreign market forces, develop a network
of personal contacts and customer relationships abroad, and thus achieve better export
performance levels in comparison with others (Madsen 1989).
Again, the results from previous research have been mixed. Some researchers found
that export performance is heavily influenced by a firm’s exporting experience
(Madsen 1989; Bijmolt and Zwart 1994). Other empirical studies are inconsistent with
these findings (Bilkey 1982; Cavusgil 1984; Moon and Lee 1990). For example,
Bilkey (1982) found a negative correlation of export experience to perceived export
profitability. By contrast, Cooper and Klienschmidt (1985) reported no relationship.
Technology Intensiveness
Technology intensiveness is believed to be a source of competitive advantage for
firms, especially if they export to developed countries (Aaby and Slater 1989). This
variable is found to relate to the propensity to export (Cooper and Kleinschmidt 1985;
Cavusgil and Nevin 1981; Cavusgil 1984). Other researchers reported that the effect
of the firm’s technological intensity on export performance is uncertain (eg, Madsen
1989). Raid (1986) found no relationship between technology and export
performance. Thus, the evidence on technology and export performance is also mixed.
The Presence of the Export Department / Export Manager
The presence of the export department / export manager is often hypothesised to be
one indicator for a better export performance. Several studies claimed a positive
association with export performance (Bilkey 1987 (for consumer product firms); Koh
and Robicheaux 1988; Bijmolt and Zwart 1994). In contrast, Bilkey (1987) found that
this variable has no effect on the export performance of industrial product firms.
Organisation Systems
A few studies explored the effects of organisational systems on export performance.
Essentially, findings suggest that successful exporters seem to favour decentralised
decision-making (Christensen et al 1987; Holzmuller and Stotinger 1996). Madsen
41
(1989), on the other hand, reported that centralised decision-making relates to export
success.
Management Factors
Management factors such as management characteristics, management commitment,
attitudes and perceptions have been frequently cited as important determinants of
export performance in many of the reviewed studies (eg, Aaby and Slater 1989).
Management Characteristics
Several studies have linked the individual characteristics of top managers with the
level of export success (eg, Axinn 1988; Cavusgil and Zou 1994; Nakos, Brouthers,
and Brouthers 1998). The variables most often mentioned were the top manager’s
education level, age group, foreign language capability, and international exposure
(Leonidou, Katsikeas, and Piercy 1998). Each of these is discussed below.
•=
Educational Level of the Top Manager
Several studies have established a positive relationship between the educational level
of top managers and export performance (eg, Christensen et al 1987). The common
assumption is that educated managers are more likely to be open-minded and more
able to deal with foreigners than less educated managers. Therefore, the conclusion is
that firms with more educated managers are expected to perform better than those
with less educated managers (Axinn 1988; Nakos et al 1998). Nevertheless, some
studies found no effect of this variable on export performance (Cavusgil and Naor
1987; Evangelista 1994).
•=
Top Manager’s Age
Previous research has reported a significant relationship between the age of top
managers and export propensity (Bilkey 1978; Dichtl, Koeglemayr, and Mueller
1990). However, the empirical results are mixed. Younger managers are believed to
be more internationally minded and cosmopolitan than older managers (Leonidou et al
42
1998). Aaby and Slater (1989) also argued that firms with older managers tend to take
fewer risks and are less willing to be innovative and expand internationally. By
contrast, Kaynak and Kuan (1993) found that firms with older managers tend to have
higher performance than those with younger managers.
•=
Foreign Language Proficiency of the Top Manager
The significance of the top manager’s language proficiency as one of the variables to
explain export success was reported in Leonidou et al’ s 1998 review. They reported
that there are at least 20 studies exploring this variable and 14 out of the 20 studies
related this variable to export involvement. Nine studies concluded that managers
with a good command of foreign languages are more likely to initiate exporting
(Leonidou et al 1998: 88).
Managers who have a capacity to communicate in languages other than their own are
more likely to interact with foreign customers and this may result in conducting
business with them (Holzmuller and Kasper 1990). In addition, several studies
showed that firms whose top managers could speak foreign languages are more likely
to have higher export performance than firms in which top managers can speak only
one language (Kaynak and Kuan 1993)
•=
International Exposure
International exposure to other cultures, either through studying, working or living
abroad, is found to relate significantly with export performance (Axinn 1988). Kaynak
and Kuan (1993) also found that managers who travel abroad tend to be more
successful exporters. In contrast, Evangelista (1994) found that the foreign orientation
of the top manager and years lived abroad have no significant effect on export
performance.
Management Commitment
Keegan (1984:459) stated that “The single most important factor in determining
export success is company attitude and commitment”. Management commitment to
43
exporting is commonly found to be an important contributor to firm’s export
performance (Cavusgil and Nevin 1981; Cavusgil and Kirpalani 1993; Donthu and
Kim 1993; Cavusgil and Zou 1994; Axinn et al 1996). Aaby and Slater (1989)
supported the notion that management’s commitment played an important role in the
export success of the firm. Koh (1991) found that committed exporters tend to adopt
marketing strategies that lead to a better performance. Beamish et al (1993) found the
evidence linking commitment to export intensity but not to export profitability.
Bijmolt and Zwart (1994) concluded that successful exporters are those firms whose
export activities were given a high priority. Similarly, Axinn et al (1996) concluded
that placing a higher priority on exporting is significantly linked with higher export
performance. On the other hand, a lack of willingness to commit resources was found
to have a negative influence export performance (Cavusgil and Nevin 1981).
Management Attitudes and Perceptions towards Export Operations
Many researchers suggest that positive attitudes and perceptions of management are
important factors related to export performance (see Leoniduo et al 1998; Aaby and
Slater 1989). Management perceptions of the profit contribution and future growth
which exporting brings to the firm, relative to the contribution of the domestic market,
seems to determine the export success of the firm (Axinn 1988). Bilkey (1982) argued
that the positive perception of exporting as an attractive strategy is one export success
factor. Likewise, Bijmolt and Zwart (1994) advocated that positive attitudes of
management have a positive effect on export success. In addition, management’s risktaking attitudes are positively linked to export performance (Cavusgil 1984).
Alternatively, negative perceptions about risk and potential for export present
substantial barriers to export (Axinn 1988).
Strategies
Apart from organisational and managerial factors, ‘strategies’ have received much
attention as major contributions to export success. In fact a large number of studies
attributed export performance to strategy (eg, Cavusgil and Zuo 1994; Lee and Yang
1990; Cavusgil and Kirpalani 1993; Christensen et al 1987; Cooper and Kleinschmidt
1985).
44
Product
With regard to product strategy, a number of studies found empirical support for
product strength and quality. Louter et al (1991) discovered that product strength, in
terms of product uniqueness and product packaging, helps firms gain competitive
advantage in overseas markets. In addition, Aaby and Slater (1989) stated that good
product quality is one important success factor. In terms of product lines, it is found
that a broad product line helps firms to diversify risks and leads to better export
success (Beamish et al 1993).
In terms of adaptation-standardisation strategy, several studies concluded that product
adaptation is an important determinant of export performance. This could probably be
explained by the fact that an adapted product can satisfy foreign customers’ needs
better than standardised products (Zou and Stan 1998). Cavusgil and Kirpalani’s
(1993) and Axinn et al’s (1996) findings also supported this argument.
On the other hand, other studies lend support to a standardised strategy (eg, Kirpalani
and MacIntosh 1980; Christensen et al 1987; Beamish et al 1993). Christensen et al
(1987) concluded that standard products are more successful for Brazilian firms.
Likewise, Beamish et al (1993) found that the profitability of Canadian firms was
positively related to a minimum product adaptation. In addition, Kirpalani and
MacIntosh (1980) stated that firms with standardised narrow product lines achieve
higher export sales levels.
Promotion
Research in international marketing has suggested a number of promotional activities
such as personal visits to foreign distributors, provision of product catalogues and free
samples to potential buyers, advertising and promotional campaigns contribute to
export performance. For example, a study by Kirpalani and Macintosh (1980) related
several marketing variables to export performance and concluded that promotional
activities contributed to higher export sales levels. In addition, Axinn and Thach
(1990) argued that active promotions and information provision to potential customers
leads to a better performance.
45
Price
A number of studies suggest that pricing policies are critical to attaining successful
export performance (Chetty and Hamilton 1993; Bilkey 1982; Bilkey 1987).
However, research has been inconclusive. The study by Koh and Robicheaux (1988)
and Bilkey (1987) revealed that exporters perceived better export performance if they
charged higher prices for export sales than for sales in the domestic market. In
contrast, Christensen et al (1987) recommended that exporting firms use a competitive
pricing strategy.
Place or Distribution
Generally, findings from past research indicated that the process by which distributors
were selected, as well as the support to, and commitment of, foreign distributors are
key export success factors.
Bilkey (1982) concluded that dealer support correlated positively with export
performance. Likewise, Cavusgil and Zou (1994) found that manager’s support to
distributors in the form of sales training, technical assistance, marketing know-how
and promotional support positively related to export performance.
Madsen (1989) suggested that close personal contact and joint decision making with
distributors are positively associated with export performance. Louter et al (1991)
found frequent customer contact to be an important factor in export success.
Export Strategy
With regard to export strategy, some researchers argued that firms should adopt
export expansion strategy (Lee and Yang 1990), whilst the others suggested firms to
adopt export concentration strategy (Madsen 1989). Cooper and Kleinschmidt (1985)
suggested that world oriented exporters outperformed nearest neighbour exporters.
Christensen et al (1987) found that successful exporters are more likely to export to
developed countries. Again, there is no model of export strategy which can be said to
be generally favoured in the literature.
46
Market Research
Various studies dealing with market research activities also reported mixed results.
Several studies provide support for a positive association between the use of market
information and successful export performance. For example, Christensen et al (1987)
argued that successful exporters enter foreign markets based on detailed market
studies. Hart and Tzokas (1999) also found that informal market research activities
such as customer visits, exhibitions and company visits are significantly related to
export performance. On the other hand, Walters and Samiee (1990) reported a
negative relationship between market research and export profit. Madsen (1989)
found no relationship between marketing research and export performance.
Export Performance: Comments on a Confused and Confusing Literature
What stands out in the export performance literature is the multiplicity of views with
respect to the determinants of export performance and the nature of relationships
between these factors and export performance. A number of studies attributed export
performance to strategy (eg Cavusgil and Zou 1994). However, others linked export
success to organisational characteristics (eg, Aaby and Slater 1989; Bijmolt and Zwart
1994), and others to management factors (eg Axinn 1988, Christensen et al 1987).
The nature of relationships of these factors to export performance introduced another
area of disagreement. According to Cavusgil and Zou (1994), export performance is
mainly determined by export marketing strategy and firm characteristics like
international competence and commitment to export venture. They argued that
product characteristics and some external factors such as industry and export market
characteristics only affect export performance indirectly though their impact on export
marketing strategy. In contrast, Madsen (1989) and Louter et al (1991) argued that
there are direct links between all internal and external factors and export performance.
In addition, very few studies have built upon an explicit theoretical base. The
literature in this area still shows, with few exceptions, a lack of an application of
theoretical reasoning (Zou and Stan 1998).
47
In essence, the export performance literature is composed of many fine individual
studies, which illuminate the complexity of the topic. The key problem, however, is
the absence of any sort of convergence. What stands out is divergence and disunity.
This thesis looks outside of the extant export performance literature to see if other
theoretical frameworks can shed light on the question of export performance. Before
doing so, we need to consider one final aspect of the export performance literature,
namely the question of how to measure export performance. This is discussed in the
next section.
A summary of the export performance literature review is presented in Table 3.1.
48
Table 3.1: Summary of Selected Reviewed Articles
Study
Year
Country
Dependent
Variables
Organisation
and
Management
Factors
Strategies
Aaby and Slater
1989
N/A
EI, EG, ES,
EP
MC, PRA
PS, MPD,
DCR
Axinn
1988
USA
EI
MP, MIE
Beamish et al
1993
UK, Canada
EI, EP
GD
Beamish et al
1999
Australia
ES, EP, EI
OS, MC, SEP
Bilkey
1982
USA
S
MP, FS, EK
Bijmolt and
Zwart
1994
Netherlands
ES
OS, PMA
Cavusgil
1984
USA
ES, EI
FS, MC, PRA,
PD, T
MRI, FEP
Cavusgil and
Nevin
1981
USA
S
MC, T
FEP, PA, PU
Cavusgil and
Zou
1994
USA
EG, ES, S
MC, MP
PA, PROA,
DS
Christensen et
al
1987
Brazil
S
FS, T, DD, MCS,
MP, QC, EK
FEP, BPL,
PSD, CP,
PROA, P
Cooper and
Kleinschmidt
1985
Canada
EG, EI, ES
FS, PD, R&D
FEP
Katsikeas
1994
Greece
S
FS
BPL, DCR
P, DCR
49
Table 3.1: Summary of Selected Reviewed Articles (continue)
Study
Year
Country
Dependent
Variables
Organisation and
Management
Factors
Strategies
Katsikeas et al
1995
Greece
ES
MS
DS, MR,
FEP
Kaynak and
Kuan
1993
China
EG
FS, T
BPL
Kirpalani and 1980
Macintosh
USA,
Canada
EG
OS, MC, MS,
MIE, T
PSD, P,
PRO
Koh and
Robicheux
1988
USA
EP
Masden
1989
Denmark
ES, EP, EG
PD
FEP, PS, CP
Reid
1982
Canada
S
FS
FEP
Rossen and
Ford
1982
UK,
Canada
EI
MC
DCR
Thirkell and
Dau
1998
NZ
EI
Walters and
Samiee
1990
USA
ES, EG
P
MR, PC
FS
MR, EPC
Note:
Dependent Measures:
EG:
EI:
EP:
ES:
S:
Export Growth (increase in sales or profits over a period of time)
Export Intensity (percentage of total sales to total firm sales)
Export Profitability
Export Sales
Export Success (subjective perception of export performance)
Independent Measures:
1. Organisation and management factors
DD:
Decentralised Decision Making
50
EK:
FLS:
GD:
FS:
MC:
MCS:
MIE:
MS:
MP:
OS:
PD:
PMA:
PRA:
QC:
SEP:
T:
Export Knowledge
Foreign Language Skills
Geographic Distant
Firm Size
Management Commitment
Management Control Systems
Management International Experience
Management Export Skills
Management Perceptions
Organisational Structure
Psychic Distance
Positive Management Attitudes
Perceptions of Risk Aversion
Quality Control
Stage in Exporting Process
Technology
2. Strategies
BPL: Broad Product Line
CP:
Competitive Pricing
DCR: Distribution Channel Relationships
DS:
Support to Distribution Channels
FEP: Formal Export Planning
MR: Marketing Research
MRI: Market Research Initial Market Entry
P:
Price
PA:
Price Adaptation
PC:
Personal Communication with Distributor
PRO: Promotional Activities
PROA: Promotion Adaptation
PS:
Product Strength
PSD: Product Standardisation
PU:
Product Uniqueness
51
3.2.2 Measure of Export Performance
The measurement of export performance is one of the most challenging topics in
international marketing research. To date there is still no agreement on how to
measure export performance (Matthyssens and Pauwels 1996; Zou and Stan 1998).
This is partly due to a lack of research in this area (Aaby and Slater 1989). Several
researchers maintain that poor conceptualisation of export performance and a lack of
systematic research conducted in this area has caused confusing results and problems
for the comparability of findings (Thach and Axinn 1994; Lee and Yang 1991; Zou
and Stan 1998).
Generally, export performance has been conceptually defined as export effectiveness,
export efficiency, adaptability, and continuous engagement in exporting (Aaby and
Slater 1989; Madsen 1987; Styles 1998). It has been, however, viewed and measured
in many different ways (Zou and Stan 1998; Aaby and Slater 1989). Some studies
focused only on a narrow view of export performance. Others covered a broader view
of the performance (Zou and Stan 1998).
Some export performance studies dichotomised the study group into exporters and
non-exporters (eg, Cavusgil and Nevin 1981; Christensen et al 1987), high and low
involvement (Diamantopoulos and Inglis 1988), or successful and unsuccessful
exporters (Das 1994). These approaches mainly aim to provide a profile of the
different categories. The categorical approach studies usually employed discriminant
analysis, automatic interaction detection (AID) or Chi-square analysis to differentiate
the categories (Aaby and Slater 1989).
Other studies measured export performance using some success dimensions. These
studies generally used multivariate analysis such as multiple regression or analysis of
variance (ANOVA) to assess the impact of predictor variables on criterion variables
(Aaby and Slater 1989). Zou et al (1998) summarised export performance measures
into three categories. The first category emphasises on the financial outcomes of
exporting. The most commonly mentioned in the previous literature are export sales
(Cavusgil 1984; Madsen 1989; Katsikeas et al 1995); export growth (Cooper and
52
Klienschmidst 1985; Madsen 1989; Dominguez 1993; Cavusgil and Zou 1994);
export intensity (Bilkey 1982; Cavusgil 1984; Cooper and Kleinschmidst 1985; Axinn
1988; Beamish et al 1993; Styles and Ambler 1994); and export profitability (Madsen
1989; Beamish et al 1993; Bijmolt and Zwart 1994; Cavusgil and Zou 1994). Among
these measures, export intensity, which is the proportion of export sales to total sales,
received the most attention (Matthyssens and Pauwels 1996).
Another way to measure export performance is based on strategic outcomes of
exporting such as perceptions of attainment of strategic goals, improved
competitiveness, increased market share or strengthened strategic position (Cavusgil
and Zou 1994: 4). Cavusgil and Zou explained that firms often have a set of strategic
goals, as well as financial goals. Therefore, it should be considered as an essential part
of export performance (Cavusgil and Zou 1994; Zou et al 1998).
The last type of export performance used perceptual or attitudinal measures of
performance such as perceived export success, perceived export profitability, and
satisfaction with exporting (Cavusgil and Zou 1994; Christensen et al 1987). The
logic behind this is that if a company is satisfied with its exporting operations, then
there is a strong indication of success in exporting (Zou et al 1998). Export
performance measures used in previous research is shown in Table 3.2.
Likewise, Zou and Stan (1998: 342), in their extensive review of the literature and
consistent with the reviews of Madsen (1987) and Matthyssens and Pauwels (1996),
concluded that export performance can be grouped into seven categories: sales, profit,
growth, success, satisfaction, goal achievement, and composite scales. The ‘sales’
category includes both export sales and export intensity, which are objective
measures. The ‘profit’ category comprises both objective and subjective measures of
profit. The ‘growth’ category, another objective measure, includes changes in either
sales volume or profit over a period of time. ‘Success’ is a subjective measure of
managers’ perception or belief that export contributes to firms’ overall profitability
and growth. ‘Satisfaction’ is another subjective measure of managers’ opinion
whether they satisfied with the firms’ export performance. ‘Goal achievement’, a
subjective measure, refers to managers’ evaluation of performance based on
53
objectives or set goals. Composite scales refer to measures that are based on overall
scores of several performance measures (Zou and Stan 1998: 342).
Most of the recent studies in the literature utilised more than one measure, whereas
traditionally only one indicator was used to measure export performance (Matthyssens
and Pauwels 1996). Thach and Axinn (1994: 14) argue that “Conceptually, we must
face up to the likelihood that different measures of performance capture different
aspects of the strategic and operational phenomena which underlie them”. Therefore
the use of multiple indicators is preferable.
Faced with a choice of using individual or composite measurements, it was decided
for this thesis to use both. Individual variables such as sales growth and export
intensity are assessed objectively while the other composite measures are assessed
subjectively (either compared to previous performance or competitors). The
composite measures used in this study are overall performance, relative overall
performance, relative sales growth, relative return on assets, success of new services,
customer retention, and words of mouth. The discussion on business performance is
also presented in section 3.3.2.
54
Table 3.2: Export Performance Measures Used in Previous Research
Performance Measures
Studies
Export sales level
Cavusgil 1984; Madsen 1989; Katsikeas, Piercy and
Loannidis 1995
Export sales growth
Cooper and Kleinschmidt 1985; Madsen 1989; De Luz
1993; Dominguez and Sequeira 1993; Cavusgil and
Zou 1994
Export profitability
Madsen 1989; Beamish et al 1993; Bijmolt and Zwart
1994; Cavusgil and Zou 1994
(profit rate)
Export intensity
Bilkey 1982; Cavusgil 1984; Cooper and
Kleinschmidst 1985; Koh and Robicheaux 1988; Axinn
(ratio of export sales to total 1988; Beamish et al 1993; Styles and Ambler 1994;
sales)
Sriram and Manu 1995; Holzmuller and Stottinger
1996
Satisfaction with export
performance
Bijmolt and Zwart 1994; Evangelista 1994
Development of export
performance
Bijmolt and Zwart 1994
Perceived relative
profitability of exporting
(compared to domestic
market)
Bilkey 1982; Bilky 1987
Achieved strategic goals
Cavusgil and Zou 1994
Management’s perceived
success of the venture
Cavusgil and Zou 1994
55
3.2.3 Forging Links Between Export Performance and Market Orientation
Given the fragmented and inconclusive nature of the export performance literature,
what should the researcher do? Lieberman and Montgomery (1998) commented in a
different context, on the need to forge links between the two different literatures.
The literature on the first-mover advantages has expanded greatly since
the publication of our paper a decade ago. Nevertheless, many of the
fundamental conceptual problems that we discussed remain unresolved.
We continue to be concerned that ‘as a focus for empirical research, the
concept of first–mover advantage may be too general and definitionally
elusive to be useful’ (Lieberman and Montgomery, 1988:52). How,
then, might further work on this topic be productive? We believe that
the greatest opportunities may lie in forging links with the
complementary body of research on the resource based view of the
firm’ (RBV) (Lieberman and Montgomery 1998: 1111-1112).
We could easily substitute ‘export performance’ for ‘first-mover advantage’, and
‘market orientation’ for ‘resource based view’. In other words, we propose the need to
forge a link between market orientation and export performance. The concept of
market orientation has been widely debated and researched in the past decade. The
notion that market orientation enhances business performance has been well
documented in the domestic marketing context. (eg, Narver and Slater 1990; Kohli
and Jaworski 1990; Slater and Narver 1994). It is logical to think that if market
orientation contributes to success in domestic business performance, then it should do
so for export markets. Thus far, there are very few empirical studies of the impact of
market orientation in international business contexts (e.g. Kwon and Hu 2000;
Sandqvist et al 2000; Diamantopoulos and Cadogan 1996). Hence, the knowledge of
how market orientation helps firms to have superior performance in export markets is
still limited. Moreover, none of the studies thus far provide a comparison of market
orientation of the same companies in both domestic and export markets. This study
aims to apply market orientation theory in both markets.
56
It follows that we need to review the market orientation literature. The review of
market orientation literature will be presented in the next section.
3.3 Review of the Market Orientation Literature
Market orientation has become an increasingly popular research theme and has
received a great deal of attention from scholars for a decade now. (e.g. Deshpande and
Webster 1989; Kohli and Jaworski 1990; Narver and Slater 1990; Ruekert 1992;
Greenley 1995; Hunt and Morgan 1995; Hurley and Hult 1998; Slater and Narver
2000). The resurgence of interest from both academics and practitioners in this topic
is not surprising, since market orientation is perceived to be the implementation of the
marketing concept (Kohli and Jaworski 1990), which in turn provides the
philosophical basis for successful business strategy. It is also believed that market
orientation can provide a solid foundation for a sustainable competitive advantage for
a company, which in turn will enhance the company’s performance (Narver and
Slater, 1990; Slater and Narver 1994b; Hunt and Morgan 1995). The often-postulated
relationship between market orientation and business performance has also received
considerable attention. Selected empirical studies are discussed in section 3.3.2.
Research in this area has focused on a number of issues including:
1. Market orientation constructs
2. The consequences of market orientation, especially on business performance
3. The antecedents of market orientation
4. The moderator effect on the market orientation-performance relationship.
The above issues will be discussed in the following sections.
3.3.1 What is Market Orientation?
The notion of market orientation can be traced to the 1950s when Drucker (1954)
argued that customers should be the foundation of an organisation and the very reason
for its existence. Drucker’s argument was supported by Levitt (1960) who asserted
that customer needs must be a firm’s core business purpose. Other authors
57
subsequently extended the core of this idea into what eventually came to be known as
the marketing concept (McNamara 1972; Lawton and Parasuraman 1980; Hooley,
Lynch, and Shepherd 1990; Kohli and Jaworski 1990; Narver and Slater 1990). Since
then, numerous academics and practitioners have argued that this customer-oriented
business philosophy be made an essential part of everyday management practice (e.g.
Kotler and Levy 1969; Webster 1988; Shapiro 1988).
Terms
such
as
‘market-oriented’,
‘customer-focused’,
‘market-driven’,
and
‘customer-centric’ are used interchangeably in the literature (Deshpande 1999). The
term ‘market orientation’ differs from the traditional notion of ‘marketing orientation’
in several ways. Firstly, market orientation is no longer a concern of only the
marketing department, but rather a concern of all functional parts of the organization.
Each has the aim of creating superior value for customers. Secondly, and related to
the first, an organization that is market oriented does not view the marketing
department as being more important than other departments (Shapiro 1988; Day 1990;
Webster 1994). All must work together to achieve superior value.
Many definitions of market orientation have been provided by scholars in the field.
For example, Deshpande and Webster (1987) defined market orientation as an
organisational culture that has a set of shared values and beliefs in putting the
customer first in business planning. Narver and Slater (1990) also viewed market
orientation as an organisational culture. However, they went further and argued that
market-oriented firms focus not only on customers but also on competitors. Narver
and Slater stated that competitor orientation is equally as important as customer
orientation. They also placed emphasis on the importance of inter-functional
coordination: achieving unison between all functions in the organisation. For
Deshpande and Farley (1998:213), by contrast, market orientation is a set of crossfunctional processes and activities directed at creating and satisfying customers
through continuous needs assessment. They did not emphasise competitor orientation
at all.
Another pair of renowned scholars in the field, Kohli and Jaworski (1990), viewed
market orientation as the implementation of the marketing concept. They defined and
measured a market orientation as a set of activities or behaviours related to market
58
intelligence gathering, market intelligence dissemination across functions within an
organisation, and the action responses based on this intelligence. Kohli and Jaworski
emphasised the behavioural aspects of market orientation. They did not suggest that
market orientation is an aspect of organizational culture.
Hunt and Morgan (1995) argued that market orientation is not the implementation of
the marketing concept as proposed by Kohli and Jaworski (1990) but rather
supplementary to the marketing concept. Market orientation, according to Hunt and
Morgan, comprises the systematic gathering of information on customers and
competitors, both present and potential; the systematic analysis of the information for
the purpose of developing market knowledge; and the systematic use of such
knowledge to guide strategy recognition, understanding, creation, selection,
implementation, and modification (Hunt and Morgan 1995:1). Their definition
focuses on both customers and competitors but does not mention inter-functional
coordination.
Shapiro (1988), in his article “What the hell is market-oriented?”, defined market
orientation as a set of processes aimed at acquiring information on all important
buying influences and spreading that information through every department in the
organisation. Shapiro emphasised that a market-oriented company is one that
completely understands its markets and its customers. He suggested that in order to be
market oriented, collaboration among various functions in an organisation is
important.
It was not until the late 1980s that a systematic approach was taken to developing a
better understanding of what market orientation really means and what its constructs
constitute. Kohli and Jaworski (1990) were the first researchers to publish exploratory
work on this topic. In the same year, Narver and Slater (1990) published the first
empirical work, which tested a scale for measuring market orientation, and tested its
association with business performance. Both works have been cited extensively since
then. These two primary works built on previous conceptual articles in marketing (i.e.,
Webster 1988; Shapiro 1988; Deshpande and Webster 1989). The following section
will take a closer took at these two perspectives.
59
Kohli and Jaworski’s View
Kohli and Jaworski (1990:1) viewed the term ‘market orientation’ as the
implementation of the marketing concept. In other words, a market-oriented firm is
the one whose actions are consistent with the marketing concept.
From their extensive review of marketing literature in the last 35 years, Kohli and
Jaworski (1990:3) proposed that there are three core themes in marketing concepts:
(1) customer focus, (2) coordinated marketing, and (3) profitability. They then
conducted interviews with 62 managers in both marketing and non-marketing
positions in the US and concluded that profitability is a consequence of market
orientation, and not a component of it. They finally defined market orientation as
follows:
Market orientation is the organization-wide generation of market
intelligence pertaining to current and future customer needs, dissemination
of
the
intelligence
across
departments,
and
organization-wide
responsiveness to it (Kohli and Jaworski 1990:6).
Market intelligence refers to the collection and assessment of both customers’ current
and future needs, plus the impact of government regulation, competitors, technology
and other environmental forces. Kohli and Jaworski (1990:5) stated that market
intelligence is not the exclusive responsibility of the marketing department. Instead, it
is in the responsibility of all departments. Even though in this definition market
intelligence includes information about competitors, Kohli and Jaworski did not place
the same importance on competitor orientation as on customer orientation. In this
respect they differ somewhat from Narver and Slater’s view of market orientation.
Kohli and Jaworski (1990:5) also stated that market intelligence must be
communicated and disseminated throughout an organisation in both formal and
informal ways. Effective dissemination of market intelligence is seen as a vital act
since it provides a shared basis for collaborative efforts by different departments. This
idea is in line with the importance of inter-functional coordination within the
60
organisation recommended by Shapiro (1988), Narver and Slater (1990) and Slater
and Narver (1994).
The last component of market orientation, according to Kohli and Jaworski, is
responsiveness to market intelligence, which is generated and disseminated. Findings
from their study suggested that ‘responsiveness’ involves the selection of target
markets, the design and selection of products and services, the production, distribution
and promotion of the products.
Kohli and Jaworski (1990) also make the following points: (1) the focus is on those
activities that facilitate the operationalisation of the marketing concept; and (2) the
concept is a continuous rather than a dichotomous (either/or) construct, that is,
organisations are market oriented in varying degrees.
Narver and Slater’s View
From an intensive review of both strategic and marketing literatures, Narver and
Slater (1990) proposed that market orientation consists of three behavioral
components: customer orientation, competitor orientation, and inter-functional
coordination. According to them, these three components are of equal importance.
Customer Orientation
Narver and Slater (1990) stated that the heart of market orientation is its customer
focus. For companies to be customer oriented, they need to find out what customer
needs are, now and in the future, in order to create a value-added benefit (Narver and
Slater, 1990; Slater and Narver, 1994b). This concept seems to coincide with Kohli
and Jaworski’s (1990) idea that firms must determine their customers’ needs and fulfil
them. However, Narver and Slater (1990:21) emphasised not only fulfilling customer
needs, but also creating value-added benefits by either increasing a buyer’s benefits or
decreasing a buyer’s costs. They suggested that employees in these organisations pay
attention to service delivery. Employees of these organisations also often spend
considerable time with their customers (Slater and Narver 1994b).
61
Competitor Orientation
Another component of market orientation is to be competitor oriented. Narver and
Slater (1990) stated that firms should understand and identify the short-term strengths
and weaknesses and long-term capabilities and strategies of both current and future
competitors. Employees from every department in a market-driven organisation share
information about competitors because this information can be used to the company’s
advantage (Slater and Narver 1994b). Competitor orientation is viewed as equally
important as customer orientation.
Inter-functional Coordination
The last behavioural component of market orientation is inter-functional coordination,
in which every department is important and has a role to play in satisfying customers.
This idea concurs with Sharpiro (1988), who stated that market orientation is not
marketing orientation. A market orientation does not suggest that the marketing
department has the most important role.
According to Narver and Slater (1990), customer orientation and competitor
orientation include all of the activities involved in generating market intelligence
about customers and competitors and disseminating it throughout the business. They
also argued that in order to be market-oriented, it is important for all departments to
communicate information gathered from customers and competitors and to coordinate
their efforts in order to create superior value for customers.
On the whole, the two definitions given by both Kohli and Jaworski and Narver and
Slater are quite similar and are complementary. Both viewed market orientation as a
continuous and not dichotomous construct. Furthermore, both measures are similar in
that they focus on obtaining and disseminating information about customers and
competitors in order to attain a competitive advantage. (It is true, however, that Kohli
and Jaworski’s construct seems to emphasise customers more than competitors.) Both
pairs of authors also emphasise the importance of concerted efforts of all functions in
responding to customer needs. In addition, both Narver and Slater and Kohli and
Jaworski see market orientation as one construct with three components.
62
However, there are important differences between the two groups of researchers. As
noted, Narver and Slater explained market orientation as a corporate culture, which
leads to values and behaviours toward customers and competitors with specific aims
(ie. profitability). Kohli and Jaworski on the other hand described market orientation
as the implementation of a marketing concept and did not indicate that market
orientation is an aspect of culture (Hurley and Hult 1998).
This study adopts Narver and Slater’s (1990) construct for several reasons. Firstly,
Narver and Slater’s construct separates customer orientation and competitor
orientation into different components. Therefore, it is easier to see the impact of each
component (customer or competitor orientations) on business performance. Although
Narver and Slater view market orientation as one construct, it is quite common that
researchers analyse each component separately (Lukas and Ferrell 2000). Secondly,
some studies indicate that Narver and Slater’s market orientation construct
outperforms the Kohli and Jaworski’s construct (also known as MARKOR, as
developed by Kohli, Jaworski and Kumar 1993), in terms of criterion validity,
reliability and uni-dimensionality (Farrell and Oczkowski 1997; Oczkowski and
Farrell
1998).
Moreover,
other
researchers
have
criticised
the
narrow
conceptualisation of MARKOR, in that it does not sufficiently capture the notion of
providing value to customers (Pelham 1993).
3.3.2 Consequences of Market Orientation
Market orientation is viewed as a source of sustainable competitive advantage for an
organisation in that it helps to create superior value for customers (Narver and Slater
1990; Slater and Narver 1994b; Slater and Narver 2000). Therefore, it is not
surprising that an increase in market orientation can be expected to result in the higher
business performance of an organisation. In fact, many researchers have found a
positive link between the extent of market orientation and business performance
(Kohli and Jaworski, 1990; Narver and Slater, 1990; Ruekert, 1992; Jaworski and
Kohli, 1993; Pleshko, 1993; Slater and Narver, 1994a; Orvis, 1996; Pulendran, 1996;
Deshpande and Farley 1999; Slater and Narver 2000). Other marketing authorities
63
(such as Kotler, 1984; Levitt, 1960 and Webster 1988) also addressed the notion that a
business that increases its market orientation will improve its market performance.
Additionally, market-oriented culture facilitates clarity of focus and vision in an
organisation. This in turn generates pride in belonging to an organisation and results
in higher employee morale and greater organisational commitment (Jaworski and
Kohli 1993; Ruekert 1992). Sigauw, Brown and Widing (1994) reported that if a firm
is perceived as having a high market orientation, then the sales force practices a
greater level of customer orientation, reduces role stress, and expresses greater job
satisfaction and organisational commitment. Market orientation is also proven to be a
significant contribution to a product innovation projects (Atuahene-Gima 1996) and
new product success (Cooper and Kleinschmidt 1993; Pelham and Wilson 1996).
Another consequence of market orientation is customer satisfaction, which increases
repeat purchases and draws new customers to the business (Kohli and Jaworski 1990;
Kumar, Subramanian, and Yauger 1998). Siguaw, Simpson and Baker (1998) found
that market orientation enhances channel relationships between suppliers and
distributors.
There are many studies examining the relationship between market orientation and
business performance. For example, Narver and Slater (1990) studied the effects of
market orientation on business profitability. They interviewed managers in 113
strategic business units (thereafter called SBUs) in one corporation. They used
relative return on assets as a measurement for business performance. Their findings
suggested that market orientation is an important determinant of profitability for both
commodities and non-commodity businesses. They also observed that businesses that
have a higher degree of market orientation also have greater profitability. In their
later work, Slater and Narver (1994a) included two other measures, sales growth and
new product success, in their model. The results of their studies showed that market
orientation is also related positively to sales growth and new product success. In their
recent work using multiple key informants from a broad cross section of businesses,
Slater and Narver (2000) found that market orientation is positively related to
business profitability, measured by return on investment (ROI). They concluded that
becoming and remaining market oriented is essential for a company’s success.
64
Kohli and Jaworki (1990), in their first attempt to conceptualise market orientation
and its implications, interviewed 62 managers in diverse functions and organisations.
Their findings suggested that market orientation enhances the performance of an
organisation in terms of return on investment (ROI), profit, sales volume, market
share and sales growth. Market orientation also has a positive effect on employees.
They concluded that market orientation results in employees’ job satisfaction and
commitment to the organisation. The third consequence of market orientation is that it
creates loyal customers, who not only keep coming back to the organisation, but also
will tell others about the organisation.
Jaworski and Kohli (1993) conducted another study regarding antecedents and
consequences of market orientation by using two sets of samples (sample 1: 222
SBUs; sample 2: 230 SBUs). This time they used both a subjective measure
(management’s opinion on overall performance compared to that of major
competitors) and an objective measure (market share). The results suggested that
market orientation is related to overall business performance. However, it is only
significantly related to business performance when overall performance is assessed by
the subjective measure. Market orientation does not appear to be related to
performance if measured by market share (objective measure). Jaworski and Kohli
(1993) explained that market share may not be an appropriate indicator of
performance. Secondly, the effect of market share on performance may not be
captured in a cross-sectional study.
The market orientation concept does not only apply to consumer or industrial product
companies, but also to service companies. Orvis (1996) investigated the influence of
market orientation on retail store performance in the United States. The results
support the positive association between high measures of market orientation and high
levels of retail store performance.
The market orientation-performance relationship has also proven to be significant in
various industry contexts. In the health care industry, Kumar et al (1998) studied 159
hospitals in the United States and concluded a strong positive relationship between
market orientation and various measures of organisational performance. In the
biotechnology industry, Appiah-Adu and Ranchhod (1998) found that market
65
orientation is positively and significantly associated with 3 out of 4 performance
measures examined. Caruana, Ramaseshan, and Ewing (1999) also confirmed that
market orientation has a positive association with organisation performance in the
public sector (among government departments). These results lend strong support to
the ‘generalisability’ of market-orientation theory.
Although a majority of research in this area has been conducted in the United States,
several researchers have replicated these studies in other countries. These include the
UK (Greenley 1995; Diamantopoulos and Hart 1993), UK and Malta (Pitt, Caruana,
and Berthon 1996), Australia (Pulendran 1996; Atuahene-gima 1996; Caruana et al
1999), Saudi Arabia (Bhuain 1998), Japan and India (Deshpande and Farley 1999),
Germany (Fritz 1996), Korea (Kwon and Hu 2000), and Ghana (Appiah-Adu 1998).
However, these studies have yielded mixed results. Non-US studies often suggest that
there is a weak or non-significant relationship between market orientation and
business performance (Diamantopoulos and Hart, 1993; Greenley, 1995; Appiah-Adu,
1998).
For example, Diamantopoulos and Hart (1993) interviewed 87 Managing Directors of
UK manufacturing firms across 7 industries. The results show a weak association
between market orientation and business performance. The authors argued that the
market orientation-business performance relationship is situation specific to various
moderating influences.
Another example from the UK was studied by Greenley (1995). He developed an
empirical study of 240 UK firms in an attempt to investigate a relationship between
market orientation and performance. He used ROI (return on investment), new
product success and sales growth as measures. The results from his study were similar
to those of Diamantopoulos and Hart (1993), suggesting that market orientation could
not be said to have an effect on return on investment, new product success rate or
sales growth.
Appiah-Adu (1998) studied the relationship between market orientation and
performance in Ghana and concluded that market orientation does not have a direct
impact on sales growth or return on investment.
66
It is, therefore, interesting to test whether the market orientation concept is applicable
to businesses in Thailand and whether market orientation relates to business
performance in both domestic and export markets among Thai firms.
As mentioned before, market orientation is found to relate to various aspects of
performance. In this study, business performance includes both objective measures
(sales growth, export intensity) and subjective measures (overall performance, relative
overall performance, relative sales growth, relative ROA, success of new services,
customer retention, and words of mouth).
A summary of findings from these empirical studies is presented in Table 3.3.
67
Year
2000
1999
1999
1999
Country
Korea
Australia
India and Japan
Australia
Sample
states of Queensland, Victoria and
171 government departments in the
3.
2.
1.
3.
2.
1.
Cost effectiveness
Level of customer services
Improvement achieved
Overall performance
Export profit
Export growth
Export intensity
Performance Measure
Western Australia
4.
Relative profitability compared to
Large firms whose stocks is traded
224 interviews in Japan
2
Relative size
in India and Japan
1.
Relative sales growth
Relative market share
4
Profitability
3
1.
Customer satisfaction
116 interviews in India
87 large manufacturing and service
2.
Adaptability
2.
competitors
1
341 exporting firms
Table 3.3: Summary of Empirical Studies
Author(s)
Kwon and Hu
Caruana et al
Deshpande and
Farley
Vorhies et al
firms
3.
Market Orientation/
Performance Relationship
Positive
Positive
Positive
Positive
68
1995
1996
1996
1997
1998
Year
58 British Charity organisation
(manufacturing and service firms)
74 companies
1
2.
1.
2.
1.
Relative return on equity
A number of volunteers
Long term and short term objectives
achieved
Sales growth
Return on investment
Performance Measure
161 firms in UK
Relative sales growth
Sample
1.
2
England
United Kingdom
193 firms in Malta
Relative return on investment
2.
2.
Relative sales level
And Malta
3.
Return on investment
Management opinion on overall
performance
1.
1.
240 companies
New product success
105 SBUs
United Kingdom
2.
Sales growth
Australia
Ghana
Country
Table 3.3: Summary of Empirical Studies (continue)
Author(s)
Appiah-Adu
Balabanis et al
Pitt et al
Pulendran
Greenley
3.
Market Orientation/
Performance Relationship
Not significant
Not significant
Positive in both UK and Malta
Positive
Weak association
69
Year
Country
Sample
Table 3.3: Summary of Empirical Studies (continue)
Author(s)
Market Orientation/
2.
1.
New product success
Sales growth
Relative return on investment
Performance Measure
Performance Relationship
3.
Relative sales growth
Positive
1
Relative profit margin
107 SBUs in two companies
2
Market share
United States
1.
Management’s opinion on overall
performance.
Positive
1994
2.
Long run financial performance
Positive
Slater and Narver
1.
Relative return on assets
Jaworski and
Kohli
1993
United States
Sample one: 222 SBUs in 115
companies
Sample Two: 230 Companies
Positive
Weak association
5 SBUs in one company
1.
87 companies
United States
113 SBUs in one companies
United Kingdom
1992
United States
1993
Ruekert
1990
Diamantopoulos
and Hart
Narver and Slater
70
3.3.3
Environmental Moderators of the Relationship between Market Orientation and
Business Performance
Is the relationship between market orientation and business performance moderated by
environmental factors? In other words, can the relationship between the two be strengthened
or weakened depending on the business environment of a firm? This question is driven by the
long tradition of support for the assumption that environmental factors influence the
effectiveness of organisational variables. In fact, several studies have investigated the
association between different environmental factors and established the effects of moderating
influences on organisational variables. For example, Hambrick (1983) and McKee,
Varadarajan, and Pride (1989) have found that the effectiveness of a particular strategic
orientation is dependent on the dynamics of the market. Lusch and Laczniak (1987) also
found that the level of market orientation of a firm is contingent on the competitive
environment in which it operates.
Previous studies on market orientation-business performance relationship have identified a
number of variables that are likely to moderate this relationship (Day and Wensley 1988;
Kohli and Jaworski 1990; Slater and Narver 1994; Greenley 1995; Kumar et al 1998). These
variables include market turbulence, competitive intensity, technological turbulence and buyer
power. In other words, market orientation is likely to have less impact on performance in
some environmental conditions and may have stronger impact on performance in other
conditions.
Kohli and Jaworski (1990:15) argued that market orientation may or may not be desirable
depending on the nature of its supply and demand side factors. If market demand is strong, a
company can get away with not being market-oriented. From their intensive interviews with
managers, they concluded that market turbulence and competition turbulence will strengthen
the relationship between market orientation and business performance, while technology
turbulence will weaken the relationship between the two. They even went further to suggest
that companies should calculate cost and benefits of becoming market-oriented firms (Kohli
and Jaworski (1990:15).
71
However, their later work revealed that the relationship between market orientation and
business performance appears to be robust across market environments (market turbulence,
technological turbulence and competitive intensity) (Jaworski and Kohli 1993).
Slater and Narver (1994) found limited support for a moderator role for competitive
environment on the market orientation-performance relationship. Their results show that
market turbulence has an effect only on ROA (rate of return on assets), whilst technological
change has an effect only on new product success, and market growth is the factor that
moderates the relationship between market orientation and business performance if measured
by sales growth. Hence, they were opposed to the idea that an organisation should adjust its
level of market orientation to match environmental conditions. In other words, they believed
that being market oriented could never be a negative regardless of the market conditions firms
operate in.
Moderator influences on the market orientation-performance relationship have been
investigated in different populations. For example, Pulendran (1996) used three moderators—
market turbulence, technological turbulence and competitive intensity—in her study of
Australian firms. She concluded that only market turbulence has an effect on the relationship
between market orientation and business performance. The other two moderators do not have
any effect on the relationship. Appiah-Adu (1998) also reported that in the Ghanaian business
context a competitive environment does influence the market orientation-performance
relationship. In addition, Greenley (1995), investigating UK organisation, suggested that the
influence of market orientation on performance is moderated by environmental variables,
including market turbulence, customer power and technological turbulence.
Kumar et al (1998) also found that competitive hostility and market turbulence were
positively related to the market orientation-performance relationship. In other words, the
relationship between market orientation and performance is strengthened when market
turbulence is high and vice versa. On the other hand, supply power is found to have a reverse
effect. That is, the relationship between market orientation-performance is weakened when
supply power is high.
To sum up, it is postulated that environmental moderators affect the relationship between
market orientation and business performance. This thesis will examine whether moderating
factors such as market turbulence, technological turbulence, competitive intensity and buyer
72
power, affect the relationship between the degree of market orientation and performance
among Thai firms. Figure 3.1 shows the relationship between market orientation, business
performance and environmental variables.
Market
Orientation
Business
Performance
Environmental
Moderators
Figure 3.1: Environmental Context as a Moderator
Table 3.4 summarises the findings of the empirical studies with regards to environmental
factors. Most of the findings support a moderating role in the relationship between market
orientation and business performance.
73
Table 3.4: Empirical Studies on Moderating Effects
Authors
Year
Sample/Country
Moderator Variables
Moderating Effects
Kumar et al
1998
159 hospitals in
United States
1. Market turbulence
2. Competitive hostility
3. Supplier power
Market turbulence
Competitive hostility
Supplier power
Appiah-Adu
1998
74 companies in
Ghana
1. Market dynamic
2. Competitive intensity
3. Market growth
Competitive intensity
Pulendran
1996
105 SBUs in
Australia
1. Market turbulence
2. Technological
turbulence
3. Competitive intensity
Market turbulence
Greenley
1995
240 companies in
United Kingdom
1. Market turbulence
2. Technological change
3. Market growth
Market turbulence
Slater and
Narver
1994
107 SBUs in two
companies in
United States
1.
2.
3.
4.
5.
6.
Market turbulence
Technological change
(limited support)
Jaworski and
Kohli
1993
Sample one: 115
companies
Sample two: 230
companies in
United States
1. Market turbulence
2. Competitive intensity
3. Technological
turbulence
Market turbulence
Technological change
Market growth
Buyer power
Competitor hostility
Competitor
concentration
No support for
moderator role
74
3.3.4 Antecedents to a Market Orientation
Antecedents to market orientation are factors that enhance or impede the level of market
orientation implemented by the company (Kohli and Jaworski 1990). What makes some firms
more market-oriented than others? Are there factors that act as catalysts and those that act as
deterrents to market oriented activities? Despite the importance of these questions, empirical
studies on this issue are still limited (Bhuian 1998).
Early research on the antecedents to market orientation was undertaken by Kohli and Jaworski
(1990). From their intensive literature review and field interviews with managers, Kohli and
Jaworski (1990:6-7) revealed that there are three hierarchically ordered categories of
antecedents to a market orientation: senior management factors, interdepartmental dynamics,
and organisational systems, respectively. For senior management factors, they suggested that
top management emphasis on being market oriented, risk-taking behaviours, obtaining formal
education and upward mobility of top management are prerequisites to market orientation.
Moreover, interdepartmental dynamics such as conflicts can impede the level of market
orientation. On the other hand, interdepartmental connectedness can enhance the level of
market orientation. The last category, organisational system such as departmentalisation,
formalisation, and centralisation, are seen to hinder the level of market orientation of an
organisation. Alternatively, market-based reward system is predicted to enhance market
orientation.
Based on Kohli and Jaworski’s (1990) exploratory findings, Jaworski and Kohli (1993)
developed the idea further by conducting empirical research that examines antecedent
variables and the level of market orientation of an organisation. Their empirical study of a
US-based sample concluded that top management emphasis on being market oriented,
interdepartmental connectedness, and a reward-system orientation based on customer
satisfaction were related to higher level of market orientation. On the other hand, higher levels
of conflict and centralisation within firms contributed to lower levels of market orientation
(Jaworski and Kohli, 1993).
Pulendran (1996), replicating Jaworski and Kohli’s (1993) work, concluded from Australian
samples that a high level of market orientation is a result of top management emphasis, a
75
customer satisfaction based reward systems and interdepartmental connectedness. By contrast,
interdepartmental conflict contributes to lower market orientation of the firm.
Another piece of empirical work on antecedents to market orientation was completed by
Bhuian (1998) who examined market orientation and its antecedents in Saudi Arabian
manufacturing firms. He adopted five antecedents from Jaworski and Kohli (1993). They are
top management characteristics (top management emphasis and top management risk
aversion), organisational systems (centralisation and market based reward systems), and
interdepartmental dynamics (conflict). The findings suggest that top management emphasis,
centralisation, and conflict are antecedents to market orientation in Saudi Arabia.
Top management plays a key role in reinforcing the implementation of any business
philosophy and business strategies. Many empirical studies from the export literature
suggested that the commitment of top management is a critical determinant of export success
(eg, Beamish et al., 1993; Donthu and Kim, 1993; Cavusgil and Zou, 1994; Evangelista,
1994). Madsen (1994) reported that top management commitment has been seen as critical to
export success, especially during the early stages of internationalisation. Similarly, Cavusgil
and Zou (1994) reported that managerial commitment is one of the key determinants of export
performance on export venture level.
In addition, it is has been found that management perceptions is a significant variable in
explaining export performance (Aaby and Slater 1989). One of the important variables is
management perception of export profitability and future growth (Cavusgil and Nevin, 1981).
Bilkey (1978), in his review of 43 studies on export behaviour of firms, suggested that one of
the major keys in motivating firms to engage in exporting is long-term profitability.
This thesis postulates that top management commitment towards export operations and top
management perceptions of export profitability and future growth enhance the level of export
market orientation, which in turn increases export performance.
This thesis also seeks to replicate the work of Jaworski and Kohli (1993) to find out whether
the three sets of antecedents to a market orientation (top management factors,
interdepartmental dynamics and organisational systems) act as catalysts or deterrents in Thai
organisations. The antecedents to market orientation are shown in Figure 3.2.
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Top Management Factors
Top management emphasis
Risk aversion
Interdepartmental Dynamics
Conflict
Connectedness
Organisational Systems
Formalisation
Centralisation
Market-based reward systems
Market Orientation
Management Commitment
towards export operations
(export market only)
Management Perceptions of
export profitability and growth
(export market only)
Figure 3.2: Antecedents to Market Orientation
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3.4 Chapter Summary
In a nutshell, the review of the literature can be concluded as follows:
First, what stands out in the export performance literature is the multiplicity of views with
respect to the determinants of export performance and the nature of relationships between
these factors and export performance. Thus far, there is no model of export success which is
generally favoured in the literature.
Second, the notion that market orientation is an important factor related to business
performance has been widely acknowledge for a decade. In a domestic setting there has been
a strong empirical support suggesting a positive relationship between market orientation and
various indicators of business performance.
This thesis attempt to forge links between the export performance and the market orientation
literatures.
Third, although empirical studies on market orientation have been repeated in many countries,
a review of the evidence so far suggests that the majority of studies have been based on
developed countries. This thesis will add evidence from a developing country, Thailand, to
the existing worldwide database on market orientation.
To sum up, from the review of the literature, considerable gaps remain as follow. Firstly, the
link between market orientation and export performance is worth exploring. Next, if market
orientation is essential for business performance in Thailand, then questions such as in what
kinds of business environment market orientation is essential and vice versa, and how to
increase the level of market orientation in a Thai organisation, are important.
The next chapter discusses the conceptual framework, research questions and hypotheses,
which arise from literature review.
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Chapter Four
Conceptual Framework and Research Questions
4.1
Objectives and Structure of the Chapter
The objectives of this chapter are to propose a conceptual framework and model
based on the literature review in Chapter Three and to suggest research questions and
hypotheses drawn from the model.
The chapter is divided into three major sections. Section 4.2 proposes a conceptual
framework for this research. Section 4.3 elaborates key components in the model.
Section 4.4 presents research questions and hypotheses.
4.2
Proposed Conceptual Framework
Academic scholars and business practitioners have long advocated the importance of
firms having a market orientation for the simple reason that market orientation can
improve a firm’s business performance.
Narver and Slater (1990) emphasised that a market-oriented firm needs to focus on
the current and future needs of customers. Equally important, the firm needs to
understand strengths and weaknesses, capabilities and strategies of its competitors. In
addition, market-oriented firms place importance on each individual function within
the organisation (not merely the marketing department) in creating value for
customers. Therefore, their cooperation in sharing information about customers and
markets, and responding to customers’ needs is absolutely essential.
The focus of this thesis is in line with Narver and Slater’s argument saying that for a
business to maximise its long-run profit, it must continuously create superior value for
its target customers. To create continuous superior value for customers, a business
must be customer oriented, competitor oriented and inter-functionally coordinated
(Narver and Slater 1990:21-22).
79
However, the performance benefits resulting from a market-oriented focus may vary
depending on the environment in which firms operate. Kohli and Jaworski (1990)
advocated that under certain conditions market orientation may not be desirable for a
firm. As noted in the previous chapter, they go so far as to suggest that managers
should calculate the cost–benefit ratio of market orientation.
Previous studies have identified several environmental conditions which may
moderate the market orientation-business performance relationship, including market
turbulence, technological turbulence, competitive intensity and buyer power (Kohli
and Jaworski 1990; Kumar, Subramanian, and Yauger 1998).
Market-oriented activities not only have an impact on overall business performance of
a firm, they may also help management to make better decisions regarding how to
apply marketing strategies or activities in other foreign markets. For example, should
they standardise or adapt their strategies? If adaptation is required, to what extent is it
needed?
To become more market oriented a firm needs management support, connectedness
between departments, risk-taking behaviour, and market-based reward systems. In
addition, in order to increase the degree of export market orientation, firms also need
management commitment for export markets and a positive attitude towards future
profit and growth deriving from export markets. On the other hand, conflicts among
departments, formalisation and centralisation may hinder the degree of marketoriented activity (Jaworski and Kohli 1993).
The conceptual framework in this study is presented in Figure 4.1
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6
5
4
3
2
Reward Systems
Centralisation
Formalisation
Connectedness
Interdepartmental
Interdepartmental Conflict
Top Management Risk Aversion
on Being Market Oriented
Top Management Emphasis
Antecedents
3. Inter-functional Coordination
2. Competitor Orientation
1. Customer Orientation
Market Orientation
10. Quality of Decision
9. Average Export Sales Growth
8. Export Intensity
7. Word of Mouth
6. Customer Retention
5. Success of New Services
4. Relative ROA
3. Relative Sales Growth
2. Relative Overall Performance
1.Overall Performance
Business Performance
7
Management Commitment
1
8
Management Perceptions towards
Moderators
9
Exports’ Profit and Growth
1 Market Turbulence
2 Technological Turbulence
4 Buyer Power
3 Competitive Intensity
Figure 4.1 A Conceptual Model of Market Orientation and Business Performance
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4.3
Key Components of the Model
The model shown in Figure 4.1 has four major components:
Domain 1:
Market Orientation
Domain 2:
Antecedents to Market Orientation
Domain 3:
Environmental Moderators
Domain4:
Business Performance
Domain 1:
Market Orientation
Narver and Slater’s (1990) conceptual framework of market orientation was adopted
in this study. According to the authors, market orientation consists of three
components: customer orientation; competitor orientation and inter-functional
coordination (Narver and Slater 1990).
Domain 2:
Antecedents to Market Orientation
This study adopted seven antecedents to market orientation from Jaworski and Kohli’s
(1993) study. Two of them, top management emphasis on being market oriented and
top management risk aversion, are related to top management factors. Another two
variables are associated with interdepartmental dynamics (interdepartmental conflict
and interdepartmental connectedness). The last three are related to organisational
systems (formalisation, centralisation, and reward systems).
In addition, two new antecedents pertaining to export market orientation, which are
derived from the review of export literature, were added in the model. They are
management commitment towards export operations and management perceptions
towards export profitability and growth.
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Domain 3:
Environmental Moderators
Based on the assumption that under certain conditions market orientation may not be
necessary for a firm, it appears likely that there are moderators which affect the
relationship between market orientation and business performance.
In this study it is hypothesised that four environmental variables—market turbulence,
technological turbulence, competitive intensity and buyer power—influence the
linkage between market orientation and performance.
Domain 4:
Business Performance
No measure on its own can totally represent business performance. As noted in the
previous chapter, two types of measures are often utilised in the export marketing
literature: a composite measure and the use of several individual indicators. The
export performance literature indicates that most researchers tend to consider
performance dimensions independently rather than building a composite measure
(Matthyssens and Pauwels 1996). The individual measures used in this study, which
are also considered as objective measures, are export intensity (ratio of export sales to
total business sales value) and export sales growth.
On the other hand, the strategic marketing literature often utilises subjective or
judgmental measurement. In this study, objective and subjective measures of export
performance are used. The subjective measures used are relative sales growth, relative
ROA (return on assets), overall performance, relative overall performance, success of
new services, customer retention and word of mouth.
One of the objectives of this study is to find a linkage between market orientation and
the quality of the decision on whether and to what extent a company should adapt or
standardise its marketing strategies and activities in foreign markets. The decision to
modify marketing strategies includes product strategies, brand name, packaging,
pricing strategies, distribution strategies, advertising theme, and sales promotion
strategies.
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4.4
Research Questions and Hypotheses
The relationships depicted in the conceptual framework are summarised in five
research questions. Research questions, hypotheses and their rationale are discussed
below.
4.4.1 Research Question One
“How does market orientation affect performance?”
As discussed in Chapter Three, the notion that market orientation is an important
determinant of business performance has been well supported by many scholars
(Kohli and Jaworski 1990; Narver and Slater 1990; Jaworski and Kohli 1993; Slater
and Narver 1994; Kumar et al 1998). Narver and Slater (1990) explained market
orientation in terms of an organisational culture that can create necessary behaviours
for developing superior value for customers, which in turn results in a firm’s superior
performance. Kohli and Jaworski (1990:13) also argued that market orientation
appears to provide a unifying focus for the efforts of individual employees and among
departments within an organisation, which leads to superior performance.
A number of US-based studies argued that market orientation has a positive
relationship with business performance (Narver and Slater 1990; Kohli and Jaworski
1990; Ruekert 1992). However, non-US studies (Greenley 1995; Appiah-Adu 1998)
did not find evidence strong enough to support the market orientation-business
performance relationship. For example, Greenley (1995) found that market orientation
is a predictor of performance only under certain environmental conditions.
Although some studies could not determine market orientation-performance
relationship, it is still reasonable to postulate a positive relationship between the two.
The rationale for this, as suggested by Narver and Slater (1990), comes from the link
between market orientation and sustainable competitive advantage, which in turn
enhances firm performance. There seem to be no reason why we cannot extend these
arguments to apply them to a firm engaging in export activities.
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Performance Measures
Performance measures used in previous studies have been varied. They range from
hard measures such as market share, return on assets (ROA), return on investment
(ROI), return on equity (ROE), and sales growth, to soft measures such as
organisational commitment and esprit de crops. They include both subjective and
objective, composite and individual measures.
In this study, business performance is measured by the composite of overall
performance, relative performance, relative sales growth, relative ROA, success of
new services or products, word of mouth, and customer retention. It is also measured
by individual objective measures such as sales growth and export intensity (the ratio
of export sales to total sales).
The relationships between market orientation and business performance are
summarised in the following hypotheses. (Note that E stands for ‘export’ and D for
‘domestic’.)
Hypotheses E 1:
The degree of export performance increases when
the degree of export market orientation increases;
Corollary Hypotheses: The degree of export performance increases when
E 1a:
the degree of export customer orientation increases;
E 1b:
the degree of export competitor orientation increases;
E 1c:
the degree of export inter-functional coordination increases.
Replication Hypothesis
Hypothesis D1:
The degree of domestic performance increases when
the degree of domestic market orientation increases;
Corollary Hypotheses: The degree of domestic performance increases when
D 1a:
the degree of domestic customer orientation increases;
D 1b:
the degree of domestic competitor orientation increases;
D 1c:
the degree of domestic inter-functional coordination increases.
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Hypotheses E 2:
The degree of export sales growth increases when
the degree of export market orientation increases;
Corollary Hypotheses: The degree of export sales growth increases when
E 2a:
the degree of export customer orientation increases;
E 2b:
the degree of export competitor orientation increases;
E 2c:
the degree of export inter-functional coordination increases.
Replication Hypotheses
Hypothesis D 2:
The degree of domestic sales growth increases when
the degree of domestic market orientation increases;
Corollary Hypotheses: The degree of domestic sales growth increases when
D 2a:
the degree of domestic customer orientation increases;
D 2b:
the degree of domestic competitor orientation increases;
D 2c:
the degree of domestic inter-functional coordination increases.
Hypotheses E 3:
The degree of export intensity increases when
the degree of export market orientation increases;
Corollary Hypotheses: The degree of export intensity increases when
4.4.2
E 3a:
the degree of export customer orientation increases;
E 3b:
the degree of export competitor orientation increases;
E 3c:
the degree of export inter-functional coordination increases.
Research Question Two
“How do management commitment to export operations and management
perceptions of export profitability and growth affect the level of export market
orientation? ”
Not only does this study extend the analysis of market orientation to export
performance, it also adds two antecedents not previously used in studies of market
orientation. These are management commitment to export operations and
management perceptions of export profitability and growth.
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The rationale behind these two antecedents is that top management plays an important
role in guiding the direction of an organisation. If exporting is given a priority and
management shows both attitudinal and behavioural commitment towards export
operations, the signal is sent to the entire organisation that export markets and export
customers are important. As a result, it is most likely that the whole organisation will
be geared to respond to export customers’ needs.
Likewise, if management has positive perceptions of export profitability and growth,
it is most likely that management will put effort and resources towards export
markets. Consequently, export market oriented activities will surely be increased.
Hence, the following hypotheses are proposed:
Hypotheses E 4:
Greater management commitment to export operations
will lead to a greater level of market orientation;
Corollary Hypotheses: Greater management commitment to export operations will
lead to
E 4a:
a greater level of export customer orientation
E 4b:
a greater level of export competitor orientation
E 4c:
a greater level of export inter-functional coordination.
Hypotheses E 5:
Greater management perceptions of export profitability
and growth will lead to a greater level of export market
orientation;
Corollary Hypotheses: Greater management perceptions of export profitability and
growth will lead to
E 5a:
a greater level of export customer orientation
E 5b:
a greater level of export competitor orientation
E 5c:
a greater level of export inter-functional coordination.
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4.4.3 Research Question Three
“How do antecedents as proposed by Jaworski and Kohli (1993)management
emphasis on market orientation, top management risk aversion, interdepartmental
conflict, interdepartmental connectedness, formalisation, centralisation and reward
systems affect the level of market orientation (both export and domestic markets)
in the Thai business context?”
Despite the importance of the market orientation concept, systematic inquiries of the
antecedents to market orientation have only been limited only to the work of Jaworski
and Kohli (1993). Their study found a number of factors associated with market
orientation, which the authors summarised as comprising three areas: top management
factors, interdepartmental dynamics and organisational systems. This study seeks to
replicate the work of Jaworski and Kohli (1993) in examining the relationship
between market orientation and its antecedents. Each variable and its rationale is
discussed below.
Top Management Factors
One of the major arguments in Kohli and Jaworski’s (1990) study is that top
management plays a significant role in promoting market-oriented culture. The
importance of top management emphasis is shown in the following statement made by
the senior vice president of an industrial services company.
We’ll do almost a 100 million worth of sales this year. We have a customer
that bought a mere $10,000 worth of services. He calls the president and
launches into a long tirade of complaints. The president writes down what
he says and responds to him in writing. He investigates the difficulty. He
gets back to him. In that process, if you are a junior engineer who just
worked on a $10,000 project and the president calls you up and says ‘let’s
talk about this and work out some kind of response to him’, the word
spreads throughout the base of the company. We’re a customer-oriented
company. We’re market place oriented. We want to satisfy customer needs
(Kohli and Jaworski 1990:7).
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Several researchers also asserted that top management is a crucial factor in shaping
organisational values and creating a market oriented philosophy (Felton 1959; Levitt
1969; Webster 1988). In other words, top management has to send clear signals to an
organisation about the importance of being market oriented. Levitt (1969:244)
emphasised that top management involvement, commitment and support is crucial in
reinforcing corporate culture. He argued that market orientation goals should be
clearly communicated throughout the organisation and employees should be
motivated to achieve these goals. Commitment and support from top management is,
therefore, an essential requirement to market orientation (Kohli and Jaworski 1990).
Therefore, the following hypotheses are proposed:
Hypotheses E 6:
Greater top management emphasis on being market
oriented will lead to a greater level of export market
orientation;
Corollary Hypotheses: Greater top management emphasis on being market oriented
will lead to
E 6a:
a greater level of export customer orientation;
E 6b:
a greater level of export competitor orientation;
E 6c:
a greater level of export inter-functional coordination.
Replication Hypotheses
Hypotheses D 6:
Greater top management emphasis on being market
oriented will lead to a greater level of domestic market
orientation;
Corollary Hypotheses: Greater top management emphasis on being market oriented
will lead to
D 6a:
a greater level of domestic customer orientation;
D 6b:
a greater level of domestic competitor orientation;
D 6c:
a greater level of domestic inter-functional coordination.
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The heart of market orientation is to understand both the present and future needs of
customers and respond to them. Doing so involves risk taking because not every new
product launched is successful. Therefore, if top management is intolerant of failure,
junior employees will be discouraged from trying new ideas. On the other hand, if top
management shows a willingness to take risks and accepts occasional failures as being
normal, subordinates are more likely to propose and introduce new ideas in response
to market needs (Jaworski and Kohli 1993).
Thus, the following hypotheses are proposed.
Hypotheses E 7:
Greater top management risk aversion will lead to a lower
level of export market orientation;
Corollary Hypotheses: Greater top management risk aversion will lead to
E 7a:
a lower level of export customer orientation;
E 7b:
a lower level of export competitor orientation;
E 7c:
a lower level of export inter-functional coordination.
Replication Hypotheses:
Hypotheses D 7:
Greater top management risk aversion will lead to a lower
level of domestic market orientation;
Corollary Hypotheses: Greater top management risk aversion will lead to
D 7a:
a lower level of domestic customer orientation;
D 7b:
a lower level of domestic competitor orientation;
D 7c:
a lower level of domestic inter-functional coordination.
Interdepartmental Dynamics
Interdepartmental dynamics are the formal and informal interactions and relationships
within an organisation (Kohli and Jaworski 1990). The first interdepartmental
dynamic proposed by Jaworski and Kohli (1993:55) is interdepartmental conflict,
which refers to the tension among departments arising from the incompatibility of
actual or desired responses.
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The notion that interdepartmental conflict may hinder the implementation of the
marketing concept is also noted by other researchers (Levitt 1969; Felton 1959).
Conflict of interest among departments can cause tension, which may hinder a
collaborative response to market needs (Kohli and Jaworski 1990). Conflict is also
likely to cause employees to be less inclined to interact with one another (Ruekert and
Walker 1987), thereby inhibiting market orientation.
Therefore, it can be expected that:
Hypotheses E 8:
Greater interdepartmental conflict will lead to a lower level
of export market orientation;
Corollary Hypotheses: Greater interdepartmental conflict will lead to
E 8a:
a lower level of export customer orientation;
E 8b:
a lower level of export competitor orientation;
E 8c:
a lower level of export inter-functional coordination.
Replication Hypotheses:
Hypotheses D 8:
Greater interdepartmental conflict will lead to a lower level
of domestic market orientation;
Corollary Hypotheses: Greater interdepartmental conflict will lead to
D 8a:
a lower level of domestic customer orientation;
D 8b:
a lower level of domestic competitor orientation;
D 8c:
a lower level of domestic inter-functional coordination.
The second interdepartmental dynamic factor is connectedness, which is a result of
regular interactions both formal and informal among employees across an
organisation (Kohli and Jaworski 1990). Based on interviews with practitioners,
Kohli and Jaworski (1990) found that organisations that actively promote
communications and interactions among all levels of their employees enhance their
market orientation. In addition, connectedness seems to facilitate the inter-functional
coordination among different functions within an organisation, which is one of the
key components of market orientation.
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Thus, the following hypotheses are made:
Hypotheses E 9:
Greater interdepartmental connectedness will lead to a
greater level of export market orientation;
Corollary Hypotheses: Greater interdepartmental connectedness will lead to
E 9a:
a greater level of export customer orientation;
E 9b:
a greater level of export competitor orientation;
E 9c:
a greater level of export inter-functional coordination.
Replication Hypotheses:
Hypotheses D 9:
Greater interdepartmental connectedness will lead to a
greater level of domestic market orientation;
Corollary Hypotheses: Greater interdepartmental connectedness will lead to
D 9a:
a greater level of domestic customer orientation;
D 9b:
a greater level of domestic competitor orientation;
D 9c:
a greater level of domestic inter-functional coordination.
Organisational Systems
Jaworski and Kohli (1993) proposed that organisational systems such as formalisation
and centralisation are inversely related to market orientation. The rationale for this
argument is that formal organisation structure creates bureaucracies. Bureaucracies
often cause a delay in decision making and result in slow response to market change.
However, a market-oriented company needs to respond to customers’ needs faster
than its competitor. Formalisation, therefore, can hinder market-oriented activities.
A market-oriented company depends on employees at any level to take initiative to
solve problems for customers. Customers will be served better and faster if front line
staff is given some authority to respond or act without having to ask permission from
supervisors all the time. Hence, centralisation obstructs the market-oriented culture.
The following hypotheses are based on this rationale:
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Hypotheses E 10:
Greater formalisation will lead to a lower level of export
market orientation:
Corollary Hypotheses: Greater formalisation will lead to
E 10a:
a lower level of export customer orientation;
E 10b:
a lower level of export competitor orientation;
E 10c:
a lower level of export inter-functional coordination
Replication Hypotheses:
Hypotheses D 10:
Greater formalisation will lead to a lower level of domestic
market orientation;
Corollary Hypotheses: Greater formalisation will lead to
D 10a:
a lower level of domestic customer orientation;
D 10b:
a lower level of domestic competitor orientation;
D 10c:
a lower level of domestic inter-functional coordination.
Hypotheses E 11:
Greater centralisation will lead to a lower level of export
market orientation;
Corollary Hypotheses: Greater centralisation will lead to
E 11a:
a lower level of export customer orientation;
E 11b:
a lower level of export competitor orientation;
E 11c:
a lower level of export inter-functional coordination.
Replication Hypotheses:
Hypotheses D 11:
Greater centralisation will lead to a lower level of domestic
market orientation:
Corollary Hypotheses: Greater centralisation will lead to
D 11a:
a lower level of domestic customer orientation;
D 11b:
a lower level of domestic competitor orientation;
D 11c:
a lower level of domestic inter-functional coordination.
The last antecedent relates to reward systems. The literature suggests that employees’
behaviours can be influenced by reward systems (Jaworski 1988). Webster (1988)
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argued that the key to developing a market-driven organisation lies in the appraisal
and reward systems used in an organisation. He explained further that if employees
are appraised based on sales volume and short-term profits, then they are likely to
focus on these principles and neglect other more important factors such as customer
satisfaction, which should be a primary goal of an organisation. In addition,
respondents in Kohli and Jaworski’s (1990) study opined that reward systems based
on short-term financial performance (ie, units sold), can jeopardise market orientation
in the long run.
The above argument suggests that it can be expected that reward systems based on
customer satisfaction can encourage and motivate employees to implement marketoriented activities and work towards the achievement of superior customer value.
The formal hypotheses to be test are:
Hypotheses E 12:
Greater reliance on market-based reward systems will lead
to a greater level of export market orientation;
Corollary Hypotheses: Greater reliance on market-based reward systems will lead to
E 12a:
a greater level of export customer orientation;
E 12b:
a greater level of export competitor orientation;
E 12c:
a greater level of export inter-functional coordination.
Replication Hypotheses:
Hypotheses D 12:
Greater reliance on market-based reward systems will
lead to a greater level of domestic market orientation:
Corollary Hypotheses: Greater reliance on market-based reward systems will lead to
D 12a:
a greater level of domestic customer orientation;
D 12b:
a greater level of domestic competitor orientation;
D 12c:
a greater level of domestic inter-functional coordination.
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4.4.4 Research Question Four
“Do environmental moderators such as market turbulence, competitive intensity,
technological turbulence, and buyer power strengthen or weaken the relationship
between market orientation and business performance?”
Several scholars suggest that the link between market orientation and performance is
likely to depend on the environmental context (eg, Kohli and Jaworski 1990; Greenley
1995; Kumar et al 1998). From their field interviews, Kohli and Jaworski (1990)
revealed that in certain environmental contingencies, market orientation is likely to
have less impact on business performance. They recommended further that managers
should calculate the costs and benefits of being market oriented.
Previous studies on the market orientation-performance relationship have identified a
number of variables that are likely to moderate this relationship (Kohli and Jaworski
1990; Jaworski and Kohli 1993; Narver and Slater 1994; Greenley 1995; Kumar et al
1998). These variables include market turbulence, competitive intensity, technological
turbulence and buyer power.
The first environmental moderator, market turbulence, is defined as the degree to
which the composition of customers and their preferences have changed over a period
of time (Jaworski and Kohli 1993). Jaworski and Kohli (1993) explained that in
turbulent markets, firms have to keep modifying their products or services to cope
with the changing customers’ preferences. In stable markets, the need to do so is
considerably reduced. Therefore, firms operating in more turbulent markets are likely
to have a greater need to be market oriented compared to firms which operate in less
turbulent markets. In other words, market orientation is expected to be more important
to performance in fluctuating markets than in stable markets.
The second environmental factor that moderates the link between market orientation
and business performance is competitive intensity. Competitive intensity is defined as
the concentration of the competition in a particular industry. According to Kohli and
Jaworski (1990), the lesser the competition, the lesser will be the need for firms to
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become involved in market-oriented activities and vice versa. This argument is
reflected in the statement below.
One thing is that marketing and advertising change so much. What worked
last year may not work this year. A lot of it has to do with the competitive
nature that you’re in at the time because people’s needs change…If you
don’t have competition, you don’t need it as much (Kohli and Jaworski
1990:14).
Thus, market orientation is likely to be more strongly related to business performance
in intense competition than in low competition.
The third environmental moderator is technological turbulence. Technological
turbulence is defined as the extent to which technology has changed in a particular
industry (Jaworski and Kohli 1993). In industries characterised by rapidly changing
technology, market orientation may not be as important as it is in technologically
stable industries (Kohli and Jaworski 1990). This argument was supported by a
marketing manager of a service organisation, who stated that:
Let me explain why we are not market oriented. We are a complex
business, the industry is changing dramatically. Some of our products did
not exist three years ago. The technology is changing. Everyone is
wrapped up in production/ operations (Kohli and Jaworski 1990: 14).
To summarise, market orientation is likely to be more strongly related to business
performance in low rather than highly technologically turbulent industries.
The last environmental factor that moderates the relationship between market
orientation and business performance is buyer power. Buyer power is the degree to
which buyers have influence on sellers to provide higher quality goods or services or
to negotiate lower prices for the same quality products (Kumar et al 1998; Slater and
Narver 1994). Firms that operate where buyer power is strong are likely to have to
improve their products and services continually in order to satisfy customers’ demand.
By contrast, firms do not need much change in their products and services in low
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buyer power conditions. Therefore, the benefits afforded by market orientation are
greater for firms in a high buyer power condition than for firms operating in a lower
buyer power condition.
The preceding relationship is summarised in the following hypotheses:
Hypothesis E 13:
The relationship between export market orientation and
export performance will be stronger in:
E 13.1:
high export market turbulence.
E 13.2:
high export competitive intensity
E 13.3:
low export technological turbulence
E 13.4:
high export buyer power.
Replication Hypotheses:
Hypothesis D 13:
The relationship between domestic market orientation and
domestic performance will be stronger in:
D 13.1:
high domestic market turbulence
D 13.2:
high domestic competitive intensity
D 13.3:
low domestic technological turbulence
D 13.4:
high domestic buyer power.
4.4.5 Research Question Five
“Does export market orientation help management to make better decisions about
whether to modify and to what extent they should modify their marketing strategies
in foreign markets?”
One of the consequences of market-oriented activities is the understanding achieved
of both customers and competitors and the knowledge about the market as a whole.
Market-oriented firms are the ones who listen to their customers. They will not
implement their thinking or strategies without prior consultation with their clients. If
firms stay close to their customers, it is likely that they can make a better decision
about which marketing activities or strategies are suitable for that particular market.
97
The preceding argument suggests the following hypothesis:
Hypothesis E 14:
The greater the level of export market orientation, the
better the quality of the decision to modify marketing
strategies in export markets.
4.5
Chapter Summary
This chapter discussed the conceptual framework and model derived from the
literature review in the previous chapter. Five research questions and 89 hypotheses
were drawn from the model (23 main hypotheses and 66 corollary hypotheses). Much
of it derives from Kohli and Jaworski (1990), Jaworski and Kohli (1993) and Narver
and Slater (1990) but what is new is the concept of export market orientation. For the
most part we are assuming that what holds good for the domestic market also holds
good for the international market. The remainder of the thesis seeks to determine
whether this is the case.
The next chapter discusses the research methodology employed in this study.
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Chapter Five
Research Methodology
5.1
Objective and Structure of the Chapter
The previous chapter outlined the relevant research questions. The next task is to
explain the choice of methodology for answering these questions. The objective of
this chapter is to describe the methods by which the stated research questions and
hypotheses, mentioned in the previous chapter, are tested using a survey of Thai
exporting firms.
The chapter is organised into five major sections. Section 5.2 discusses the overall
research design, including research design, sampling frame, sampling method, sample
size, unit of analysis, and key information techniques.
Section 5.3 describes data collection procedures employed in this study.
Questionnaire and back translation, pilot test of the questionnaire, and data collection
procedure are included. This is followed by Section 5.4, which looks at the survey
instruments, including all measures used.
Section 5.5 discusses the methods by which the raw survey data have been prepared,
and tests for various biases and assumptions for multiple regression analysis. The last
section covers the procedures for data analysis presented in chapters Six, Seven, and
Eight.
5.2
Research Design
5.2.1 Research Approach
The present research uses a cross-sectional study design. Cross-sectional design
involves the collection of information from any given sample of population elements
only once (Malhotra 1996). Kumar (1996) explained that this design is suitable for
studies that aim to analyse a phenomenon, situation, problem, attitude or issue by
99
considering a cross-section of the population at one point in time. The advantage of
this method is that it is cheaper and less time consuming than a longitudinal design. In
fact, the majority of extant market orientation and export performance studies have
employed cross-sectional designs (eg, Narver and Slater 1990; Lee and Yang 1990;
Jaworski and Kohli 1993; Kaynak and Kuan 1993; Evangelista 1994; Cavasgil and
Zou 1994; and Greenley 1995).
This study also employed the survey method, which makes use of a questionnaire.
There are many types of survey methods but in this case mail survey was selected as
the means to data collection. Mail survey was chosen for several reasons. Firstly, this
method is commonly used in similar kinds of research (e.g., Narver and Slater 1990;
Jaworski and Kohli 1993; Pelham 1997; Kumar Subramanian, and Yauger 1998).
Secondly, it enables the researcher to cover wider geographic areas (in this case
Bangkok and up-provinces) that in turn make it much easier for data collection than
the personal interview method. Thirdly, self-administered questionnaires can
eliminate interviewer bias (Jobber 1991).
Nevertheless, the mail survey method has some disadvantages too. The most obvious
drawback is the problem of non-response, which commonly can be as high as 70-80
per cent (Malhotra et al 1996; Aaker and Day 1980). In order to minimise the nonresponse issue, the following guidelines (as recommended by Aaker and Day 1980;
Mangione 1995) were used:
1. A cover letter was used, introducing the researcher, the objectives of the
research and the important of the survey. A supervisor support letter was also
attached to confirm that the researcher came from the cited academic
institution and to ask for co-operation from participants.
2. A cover letter was addressed to the names and positions of the key informants
who were in charge of export activities indicated by the Thailand’s Exporters
Selected List. The key informants usually were owners, presidents, managing
directors, general managers, or export managers.
3. Participants were offered a copy of the summary of research results if they
completed and returned the questionnaire.
4. A postage-paid reply envelope was enclosed for each questionnaire.
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5. A reminder letter was sent to those respondents who had not replied three
weeks after the first mailing.
5.2.2
Sampling Frame
The sampling frame used for this study is Thailand’s Exporter Selected List 1997-98,
published by the Department of Export Promotion, under the Ministry of Commerce,
Thailand. The list provides the names of exporting companies, addresses, telephone
numbers, persons to contact, which in the majority of cases includes the president,
managing director, general manager, or export manager. It also mentions types of
products, registered capital, year of establishment and manufacturing address.
The list is divided into 17 sections: agricultural products; foods; automotive parts and
accessories; chemicals products; building materials; electronic, electrical products and
parts; machinery; textiles and garments; furniture; toys; household products; gems and
jewellery; leather products and footwear; handicrafts and decorative items; artificial
flowers and plants; printing services; and other products. There are approximately
3000 different companies in the list. It is quite common for a company to register
under several product sections. However, in this survey a company was selected only
once.
The list is considered the most appropriate source to use for this study. It covers all
industries exporting out of Thailand. It is also the most frequently updated exporting
firm list available for public use. Furthermore, it is published by one of the most
reliable sources, the Department of Export Promotion.
5.2.3
Sampling Method
A systematic sampling method was used in this study. Malhotra et al (1996)
categorise the systematic sampling method as a probability sampling technique. They
point out that a sample, in a systematic sampling method, is chosen by selecting a
random starting point and then picking every Kth element in succession from the
sampling frame. It is more or less similar to simple random sampling, in that each
element in the population has a known and equal chance of being selected. The only
101
difference is that only permissible samples of size n can be drawn with a known and
equal probability of selection, while the remaining sample of size n has a zero
probability of being selected (Malhotra et al 1996: 313).
Aaker, Kumar, and Day (1998) argue that the accuracy of systematic sampling can
exceed that of simple random sampling when the ordering of the elements is related to
the characteristics of interest because the sample will be more representative of the
population. In this case, the Thailand’s Exporter Selected List is arranged by industry
and alphabetical order within each industry. The aim of this study is also to have
samples drawn from various industries. Hence, the systematic sampling method is
appropriate.
In this study, every 5th name was automatically selected, starting from the 4th name on
the list. For example, the sample included the 4th name, the 9th, the 14th, the 19th, and
so forth. A total of 600 names were selected from the list of 3000.
5.2.4 Sample Size
The required sample size for research using multiple regression as a major form of
analysis depends on a number of issues, such as the desired statistical power, alpha
level and number of independent variables (Tabachnick and Fidell 1996). For
example, at the statistically significant level (power) of 0.80, with a significant level
(alpha) of 0.05, with up to 10 independent variables, and with a minimum R2 value of
20 required, a minimum sample size of 100 is needed (Hair et al 1998).
The other way to determine the sample size for research using regression analysis is to
calculate the ratio of cases per independent variables. Green (1991) suggested that a
desirable sample size should be more than or equal to 50+8m (m is the number of
independent variables) for testing the multiple correlation, and N= 104+m for testing
individual independent variables. In addition, Hair et al (1998) pointed out that
sample size could also affect the generalisability of the results by the ratio of
observations to independent variables. The desirable ratio should be between 15-20
observations for each independent variable. However, it is acceptable if the ratio is as
low as 5 to 1 (Hair et al 1998:166).
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Given the guidelines above, the sample size of 147 for this study falls within the
acceptable range. In addition, sample sizes from previous research range from 74 to
230 (refer to table 5.1). The majority of the extant studies have a sample size of 100
plus.
5.2.5
Unit of Analysis
Narver and Slater (1990) and Jaworski and Kohli (1993) used the SBU (strategic
business unit) as a unit of analysis in their studies. The SBU is defined as a business
unit within the organisation that has a well-defined business strategy and a manager
responsible for profits and losses (Aaker 1988). In the context of Thai exporting
companies, the SBU may mean the company as a whole since the companies are
usually smaller and less complicated in their organisational structure than those of
many US firms. Since this research seeks to replicate the work of Narver and Slater
(1990) and Jaworski and Kohli (1993) in a Thai business context, it uses the SBU as
the unit of analysis. This in turn allows us to maintain a level of consistency with data
collection technique of these authors.
Table 5.1 presents a review of research methodologies used in the past.
103
Size
Sample
84 per cent
Rate
Response
Regression Analysis
Technique
Analytical
Review of Research Methodologies Used in the Past.
140
Table 5.1:
SBUs (one informant)
Regression Analysis
Unit of Analysis
USA
SBUs (multiple informant)
Country
Mail Survey
USA
Regression Analysis
Methodology
Narver and Slater (1990)
Mail Survey
70-79.6 per
cent
45.7 per cent
Study
Jaworski and Kohli (1993)
1st=222
2nd=230
87
Within and Cross
case Analysis
Firm Level (one informant)
N/A
UK
14
13.3 per cent
Structure Equation
Modelling
Regression Analysis
Personal Interview
N/A
160
37 per cent
Regression Analysis
UK
SBUs (multiple informants)
74
77 per cent
Regression /
Structuring Equation
Modelling
Regression Analysis
28 per cent
In-depth Interview
USA
Firm Level (one informant)
115
59.5 per cent
Regression Analysis
240
Mail Survey
Ghana
Firm Level (one informant)
134
28.5 per cent
Firm Level (one informant)
Pelham (1997)
Mail Survey
Saudi
Arabia
Firm Level (one informant)
159
UK
Appiah-Adu (1998)
Mail Survey
USA
Firm Level (one informant)
Mail Survey
Bhuian (1998)
Mail Survey
USA
Diamantopoulos and Hart
(1993)
Greenley (1995)
Han et al (1998)
Mail Survey
Diamantopoulos and
Cadogan (1996)
Kumar et al (1998)
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5.2.6
Key Informant Techniques
As Kumar, Stern and Anderson (1993) note, researchers who want to conduct
quantitative, large-scale research of inter-organisational relationships often face a lack
of archival data. The report from key informants provides an effective alternative.
Seidler (1974) explains that the difference between ‘respondent’ and ‘informant’ is
that the ‘respondent’ answers according to ‘their personal feelings, opinions, and
behaviours’ but the ‘informant’ generalises ‘about patterns of behaviour, after
summarising either observed or expected organisational relations’ (Seidler 1974:817).
The key informant technique is widely used in the marketing literature (e.g., Narver
and Slater 1990; Diamantopoulos and Hart 1993; Greenley 1995; Appiah-Adu 1998).
The use of the key informant technique in this research involves the collection of data
from a selected individual within an export organisation who has specific knowledge
of both domestic and export operations. The key informant technique is appropriate
for this study because the content of the questionnaire requires complete or in-depth
information, which cannot be expected from general respondents (Kumar, Stern and
Anderson 1993). For this study it was assumed that company directors, export
managers or marketing managers were potential key informants. Each of these could
be identified from the Exporters Selected List, which indicated the person to be
contacted for each company. Informants in this study were chosen on the basis of their
knowledge about export and domestic operations and their willingness to share this
information (Kumar, Stern and Anderson 1993: 1634).
To ensure that the respondents were valid key informants, names and positions of
nominated recipients were addressed. Secondly, each respondent was asked to rate on
a five-point Likert scale how confident he or she felt about reporting on the domestic
and export operations of the organisation. Those respondents who indicated that they
were not confident (Rating 1 and 2 on the five-point Likert scale) were eliminated
from the analysis. The respondent was also asked to report on how long he or she had
been working in the particular organisation. Respondents, whose working time with
the company was less than a year, were also discarded from the analysis. These
105
procedures were in line with those suggested by Philip (1981); Heide and John
(1990); Heide and Miner (1992); and Kumar, Stern and Anderson (1993).
One of the significant drawbacks of the key informant methodology is informant bias,
which results from differences due to the various roles and levels of key informants in
the organisation (Seidler 1974; Golden 1992). For example, the view of top
management (i.e., managing director) may vary from those of middle management
level (i.e., export manager or marketing manager). In order to determine whether
informant bias was a major problem in this study, t-tests that examined differences in
the degree of export market orientation and export performance between top
management and middle management informants were conducted. On the basis of
these tests, the null hypothesis posited no mean differences across the top
management group (n = 86) and middle management group (n = 52) responding with
respect to ‘ degree of export market orientation’ (t = 1.143, p = 0.255 ) and ‘overall
export performance’ ( t = -0.985 , p = 0.327 ). In summary, informant bias does not
appear to be a concern in this study.
5.3 Data Collection Procedure
In this section, the development of the questionnaire is discussed. This includes issues
such as translation, back translation and pilot testing of the questionnaire. The section
also describes the data collection procedure in detail.
5.3.1
Questionnaire and Back Translation
Data was collected through the use of fully structured questionnaires (see appendix).
The questionnaire was first developed in English. Since English is not an official
language in Thailand, some of the respondents may not be familiar with the original
questionnaire language. Ramachandran (1991) suggested that the questionnaire should
be translated into a local language to avoid miscommunication and misinterpretation.
Choosing a person to translate a questionnaire is an important process. In this study, a
translator was carefully selected based on two criteria. First, a person must have a
106
good understanding of both languages. More importantly, a person must be capable of
writing high-standard, official Thai, especially that which is suitable for
questionnaires. Secondly, a person’s credential must show that he or she has extensive
experience in developing questionnaires in Thai. In this study, the questionnaire was
translated into Thai by a Thai native who is fluent in English. In addition, this person
has had more than 10 years of experience in conducting both marketing and academic
research in Thailand.
Later a back translation into English by a different person with similar qualifications
was done to ensure that the essence of the questionnaire was not lost, distorted or
diluted through translation (Adler 1983; Brislin 1980). The back translation version
was compared with the original (English) version. Most parts of the translation
version were accurate. Some translated questions led to distortion, which needed to be
corrected. However, a few questions require the adaptation of some wordings from
the original (while retaining the same meaning) in order to create a better
understanding for the Thai key informants. Below are the examples where changes
occurred.
Original Version
Translation Version
5.6
Competition in our industry is
cutthroat.
5.6 Competition in our industry is very
strong.
6.8
Top managers in this business unit 6.8 Top managers in this business do
like to ‘play it safe”
not like to take risk.
6.18 There is ample opportunity for 6.18 There is ample opportunity for
informal
discussion
among
informal ”hall talk” among
individuals
from
different
individuals
from
different
departments in this business unit.
departments in this business unit.
6.21 People around here are quite 6.21 People around here are quite
accessible to those in other
comfortable to meet or talk with
departments.
those in other departments.
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5.3.2 Pilot Test of Questionnaire
The questionnaire was pre-tested with 10 export companies in Thailand to validate the
questionnaire before the real data collection process began. Burns and Bush (1998)
suggested that a pre-test of 5-10 representative respondents is usually sufficient to
identify problems with a questionnaire. The pre-test group consisted of three textile
companies, two shoe manufacturing firms, three food processing firms, and two
construction material companies. All firms were located in Bangkok, Thailand. The
pre-test group was excluded from participating in the actual sample of the research.
The participants were asked to evaluate the questionnaire for the clarity, bias,
ambiguous questions, and relevance to Thai business setting. The participants were
also asked to comment on the instrument with regard to wordings, sequencing, and
timing. The pre-test study indicated that time needed for answering the questionnaire
was too long. The format of the questionnaire was later redesigned and some
questions were deleted to shorten the time spent.
5.3.3 Data Collection Procedure
In this research, 600 exporting companies were selected using the systematic
sampling method as described in section 5.2.3. The questionnaire (Thai version) was
mailed in December 1998. Three weeks after the first mail a reminder letter was sent
to non-respondents. A total of 168 questionnaires were returned, which resulted in an
overall response rate of 28 per cent. From the first wave, 102 questionnaires (17 per
cent) were received. This unusually low rate may partly result from timing factors. As
mentioned earlier, the first mailing was in December. It was possible that many
respondents had taken a long holiday during the end-of-year period. After the
reminder letter was sent, 66 questionnaires were returned. The response rate increased
from 17 per cent to 28 per cent.
Of the 168 returned questionnaires, 21 were unusable. There were several reasons for
this: 5 respondents (23.8 per cent) did not pass the assessment for determining their
suitability as key informants; 10 respondents (47.6 per cent) did not complete the
questionnaire; 6 respondents (28.5 per cent) answered inconsistently. Hence, 147
108
useable questionnaires (24.5 per cent) were included for data analysis. The overall
response rate of 24.5 per cent is considered quite high when compared to similar kinds
of research using mail survey in Thailand (Singhapakdi, Vitell, and Leelakulthanit
1994).
5.4 The Survey Instrument
A structured questionnaire was used in this research. The actual survey questionnaire
is included in Appendix One. The questionnaire was divided into 9 sections. The first
section is an assessment of the quality of key informant. Section II of the survey asked
about company information in general, and their past and present experiences in
export operations. Section III asked about the quality of decision to modify marketing
strategies in the primary export market. Section IV measured the degree of market
orientation in both domestic and export markets. Section V involved a set of questions
concerning the business environments the firm operates in both markets. Section VI
asked about the working environment within firms, corporate culture and
organisational systems.
Section VII consisted of a set of questions concerning the performance of the business
unit. Section VIII asked about management’s perceptions of their future export
growth and profitability, and management commitment toward export operations. The
last section enquired about top managers’ characteristics and experiences. The
questionnaire had a total of 202 questions and was 11 pages in length.
The majority of measures used in this study were adopted from Narver and Slater
1990; Jaworski and Kohli 1993; and Evangelista 1994. Previous researchers used a
five-point Likert scale (Jaworski and Kohli 1993; Evangelista 1994), except Narver
and Slater 1990, which used a seven-point Likert scale. In order to allow comparisons
with extant work and to conform with what previous researchers had done, a fivepoint Likert scale was used from section III to section VIII.
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5.4.1 Measures of Market Orientation
Definition:
Market Orientation consists of three behavioural components—
customer orientation, competitor orientation, and inter-functional
coordination—and two decision criteria—long-term focus and
profitability (Narver and Slater 1990: 21)
The market orientation scale was developed by Narver and Slater (1990). Originally,
it consisted of 21 items. However, the long-term orientation and profit measures had a
low Cronbach alpha and low item-to-total correlation. Narver and Slater (1990)
explained that, because of the low reliability scores, they could not draw conclusions
about the empirical relationship of the two decision criteria with the three behavioural
components of market orientation. Eventually, they examined only the three
behavioural components of market orientation: customer orientation, competitor
orientation and inter-functional coordination.
Since this research aims to replicate the work of Narver and Slater (1990), the market
orientation scale will cover only the three behavioural components of market
orientation mentioned above. The final scale has 15 items of which six items describe
customer orientation, four describe competitor orientation, and five describe interfunctional coordination. The reliability of these items exceeds 0.7 as recommended by
Nunnally (1978).
5.4.2 Measures of Antecedents to Market Orientation
There are nine sets of antecedents to export market orientation and seven sets of
antecedents to domestic market orientation in this study. The antecedents to domestic
market orientation are management emphasis on market orientation, top management
risk
aversion,
interdepartmental
conflicts,
interdepartmental
connectedness,
formalisation, centralisation, and reward system. Antecedents to export orientation
share the same variables as those of domestic market plus additional two variables:
management commitment toward export operations, and management perceptions
toward export profitability and growth.
110
Management Commitment toward Exporting
Definition: The degree of management commitment toward export operations.
This scale was developed by Evangelista (1994). It comprises a three-item scale.
Management Perception toward Export Profitability and Growth
Definition: Management perception of future export profitability and growth
compared to domestic profitability and growth.
This scale was developed to measure management perception of export profitability
and future growth. It forms a three-item scale, which is subjected to reliability and
validity tests, as discussed in Chapter Six.
Top Management Emphasis on being Market Oriented
Definition: The reinforcement of top management on the important of market
orientation.
This scale, developed by Jaworski and Kohli (1993), measures the degree to which
top management emphasises the importance of market-oriented activities. It is a fouritem scale. The scale has a reported reliability coefficient of 0.66 (Jaworski and Kohli
1993).
Top Management Risk Aversion
Definition: The degree to which top management is willing to take risk and accept
failure.
This scale, also developed by Jaworski and Kohli (1993), measures the top
management’s temperament towards taking risks and accepting occasional failures as
being natural. Originally this was a six-item scale. However, Jaworski and Kohli
111
(1993) recommended that one item be deleted. The reported reliability coefficient of
the remaining five items is 0.85 (Jaworski and Kohli 1993).
Interdepartmental Conflict
Definition: Tension among departments that occurs due to the incompatibility of
actual or desired responses. (Raven and Kruglanski 1970:70)
Interdepartmental conflict is a seven-item scale with a reported alpha coefficient of
0.87 (Jaworski and Kohli 1993).
Interdepartmental Connectedness
Definition: The degree of formal or informal interaction among employees across
departments regardless of rank and hierarchy in the organisation.
Originally the measure of inter-department connectedness was comprised of seven
items. Nonetheless, one item was eliminated as suggested by Jaworski and Kohli
(1993). The remaining six items have an alpha reliability coefficient of 0.80 (Jaworski
and Kohli 1993).
Formalisation
Definition:
The extent to which employees have to conform to company rules and
regulation.
This is a seven- item scale originally developed by Aiken and Hage (1966). This scale
was adopted by Jaworski and Kohli (1993) in their study. It has a reliability
coefficient of 0.76.
Centralisation
Definition: The extent to which employees at all levels throughout the organisation
participate in decision making (Aiken and Hage 1968).
112
The centralisation scale is a five-item scale with a reported alpha coefficient of 0.88
(Jaworski and Kohli 1993).
Reward Systems
Definition: The organisational evaluation system that compensates employees for
behaviours reflecting a certain set of values
(e.g. customer
satisfaction).
The measure of reward systems is made up of five items and has an alpha reliability
coefficient of 0.73 (Jaworski and Kohli 1993). This scale has previously been used by
Anderson and Chambers (1985) and Jaworski (1988).
5.4.3
Measures of Environmental Moderators
There are four moderators in this study of which three—market turbulence,
competitive intensity and technological turbulence—are adopted from Jaworski and
Kohli (1993). The last moderator variable, buyer power, is adopted from Slater and
Narver (1994).
Market Turbulence
Definition: The degree to which the composition of customers and their
preferences have changed over a period of time.
This scale, developed by Jaworski and Kohli (1993), measures the rate of change in
the export customers and their preferences. Originally, it was a six-item scale. One
item was deleted. The remaining five-item scale has a coefficient alpha of 0.68.
Competitive Intensity
Definition:
The concentration of competition in a particular industry.
113
This scale is formed of six items, and measures the degree of competition in the
export market. It has a reported reliability coefficient of 0.81 (Jaworski and Kohli
1993).
Technological Turbulence
Definition:
The extent to which technology has changed in a particular industry.
The technological turbulence was originally comprised of five-item scale. One was
eliminated. The remaining four-item scale has a reported reliability coefficient of 0.88
(Jaworski and Kohli 1993).
Buyer Power
Definition: The extent to which buyers have bargaining power over sellers.
This scale was developed by Narver and Slater (1990). It comprises three items.
5.4.4 Measures of Business Performance
The performance criteria used in this research included the performance measures
used in previous studies. Business performance was measured by both objective and
subjective measures. Export intensity and average sales growth were used for the
objective measure. The majority of the subjective measures were based on those used
by Narver and Slater (1990) and Slater and Narver (1994), including relative return on
assets (ROA), relative sales growth, and new product success. Some measures were
adopted from Jaworski and Kohli (1993), such as overall business performance and
overall relative performance. The last two performance criteria, customer retention
and word of mouth, were adopted from Kumar, Subramanian and Yauger (1998).
The subjective measures in this study asked informants for their assessment of the
performance either by compare to the company’s performance in the past year or
compare to those of major competitors in the past year by rating on a 5 point scale
114
ranging from “poor” to “excellence”. (ie, overall performance of your business in the
past year; return on assets relative to your major competitors in the past year).
The rationale behind these measures are discussed in Chapters Three and Four.
5.4.5 Key Informant Quality Assessment
In order to assess the quality of the key informant, a two-item scale was developed.
This scale was based on that used by Mishra, Heide and Cort (1998). The questions
ask how confident the key informant thinks that he or she can report on the export and
domestic operations of the firm.
5.5 Data Preparation Procedures
Data preparation was divided into three stages. Firstly, the raw data was edited, coded
and converted into the actual variables of interest. Secondly, the variables were
checked for outliers and other abnormalities according to the underlying assumptions
employed in multiple regression analysis. Thirdly, t-tests were conducted to check for
non-response bias.
5.5.1
Entering, Checking and Transforming the Data
The raw data from the mail survey was first edited for non-answer questions and
screened for the qualities of key informants. Respondents who did not complete the
questionnaire were re-contacted by phones. Only those who had worked for the
company for at least one year and who reported that they were confident to report on
the company’s export and domestic operations (3 or above on the five- point Likert
scale) were included.
Respondents who did not meet these requirements were
discarded from the analysis.
Next, the raw data was coded and entered into a data file. These entries were doublechecked for errors by a different person to ensure the correctness of the data entry.
The coded databases were analysed using SPSS (statistical package for social
sciences) 8.0 for window. SPSS is one of the most widely used social statistical
115
packages (Afifi and Clark 1998). The Frequencies command in SPSS was again used
to detect any coding error. Re-coding and transformation of data into different
variables were done.
5.5.2
Checking for Violations of Assumptions in Multiple Regression Analysis
The variables were also checked for outliers, normality, linearity, multicollinearity,
and homoscedasticity to satisfy the underlying assumptions of the Multiple
Regression Analysis. The analysis of these problems is discussed as follows:
1
Outliers
Barnett and Lewis (1994) described outliers as observations which appear inconsistent
with the reminder of the data set. In this study, histograms and box plots were firstly
used to detect outliers. (Afifi and Clark 1998). Tabachnick and Fidell (1996)
suggested that outliers can be detected by looking at Mahalanobis distance.
Mahalanobis distance is the distance of a case from the centroid of the remaining
cases where the centroid is the point created by the means of all the variables
(Tabachnick and Fidell 1996: 67). The process used to identity outliers was the
CASEWISE subcommand in the REGRESSION procedure. The 10 cases with the
largest
Mahalanobis
distances
were
identified
through
the
RESIDUALS
subcommand. The CASEWISE subcommand also produces a plot of outliers that
have standardised residuals greater than three (Norusis 1988). Cases that proved to
have standardised residuals greater than three were eliminated from the analysis as
suggested by Lewis-Beck (1980).
2
Normality
The underlying assumption of regression analysis is that each variable and all linear
combinations of the variables are normally distributed. Normality is assessed by either
statistical or graphical methods. Two components of normality are skewness and
kurtosis. When a distribution is normal, the values of skewness and kurtosis should be
close to zero. For graphical method, normality can also be determined by examining
116
the residual plots. If the assumption is met, the residuals should be normally and
independently distributed (Tabachnich and Fidell 1996).
In this study, the assumption of normality was diagnosed by looking at both residual
plots and checking skewness and kurtosis. From the analysis, the residual plots appear
to be normal and the values of skewness and kurtosis were generally close to zero.
Therefore, the assumption of normality was not violated (Afifi and Clark 1998).
3
Linearity
Linearity is important for regression analysis because one of the underlying
assumptions of this technique is that the relationship between independent and
dependent variables is linear. Furthermore, correlation (Pearson’s r) can capture only
the linear association between variables. Therefore, if there are substantial non-linear
relationships, they will be ignored in the analysis, which in turn will underestimate the
actual strength of the relationship (Tabachnich and Fidell 1996).
In this study, linearity was examined by looking at residual plots. Standardised
residuals were plotted against predicted values using SPSS PLOT. Most of the
residuals were scattered around zero points and had oval-shapes, which suggested that
the assumption of linearity was met (Tabachnich and Fidell 1996).
4
Multicollinearity
Multicollinearity refers to the degree to which explanatory variables are highly
correlated with one another. The multiple regression procedure assumes that no
explanatory variable has a perfect linear relationship with another explanatory
variable (Tabachnich and Fidell 1996). Intercorrelations of greater than 0.8 are
considered to be evidence of high multicollinearity (Berry and Feldmann 1985:43).
The assumption of multicollinearity was first examined by looking at residual plots.
The pattern in the residual plots appeared random and similar to the null plot of
residuals. It was further examined by comparing the bivariate correlations between all
explanatory variables in each equation. This analysis indicated that the correlations
117
between all explanatory variables fell below 0.8 as recommended by Berry and
Feldman (1985). Multicollinearity was also diagnosed by tolerance values produced
by SPSS REGRESSION procedure. An examination of the results of these tests
indicated that multicollinearity was not a problem.
5
Homoscedasticity
The assumption of homoscedasticity is that the variance of the dependent variable is
approximately the same at different levels of the explanatory variables (Hair et al,
1998). In other words, the error terms in a regression model have constant variance.
Homoscedasticity is, therefore, examined by visual inspection of the scatter plot of
regression residuals. Homoscedasticity is indicated when the width of the band of
residuals is approximately the same at different levels of the dependent variable and
scatter plots show a pattern of residuals normally distributed around the mean (Berry
and Feldman 1985).
The assumption of homoscedasticity was examined by using SPSS REGRESSION
procedure. An examination of residual plots for each explanatory variable indicated
that the assumption of homoscedasticity was supported.
5.5.3
Testing for Non- Respondent Bias
There is potential for non- respondent bias in any data collection procedure that relies
on respondent co-operation. Lessler and Kalsbeek (1992) explain that the problem
with non-response is the bias or systematic distortion in a survey occurring because of
an inability to obtain a response from some members of the selected sample. Nonresponse may occur for any one of several reasons, such as not being in Thailand at
the time of data collection, refusal to participate, scheduling difficulties, and so on. A
typical method for assessing non-response bias would be to compare the
characteristics of respondents to the characteristics of the population from which the
sample was drawn. However, this was not possible. Therefore, non-response bias in
this study was assessed by comparing early to late respondents, as suggested by
Armstrong and Overton (1977). They argued that later repliers are more
representative of non-respondents than early repliers.
118
From the analysis, the null hypotheses of no mean differences between the early
respondents and late respondents could not be rejected on the basis of areas (Bangkok
versus up provinces) (F = 0.387, p = 0.535), industry, classification of export product
(consumer versus industrial product) (F=0.517, p= 0.473), numbers of employee (F =
2.084, p = 0.151), and company’s age (F= 0.209, p = 0.648). In addition, there were
no significant differences between early and late respondents in term of market
orientation level (F=0.49, p= 0.825), export intensity level (F=0.162, p=0.688), and
export overall performance (F= 0.76, p= 0.783). Therefore, non-response bias does
not appear to be a concern in this study. Table 5.2 compares the mean differences
between early and late respondent firm.
Table 5.2: Non Response Bias Test by Comparing Mean Differences between
Early and Late Respondent Firms.
Variables
F
Significance (P value)
Area Classification
0.387
0.535
Industry
0.517
0.473
Classification of Export Product
0.803
0.372
Number of Employees
2.084
0.151
Company's Age
0.209
0.648
Degree of Market Orientation
0.490
0.825
Export Intensity
0.162
0.688
Overall Export Performance
0.760
0.783
119
5.6 Data Analysis Procedures
The data analysis began with an exploratory factor analysis to test the relationship
between the observed variables and the underlying constructs variables. Data was
analysed using SPSS for Window 8.0. A detailed analysis of the constructs used in
this study is presented in the next chapter.
Next, the correlation analysis and multiple regression analysis were performed to test
the strength of the associations between variables. The results from these analyses are
presented in Chapters Six, Seven and Eight.
5.7 Chapter Summary
In this chapter, the research methodology, including overall research design, data
collection process, and survey instrument have been discussed in detail. The
methodology employed in this study is consistent with previous research practice in
the field. Because this research seeks to replicate the work of Narver and Slater (1990)
and Jaworski and Kohli (1993), the research methodology was designed as closely as
possible to those studies so that the results could be compared and contrasted. The
multivariate techniques used in this study, and the methodology described in this
chapter, will ensure that the results can be supported with confidence. The data
analysis procedure and survey results will be discussed in the Chapters Six, Seven and
Eight.
120
Chapter Six
Test of Measures and Correlation Analysis
6.1
Objectives and Structure of the Chapter
The main objective of this chapter is to describe the procedures used to test the
reliability and validity of the measures referred to in Chapter Five. Additionally, it
reports the general descriptive statistics of all multi-item scales. Mean, standard
deviation, skewness and kurtosis are included. Finally, the correlation analyses of all
relationships in this study are presented.
This chapter is divided into three major sections. Section 6.2 establishes the reliability
and validity of multi-item scales used in this study. Section 6.3 explores the data using
basic descriptive statistics. Section 6.4 then reports on correlation analysis.
6.2
Reliability and Validity Tests
Parameswaran et al (1979, cited in Wilks (1961), stated that there are three basic
requirements of measurement. First, measurement must be an operationally definable
process. Second, measurement should be accurate or valid (validity). Third, the
outcome of the measurement process must be repeatable (reliability). Churchill
(1979:66) suggested the following sequence of steps when developing measures of
marketing constructs.
1. Specify domain of construct
2. Generate sample of items
3. Collect data
4. Purify measure
5. Collect data
6. Assess reliability
7. Assess validity
8. Develop norms for the resulting measures (Churchill 1979:66).
121
The methodology in this study generally covered what Churchill (1979)
recommended above. However, since the measurement of constructs is mostly based
on established scales, steps two to four were skipped.
6.2.1
Reliability
Nunnally (1970) defined “reliability” as the extent to which measurements of the
particular test are repeatable. In other words, the measuring procedure should yield
consistent results on repeated tests. The more consistent the results given by repeated
measurements, the higher the reliability of the measurement procedure (Carmines and
Zeller 1979).
Nunnally (1970) suggested that there are at least four methods of estimating the
reliability coefficient: test-retest method, alternative form, subdivided-test method
(referred to as the split-half method) and methods concerning internal consistency. In
the test-retest method, the same set of measures is administered at two different times
to the same respondent. The scores obtained from the two different times are then
correlated. In alternative forms, two equivalent forms of a scale are constructed and
then administered at two different times to the same respondents. For the third
method, the subdivided-test or the split-half method, the scale is divided into two sets
of items and given to the same respondents. The reliability coefficient is estimated by
correlating the scores of the two halves.
However, there are methods for estimating reliability that do not require splitting or
repeating of items. Instead, these techniques require only a single test administration
and provide a reliable estimation of the coefficient reliability. As a group, these
methods are referred to as measures of internal consistency (Carmines and Zeller
1979). In the methods concerning internal consistency, the reliability is calculated by
averaging correlation between items (Nunnally 1978). The assumption of internal
consistency is that a good scale is comprised of items which are homogeneous within.
Hence, methods concerning internal consistency measure inter-item correlation. A
scale is considered to have high internal consistency when its items are highly intercorrelated, for this suggests that the items are all measuring the same thing (DeVellis
1991).
122
The most recommended measure of internal consistency is provided by coefficient
alpha (α) or Cronbach’s (1951) alpha as it provides a good reliability estimate in most
situations. The value of α ranges from 0 to 1. The nearer the value of α to 1, the better
the reliability. If the value is low, either there are too few items or there is very little
commonality among the items (Churchill 1979). For the early stages of any research,
Nunnally (1967:226) suggested that the reliability of 0.50-0.60 is sufficient, although
a coefficient of 0.7 or above is desirable (Hair et al 1998).
The coefficient alphas for the different constructs were computed using the reliability
procedure in SPSS and are presented in Table 6.1. The reliabilities of most constructs
in this study fall within the acceptable range (0.60-0.85). The exception is competitor
orientation (α = 0.53) and inter-functional coordination (α = 0.52), which have sightly
lower reliability coefficients.
123
Table 6.1: Reliability of Scales
Alpha
(Current Study)
Scales
Number
of Items
Domestic
Original
Alpha
(Previous
Studies)
Export
Market
Orientation
1.
2.
3.
4.
Market orientation
Customer orientation
Competitor orientation
Inter-functional
coordination
15
6
4
5
0.8170
0.7743
0.5390
0.5223
0.8510
0.7785
0.6257
0.5493
N/A
0.85471
0.71641
0.71121
Antecedents
1. Management
commitment
2. Future exports’ profit
and growth
3. Management emphasis
4. Risk aversion
5. Conflict
6. Connectedness
7. Formalisation
8. Centralisation
9. Reward systems
3
N/A
0.7816
N/A
3
N/A
0.8572
N/A
4
4
6
6
6
5
5
0.7484
0.6047
0.6855
0.7248
0.6429
0.8663
0.7282
0.7484
0.6047
0.6855
0.7248
0.6429
0.8663
0.7282
0.662
0.852
0.872
0.802
0.762
0.882
0.732
1. Market turbulence
2. Competitive intensity
3. Technological
turbulence
4. Buyer power
4
6
4
0.6700
0.6614
0.6948
0.7021
0.6718
0.6878
0.682
0.812
0.882
3
0.6434
0.6919
N/A
Business
Performance
1. Business performance
(Subjective measures)
7
0.7847
0.8393
N/A
Modify
Strategies
1.
7
N/A
0.7727
N/A
Environmental
Moderators
Note:
Modify strategies
1
Narver and Slater (1990)
2
Jaworski and Kohli (1993)
124
6.2.2
Validity
Validity refers to the degree to which instruments measure the constructs that they are
intended to measure (Peter 1979). In other words, validity is defined as the accuracy
of measurement. There are two kinds of validity assessment that are applicable to this
research: content validity and construct validity
Content Validity
Content validity, sometimes called face validity, is a judgmental evaluation of how
well the content of a scale represents the measures (Burns and Bush 1998). Malhotra
(1996) suggested that the scale items should be reviewed by researchers or someone
else to examine whether they cover the entire domain of the construct being
measured. Churchill (1979) recommended that in the early stages of research the scale
items used should be screened by experts and the pool of items for each construct
edited through a pilot test. Content validity in this research is ensured as the majority
of scales used in this study are borrowed from established scales that have already
been subjected to tests of content validity (Narver and Slater 1990; Jaworski and
Kohli 1993; Evangelista 1994).
Thus, the questionnaire was not screened further by experts but the translation version
was sent to ten target respondents to make sure that questions asked were relevant to
the Thai business context.
Construct Validity
Construct Validity is the extent to which a measure is related to other measures in a
manner consistent with theoretically based concepts (Carmines and Zeller 1979).
There are two categories of construct validity, both of which are examined in this
study: convergent validity and discriminant validity.
125
•= Convergent Validity
Convergent validity refers to the degree to which the scale correlates in the same
direction with other measures of the same construct. In other words, the items show
homogeneity within the same construct (Malhotra 1996).
•= Discriminant Validity
Discriminant validity refers to the extent to which a measure is distinct from other
measures, that is, it shows heterogeneity between different constructs (Malhotra
1996).
Ideally, we expect to see an item to be related with other items that measure the same
constructs (convergent validity), but to differ from items which measure different
constructs (discriminant validity) (Peter 1981). Both discriminant and convergent
validity in this study are assessed by using factor analysis.
Factor Analysis
The aims of factor analysis are to summarise the patterns of correlations among
variables and to reduce a large numbers of variables to a smaller number of variables
(Tabachnick and Fidell 1996). In general, there are two kinds of factor analysis:
exploratory and confirmatory. Exploratory factor analysis is used as a tool to
consolidate items, which are correlated. This kind of factor analysis is used in the
early stage of research. On the other hand, confirmation factor analysis is used to test
a theory and normally used in the advanced stages of the research process
(Tabachnick and Fidell 1996).
In order to assess discriminant validity, factor loadings are obtained for each item.
The loadings reflect the strength of the relationship between an item and a particular
construct or factor. The higher the loading, the better the representation that particular
item has on the factor. Hair et al (1998:111) recommended that factor loadings greater
126
than 0.30 are the minimum requirement; loadings of 0.40 are considered more
important; and loadings of 0.50 or greater are considered significant.
Using the above guidelines, items that have low factor loadings (lower than 0.30)
should be discarded. However, we tried to minimise the deletion of items from the
established measures to ensure that the level of comparability with previous studies
was not decreased. The coefficient alpha was taken into consideration as well. If the
deletion of a low factor-loading item helped to substantially improve a coefficient
alpha, then that item was deleted.
In this study, the factor analysis procedure of SPSS version 8.0 was performed to
determine the constructs. Although there are a variety of combinations of extraction
and rotation techniques, Tabachnick and Fidell (1996) argued that the results of
extraction are similar regardless of which method is used. This study uses the
combination of principal components as a method of extraction and oblique rotation
(Oblimin command in SPSS).
Construct 1: Market Orientation
Table 6.2 displays the factor loadings of market orientation in both the export and
domestic markets. Narver and Slater (1990) proposed that market orientation is
composed of three distinct components: customer orientation, competitor orientation,
and inter-functional coordination. However, the scree test done as part of the factor
analysis revealed only one factor. This was also confirmed when looking at the
pattern matrix in Table 6.2. From the factor analysis, market orientation should be
interpreted as one and not three constructs. Hence, discriminant validity for the
individual components of the market orientation scale, as a separate construct, is not
confirmed. Similarly, Pulendran (1996) also found that each component of market
orientation is related closely to each of the others and cannot be split into three
constructs.
Nevertheless, the factor analysis procedure, which specified the extraction of one
factor, suggested that all 15 items forming the market orientation scale had important
and significant factor loadings (.443 to .750) (Hair et al 1998). The results of the
127
factor analysis lend support to convergent validity. Furthermore, the reliability
coefficients for market orientation in both the domestic and export markets are high
(0.8170 for domestic market, 0.8510 for export market). The high convergence of
items justifies the use of an overall market-orientation construct for hypothesis
testing.
Theoretically, the three components are distinct from one another (Narver and Slater
1990), although discriminant validity is not found in this study. It is also important
that the results of this study can be compared with previous research. Hence, the
regression analysis is performed separately both as one main construct level (market
orientation) and at the individual component level (customer orientation, competitor
orientation, and inter-functional coordination) to examine the relationship between
market orientation, its components and business performance. However, our primary
interest is in overall market orientation (main construct).
To summarise, the market orientation construct in this thesis comprises 15 items;
customer orientation (6 items); competitor orientation (4 items); and inter-functional
coordination (5 items).
Construct 2: Antecedents
Table 6.3 presents the factor loadings of the antecedents. Using factor analysis, nine
components were extracted. Factor loading of future exports’ profit and growth, top
management emphasis, centralisation, and reward systems components, show
homogeneity within the constructs and heterogeneity between constructs. Three of
four items in the management commitment construct loaded cleanly on one construct.
The last item had to be deleted because it showed a negative correlation and low
loading factor; by doing so the reliability was improved from 0.5712 to 0.7816.
Item 5 in risk aversion was discarded due to low factor loadings. In addition, item 6 in
conflict and item 7 in formalisation were deleted due to negative correlation with the
other items in the same constructs, and low factor loadings. The elimination of items
was not only based on factor loadings, but also on the improvement in the reliability
128
coefficient. Hence, item 6 in formalisation was not removed although it showed a low
factor loading.
Likewise, item 1 in reward systems and item 4 in connectedness were not excluded,
although their factor loadings were less than 0.30, because by doing so the reliability
coefficients were not greatly affected.
Construct 3: Environmental Moderators
Table 6.4 shows the factor loadings of environmental moderators of both domestic
and export markets. From the pattern matrix, there are four components. The first
component, market turbulence, is comprised of 4 items (out of 5 items originally).
The last item, a reverse-coded item, was correlated negatively with the rest in the
same construct; therefore, it was eliminated. By doing so, the coefficient was
improved from 0.1803 to 0.7021 for export market turbulence, and 0.0521 to 0.6700
for domestic market turbulence.
The second component, competitive intensity, had the same problem as market
turbulence, namely item 6 which had a negative correlation with the other items and a
factor loading lower than 0.3. Similarly, item 4 of technological turbulence had a low
factor loading. However, these items were included in the analysis because the
reliability coefficients of these scales were higher than the threshold (0.5-0.6)
recommended by Nunnally (1967). Secondly, deleting those items has only a marginal
effect on the reliability coefficients. More importantly, for the sake of compatibility in
making comparison with previous research, the elimination of items was minimised.
The only construct on which all items loaded cleanly on one component was buyer
power. The problematic itemsincluding antecedents and moderatorswere
associated with reverse coding.
Tables 6.2 to Table 6.4 present summarise the factor analysis of market orientation,
antecedents, and environmental moderator variables.
129
-0.849
-0.804
-0.630
0.826
-0.673
Export Market
Orientation
Components
2
3
0.529
0.674
0.687
0.505
1
Table 6.2: Factor Analysis of the Main Construct: Market Orientation
Items
Customer Orientation
Customer commitment
Create customer value
Understand customer needs
Customer satisfaction objectives
Measure customer satisfaction
After sales service
•=
•=
•=
•=
•=
•=
0.751
0.461
0.445
•=
•=
•=
•=
0.753
0.691
Competitor Orientation
Salespeople share competitor information
Respond rapidly to competitors’ actions
Top managers discuss competitors’ strategies
Target opportunities for competitive advantage
Inter-functional Coordination
Inter-functional customer calls
Information shared among functions
Functional integration in strategy
All functions contribute to customer value
Share resources with other business units
0.623
•=
•=
•=
•=
•=
1
0.731
0.757
0.713
0.542
0.752
-0.388
Domestic Market
Orientation
Components
2
3
0.707
0.485
0.878
0.584
0.672
0.538
0.455
0.640
0.417
130
Table 6.3: Factor Analysis: Antecedents to Market Orientation
Components
Items
Management Commitment
Item1 (Q8.7)
Item2 (Q8.8)
Item3 (Q8.9)
Item4 (Q8.10) (deleted)
Future Exports’ Profit &Growth
Item1 (Q8.4)
Item2 (Q8.5)
Item3 (Q8.6)
Top Management Emphasis
Item1 (Q6.1)
Item2 (Q6.2)
Item3 (Q6.3)
Item4 (Q6.4)
Risk Aversion
Item1 (Q6.5)
Item2 (Q6.6)
Item3 (Q6.7)
Item4 (Q6.8)
Item5 (Q6.9) (deleted)
Conflict
Item1 (Q6.10)
Item2 (Q6.11)
Item3 (Q6.12)
Item4 (Q6.13)
Item5 (Q6.14)
Item6 (Q6.15) (deleted)
Item7 (Q6.16)
1
2
3
4
5
0.832
0.944
0.550
(-2.8E-02)
0.896
0.957
0.670
0.708
0.692
0.687
0.648
0.722
0.759
0.329
0.596
(0.238)
0.695
0.644
0.702
0.598
0.467
(-0.673)
0.418
131
Table 6.3: Factor Analysis: Antecedents to Market Orientation (Continue)
Components
Items
Connectedness
Item1 (Q6.17)
Item2 (Q6.18)
Item3 (Q6.19)
Item4 (Q6.20)
Item5 (Q6.21)
Item6 (Q6.22)
Formalisation
Item1 (Q6.23)
Item2 (Q6.24)
Item3 (Q6.25)
Item4 (Q6.26)
Item5 (Q6.27)
Item6 (Q6.28)
Item7 (Q6.29) (deleted)
Centralistion
Item1 (Q6.30)
Item2 (Q6.31)
Item3 (Q6.32)
Item4 (Q6.33)
Item5 (Q6.34)
Reward Systems
Item1 (Q6.35)
Item2 (Q6.36)
Item3 (Q6.37)
Item4 (Q6.38)
Item5 (Q6.39)
6
7
8
9
0.702
0.819
0.808
(0.126)
0.681
0.529
0.429
0.669
0.669
0.792
0.744
(-.5.6E-02)
(-0.237)
0.831
0.746
0.835
0.802
0.777
-0.278
-0.760
-0.868
-0.726
-0.716
Note: For more detail, please see the questionnaire presented in an Appendix
One
132
1
0.774
0.744
0.589
0.628
(-0.587)
2
0.721
0.470
0.637
0.713
0.520
(-0.122)
3
0.750
0.842
0.847
(0.181)
4
0.562
0.477
0.700
Table 6.4: Factor Analysis: Environmental Moderators
Export Moderator Components
Items
Market Turbulence
Item1 (Q5.1)
Item2 (Q5.2)
Item3 (Q5.3)
Item4 (Q5.4)
Item5 (Q5.5) (deleted)
Competitive Intensity
Item1 (Q5.6)
Item2 (Q5.7)
Item3 (Q5.8)
Item4 (Q5.9)
Item5 (Q5.10)
Item6 (Q5.11)
Technological Turbulence
Item1 (Q5.12)
Item2 (Q5.13)
Item3 (Q5.14)
Item4 (Q5.15)
Buyer Power
Item1 (Q5.16)
Item2 (Q5.17)
Item3 (Q5.18)
0.609
0.659
0.695
0.288
0.744
(-0.264)
2
0.738
0.821
0.854
(0.283)
3
-0.444
-0.577
-0.665
4
Domestic Moderator Components
1
-0.687
-0.580
-0.749
-0.665
(0.820)
Note: For more detail, please refer to the questionnaire presented in an Appendix One
133
6.3 Descriptive Statistics
Export Market
The means, standard deviations, skewness, and kurtosis of all constructs in the export
market are displayed in Table 6.5. Mean scores are computed by equally weighting
the mean scores of all items. For example, the mean for the export market orientation
score is computed by equally weighting the mean scores of export customer
orientation, export competitor orientation, and export inter-functional coordination.
On a five-point scale, the mean score of export market orientation is 3.738. The mean
scores of the components of export market orientation are 3.959 for customer
orientation, 3.482 for competitor orientation, and 3.772 for inter-functional
coordination. The standard deviations range from 0.520 to 0.716.
The mean scores of export antecedents range from 2.506 to 4.122. The mean score for
the measure of top management emphasis is very high (4.122), indicating that the top
management of exporting firms in Thailand underline the importance of being market
oriented. The mean scores of interdepartmental connectedness (3.681), and
formalisation (3.554) are high, implying that exporting firms in Thailand have a high
level of teamwork and that they seem to function well within the formal structure.
The mean scores of management commitment to export operations (3.424) and
management perception on future exports’ profit and growth (3.247) are also high,
suggesting that management of exporting firms in Thailand shows a high commitment
towards export markets. They also have a positive view about export markets. The
other export antecedents, risk aversion, centralisation, and reward systems, show
moderate mean scores (2.506 to 2.875).
The results from Table 6.5 also reveal that exporting firms from Thailand operate in a
situation of moderate to high environmental turbulence and competitiveness (mean
scores of 3.276 to 3.738). In the exporting business, the presence of high market
turbulence (3.738) and strong competitive intensity (3.495) is considered a normal
134
phenomenon. Additionally, the results also suggest that the bargaining power of
overseas buyers is remarkably high (3.424).
In general, exporting firms reported that they were performing reasonably well (mean
score of 3.558 on a five-point scale), despite the economic turbulence that was then
being experienced in Thailand. They were also reasonably confident about their
decision to adapt marketing strategies in foreign markets (mean score of 3.393).
The skewness and kurtosis shown in Table 6.5 are generally close to zero, indicating
that the assumption of normality appears not to be violated.
Table 6.5: Descriptive Statistics for the Export Market
Scales
No. of
Items
Mean
Standard
Deviation
Skewness
Kurtosis
Export
Market
Orientation
•=
•=
•=
•=
Market orientation
Customer orientation
Competitor orientation
Inter-functional
coordination
15
6
4
5
3.7378
3.9594
3.4818
3.7724
0.5196
0.6115
0.7175
0.5627
-0.734
-0.373
-0.689
-0.333
1.128
0.215
0.961
-0.090
Export
Antecedents
•=
Management
commitment
Future exports’ profit
and growth
Management emphasis
Risk aversion
Conflict
Connectedness
Formalisation
Centralisation
Reward systems
3
3.4236
0.9941
-0.558
-0.156
3
3.2465
0.9676
-0.178
-0.151
4
4
6
6
6
5
5
4.1224
2.7891
3.2726
3.6813
3.5542
2.5063
2.8750
0.6387
0.7065
0.5462
0.6167
0.6778
0.8870
0.6789
-0.738
-0.228
-0.453
-0.007
-0.017
0.767
0.074
0.544
0.140
0.132
-0.433
-0.520
0.422
-0.177
Market turbulence
Competitive intensity
Technological
turbulence
Buyer power
4
6
4
3.7378
3.4948
3.2760
0.7426
0.6647
0.8163
-0.811
-0.308
-0.328
1.738
0.094
-0.328
3
3.4236
0.8129
0.136
-0.368
•=
•=
•=
•=
•=
•=
•=
•=
Export
Moderators
•=
•=
•=
•=
Export
Performance
•=
Export performance
(Subjective measures)
7
3.5575
0.5298
-0.117
0.006
Modify
Strategies
Key
Informant
•=
Modify strategies
7
3.3930
0.6570
0.176
-0.199
•=
•=
Knowledge and ability
Working experience (in
years)
1
-
4.06
9.07
0.7000
5.810
-0.088
1.075
-0.926
1.711
135
Domestic Market
Table 6.6 presents the descriptive statistics for the domestic market. On a five-point
scale, the mean score of domestic market orientation is 3.779, customer orientation
3.924, competitor orientation 3.613, and inter-functional coordination 3.801. Overall,
the mean scores of market orientation and its components for the domestic market are
similar to those of the export market. However, the mean score of competitor
orientation in the domestic market (3.613) is substantially higher than that of the
export market (3.482).
The mean scores of domestic antecedents range from 2.518 to 4.137. In fact, the
descriptive statistics for domestic antecedents are the same as those of export
antecedents since they share the same questions (as discussed in section 6.3.1).
The results from Table 6.6 also indicate that domestic firms in Thailand operated in a
situation of moderate to high environmental turbulence and competitiveness (mean
scores of 3.231 to 3.613). The mean scores of the environmental moderators in the
domestic market were similar to those in the export market. Firms participating in this
survey acknowledged that they operated in a climate of high market turbulence and
tough competition.
In general, firms in this survey reported that they were performing remarkably well
(mean score of 3.405 on the five-point scale). Another point to be noted is that the
mean score of domestic performance is less than the mean score of export
performance. This implies that firms in this survey are performing better in their
export markets than in the domestic market.
The skewness and kurtosis shown in Table 6.6 are also generally close to zero. As
with the results for the export market, this indicates that the assumption of normality
was not violated.
136
Table 6.6: Descriptive Statistics for the Domestic Market
Scales
Domestic
Market
Orientation
Domestic
Antecedents
Domestic
Moderators
No. of
Items
Mean
Standard
Deviation
Skewness
Kurtosis
1.
2.
3.
4.
Market orientation
Customer orientation
Competitor orientation
Inter-functional
coordination
15
6
4
5
3.7789
3.9240
3.6129
3.8005
0.4850
0.6290
0.6871
0.5374
-0.561
-0.311
-0.486
-0.227
1.211
-0.216
0.581
-0.091
1.
2.
3.
4.
5.
6.
7.
Management emphasis
Risk aversion
Conflict
Connectedness
Formalisation
Centralisation
Reward systems
4
4
6
6
6
5
5
4.1371
2.7473
3.2509
3.6667
3.6108
2.5183
2.9140
0.6294
0.7047
0.5818
0.6714
0.6759
0.8517
0.6842
-0.798
-0.120
-0.640
-0.062
-0.097
0.580
-0.010
0.820
0.058
0.390
-0.409
-0.444
0.261
-0.171
1.
2.
3.
Market turbulence
Competitive intensity
Technological
turbulence
Buyer power
4
6
4
3.6129
3.5645
3.2312
0.7331
0.6716
0.669
-0.798
-0.618
-0.074
1.857
0.450
-0.048
3
3.4050
0.7953
-0.177
-0.314
4.
Domestic
Performance
1.
Domestic performance
(Subjective measures)
7
3.4750
0.5676
-0.438
0.786
Key
Informant
1.
Domestic knowledge
1
4.0200
0.7600
-0.036
-1.260
137
6.4 Correlation Analysis
A correlation analysis was conducted on all variables in this study for two purposes.
The first was to check the presence of multicollinearity. Multicollinearity is indicated
when the inter-correlation between explanatory variables exceeds 0.8 (Berry and
Feldmann 1985). Secondly, correlation analysis was performed to explore the
relationships between variables.
In interpreting the strength of relationships between variables, the guidelines
suggested by Rowntree (1987:170) were followed. His classification of the correlation
coefficient (r) is as follows:
0.0 to 0.2
very weak, negligible
0.2 to 0.4
weak, low
0.4 to 0.7
moderate
0.7 to 0.9
strong, high, marked
0.9 to 1.0
very strong, very high
The bivariate correlation procedure was subject to a one tailed test of statistical
significance at two difference levels: highly significant (p< 0.001) and significant (p<
0.01) or (p< 0.05). The results of the correlation analysis are shown in Table 6.7 to
Table 6.13.
6.4.1 Market Orientation
The three components forming the market orientation scale (both export market
orientation and domestic market orientation) are positively and significantly
correlated with one another (see Table 6.7 and 6.8).
The relationships between customer orientation, competitor orientation, and interfunctional coordination are highly significant at the p<0.001 level. In fact, factor
analysis indicates that these three components are closely related. In addition, all three
components are strongly related to market orientation.
138
A noteworthy feature of Tables 6.7 and 6.8 is that the Pearson Correlations (r) of the
domestic market-orientation components (domestic customer orientation, domestic
competitor orientation, domestic inter-functional coordination) are lower than those
of the export market-orientation components. In other words, the components of
market orientation in the export market exhibit a stronger relationship between one
another than those in the domestic market.
Export customer orientation, export competitor orientation, export inter-functional
coordination, and export market orientation have a positive but weak to very weak
relationship with export performance when the latter is based on subjective measures
(r ranges from 0.166 to 0.246). Likewise, domestic competitor orientation, domestic
inter-functional coordination, and domestic market orientation display a positive but
weak to very weak relationship with domestic business performance (r ranges from
0.170 to 0.239). One exception is domestic customer orientation which does not have
a significant relationship with domestic performance (r =0.1, p=0.169).
In contrast, export market orientation and its componentsexport customer
orientation, export competitor orientation, export inter-functional coordinationhas
neither significant correlation with export intensity nor with export sales growth.
As a final note, the results in Table 6.7 suggest that export sales growth (objective
measure) exhibit a significant but weak association with export performance
(subjective measure). On the other hand, export intensity (objective measure) does not
appear to have any significant relationship with export performance (subjective
measures).
139
Table 6.7: Correlation Analysis of Export Market Orientation and Its
Components
1
2
3
4
5
6
7
1.000
.635**
.579**
.858**
.246*
.123
-.118
-
.000
.000
.000
.002
.070
.079
.635**
1.000
.487**
.869**
.159*
.061
-.085
.000
-
.000
.000
.030
.234
.153
.579**
.487**
1.000
.778**
.166*
.057
.059
.000
.000
-
.000
.025
.247
.241
.858**
.869**
.778**
1.000
.184*
.101
-.002
.000
.000
.000
-
.015
.116
.491
Pearson Correlation
.246*
.159*
.166*
.184*
1.000
.052
.287*
Significance (1-tailed)
.002
.030
.025
.015
-
.269
*
Export Customer Orientation
Pearson Correlation
Significance (1-tailed)
Export Competitor Orientation
Pearson Correlation
Significance (1-tailed)
Export Inter-functional
Coordination
Pearson Correlation
Significance (1-tailed)
Export Market Orientation
Pearson Correlation
Significance (1-tailed)
Export Performance
(subjective measure)
.000
Export Intensity
Pearson Correlation
.123
.061
.057
.101
.052
1.000
.064
Significance (1-tailed)
.070
.234
.247
.116
.269
-
.220
Pearson Correlation
-.118
-.085
.059
-.002
.287**
.064
1.000
Significance (1-tailed)
.079
.153
.241
.491
.000
.220
-
Export Sales Growth
Note: **. Correlation is (highly) significant at the 0.001 level
*. Correlation is significant at the 0.01 or 0.05 levels
140
Table 6.8: Correlation Analysis of Domestic Market Orientation and Its
Components
1
2
3
4
5
1.000
.476**
.429**
.814**
.100
-
.000
.000
.000
.169
.467**
1.000
.366**
.817**
.170*
.000
-
.000
.000
.050
.429**
.366**
1.000
.729**
.239*
.000
.000
-
.000
.010
.814**
.817**
.729**
1.000
.211*
.000
.000
.000
.000
.020
Pearson Correlation
.100
.170*
.239*
.211*
1.000
Significance (1-tailed)
.169
.050
.020
.020
-
Domestic Customer Orientation
Pearson Correlation
Significance (1-tailed)
Domestic Competitor Orientation
Pearson Correlation
Significance (1-tailed)
Domestic Inter-functional
Coordination
Pearson Correlation
Significance (1-tailed)
Domestic Market Orientation
Pearson Correlation
Significance (1-tailed)
Domestic Business Performance
(subjective measure)
Note: **. Correlation is (highly) significant at the 0.001 level
*. Correlation is significant at the 0.01 or 0.05 levels
141
As shown in Table 6.9, it was found that export market orientation has a positive and
strong correlation with domestic market orientation (r = .793, p < 0.001). Although
there is no evidence, at this stage, to say which variable precedes which, it is implied
that an organisation which has a high level of export market orientation tends to have
a high level of domestic market orientation as well.
The results also indicate that domestic business performance has a positive and
moderate association with export performance (r = .552, p< 0.001) (see Table 6.9).
Table 6.9: Correlation Analysis of Export Market Orientation, Domestic Market
Orientation, Export Performance, and Domestic Performance
1
2
3
4
1.000
.793**
.184*
.096
-
.000
.015
.182
.793**
1.000
.274*
.211*
.000
-
.004
.020
Pearson Correlation
.184*
.274*
1.000
.522**
Significance (1-tailed)
.015
.004
-
.000
Pearson Correlation
.096
.211*
.522**
1.000
Significance (1-tailed)
.182
.020
.000
-
Export Market Orientation
Pearson Correlation
Significance(1-tailed)
Domestic Market Orientation
Pearson Correlation
Significance (1-tailed)
Export Performance
Domestic Performance
Note: **. Correlation is (highly) significant at the 0.001 level
*. Correlation is significant at the 0.01 or 0.05 levels
142
6.4.2 Antecedents to Market Orientation
Export Antecedents
There are nine sets of hypothesised antecedent variables in export market orientation
and seven sets of hypothesised antecedent variables in domestic market orientation.
The two additional variables are management commitment to export operations and
management perception on future exports’ profit and growth. The remaining
antecedents are the same.
Table 6.10 displays the correlation analysis of the antecedents to export market
orientation. The export antecedent variables, which are significantly correlated with
export market orientation, are management commitment to export operations (r =
0.451, p = 0.000), future profit and growth (r = 0.188, p = 0.031), top management
emphasis (r = 0.492, p = 0.000), interdepartmental connectedness (r = 0.189, p =
0.012), and reward systems (r = 0.416, p = 0.000). In addition, these variables exhibit
a positive association with export market orientation as expected. Exceptional cases
are risk aversion and inter-departmental conflict, which are significantly associated
with export market orientation but show contrary signs to what are hypothesised (see
signs in Table 7.6 in Chapter Seven).
From the results, it is obvious that management commitment to export operations has
a strong relationship with future exports’ profit and growth, top management
emphasis on being market oriented, and export market orientation. Top management
emphasis on being market oriented, on the other hand, has a positive association with
market-based reward systems.
Interestingly, the results from companies from Thailand also suggest that interdepartmental conflict has a highly significant and positive relationship with interdepartmental connectedness, but a negative association with formalisation. In other
words, if an organisation has a high level of formalisation, it tends to show low levels
of conflict. On the other hand, conflict seems to arise when the degree of interdepartmental connectedness increases.
143
Table 6.10: Correlation Analysis of Antecedents to Export Market Orientation
Management
Commitment
Pearson Correlation
Significance (1 tailed)
Future Exports’
Profit & Growth
Pearson Correlation
Significance (1 tailed)
Top Management
Emphasis
Pearson Correlation
Significance (1 tailed)
Risk Aversion
Pearson Correlation
Significance (1 tailed)
1
2
3
4
5
6
7
8
9
10
1.000
-
.643**
.000
.243**
.002
.151*
.037
.087
.152
.193*
.011
-.009
.459
-.061
.239
.124
.073
.451**
.000
.643**
.000
1.000
-
.125
.104
.118
.116
.000
.498
.117
.119
.004
.486
.046
.322
-.004
.483
.188*
.031
.243*
.002
.125
.104
1.000
-
.184*
.013
-.071
.196
.168*
.021
.037
.329
.093
.132
.286**
.000
.492**
.000
.151*
.037
.118
.116
.184*
.013
1.000
-
.129
.060
-.039
.320
-.111
.090
-.053
.262
.291**
.000
.189*
.012
.087
.152
.000
.498
-.071
.196
.129
.060
1.000
-
.412**
.000
-.108
.095
-.377**
.000
.062
.229
.110
.097
.193*
.011
.117
.119
.168*
.021
-.039
.320
.412**
.000
1.000
-
-.211*
.005
-.078
.175
.132
.055
.189*
.012
-.009
.459
.004
.486
.037
.329
-.111
.090
-.108
.095
-.211*
.005
1.000
-
-.026
.375
-.135
.052
.034
.345
-.061
.239
.046
.322
.093
.132
-.053
.262
-.377**
.000
-.078
.175
-.026
.375
1.000
-
.122
.071
-.107
.101
.124
.073
-.004
.483
.286**
.000
.291**
.000
.062
.229
.132
.055
-.135
.052
.122
.071
1.000
-
.416**
.000
.451**
.000
.188*
.031
.492**
.000
.189*
.012
.110
.097
.189*
.012
.034
.345
-.107
.101
.416**
.000
1.000
-
Conflict
Pearson Correlation
Significance (1 tailed)
Connectedness
Pearson Correlation
Significance (1 tailed)
Formalisation
Pearson Correlation
Significance (1 tailed)
Centralisation
Pearson Correlation
Significance (1 tailed)
Reward Systems
Pearson Correlation
Significance (1 tailed)
Export Market
Orientation
Pearson Correlation
Significance (1 tailed)
Note: **. Correlation is (highly) significant at the 0.001 level, and
*. Correlation is significant at the 0.01 or 0.05 levels
144
Domestic Antecedents
As shown in Table 6.11, the domestic antecedents that are significantly correlated
with domestic market orientation are top management emphasis (r =0.379, p =0.000),
top management risk aversion (r = 0.225, p = 0.013), interdepartmental conflict (r
=0.227, p =0.013), centralisation (r = -0.269, p =0.004), and reward systems (r
=0.327, p = 0.001).
The hypothesised antecedents in the domestic market that are not significantly
associated with domestic market orientation are connectedness (r = 0.142, p = 0.083)
and formalisation (r = 0.020, p = 0.421). All domestic antecedents have positive
correlations with domestic market orientation except centralisation, which shows a
negative sign.
The results of the correlation analysis also indicate that the majority of domestic
antecedents show signs in the expected direction, except top management risk
aversion, formalisation and interdepartmental conflict which show the sign in the
opposite direction (see predicted signs in Table 8.5 in Chapter Eight).
145
Table 6.11: Correlation Analysis of Antecedents to Domestic Market Orientation
1
2
3
4
5
6
7
8
Top Management
Emphasis
Pearson Correlation
Significance (1 tailed)
1.000
-
.184*
.013
-.071
.196
.168*
.021
.037
.329
.093
.132
.286**
.000
.397**
.000
Risk Aversion
Pearson Correlation
Significance (1 tailed)
.184*
.013
1.000
-
.129
.060
-.039
.320
-.111
.090
-.053
.262
.291**
.000
.225*
.013
Conflict
Pearson Correlation
Significance (1 tailed)
-.071
.196
.129
.060
1.000
-
.412**
.000
-.108
.095
-.377**
.000
.062
.229
.227*
.013
Connectedness
Pearson Correlation
Significance (1 tailed)
.168*
.021
-.039
.320
.412**
.000
1.000
-
-.211*
.005
-.078
.175
.132
.055
.142
.083
Formalisation
Pearson Correlation
Significance (1 tailed)
.037
.329
-.111
.090
-.108
.095
-.211*
.005
1.000
-.026
.375
-.135
.052
.067
.257
Centralisation
Pearson Correlation
Significance (1 tailed)
.093
.132
-.053
.262
-.377**
.000
-.078
.175
-.026
.375
1.000
-
.122
.071
-2.69*
.004
Reward Systems
Pearson Correlation
Significance (1 tailed)
.286**
.000
.291**
.000
.062
.229
.132
.055
-.135
.052
.122
.071
1.000
-
.327**
.001
Domestic Market
Orientation
Pearson Correlation
Significance (1 tailed)
.397**
.000
.225*
.013
.227*
.013
.142
.083
.067
.257
-2.69*
.004
.327**
.001
1.000
-
Note:
**. Correlation is (highly) significant at the 0.001 level,
*. Correlation is significant at the 0.01 or 0.05 levels
146
6.4.3
The Environmental Moderator Effects of Market Orientation and
Business Performance
Export Moderators
Table 6.12 reveals a number of significant correlations between environmental
moderators in the export market context. First to be noted is that export market
orientation shows a significant and positive relationship with all hypothesised
moderators in this study (export market turbulence (r = 0.332, p = 0.000), export
competitive intensity (r = .466, p = .000), export technological turbulence (r = 0.158,
p = 0.030), and export buyer power (r = 0.141, p = 0.047)). The results from the
correlation analysis suggest that when firms operate in high market turbulence, strong
competition, high technological turbulence, and strong buyer power, they tend to be
more market oriented.
The correlations also underpin the relationships between moderator variables and
export performance. In fact, all moderators have a significant association with export
performance except export competitive intensity [export market turbulence (r = 0.326,
p = 0.000), competitive intensity (r = 0.031, p = 0.357), technological turbulence (r =
0.296, p = 0.000), and export buyer power (r = -0.249, p = 0.001)]. In addition, all
moderators have a positive relationship with export performance except buyer power,
which exhibits a negative sign.
It can be concluded that those exporting firms that operate in an environment in which
overseas buyers have strong bargaining power will tend to show low business
performance. Alternatively, firms that operate in high market and technological
turbulence show high business performance.
147
Table 6.12: Correlation Analysis of Export Environmental Moderators
1
2
3
4
5
6
Export Market
Turbulence
Pearson Correlation
Significance (1 tailed)
1.000
-
.344**
.000
.326**
.000
-.037
.328
.332**
.000
.326**
.000
Export Competitive
Intensity
Pearson Correlation
Significance (1 tailed)
.344**
.000
1.000
-
.270**
.000
.388**
.000
.466**
.000
.031
.357
Export Technological
Turbulence
Pearson Correlation
Significance (1 tailed)
.326**
.000
.270**
.000
1.000
-
.019
.411
.158*
.030
.296**
.000
Export Buyer Power
Pearson Correlation
Significance (1 tailed)
-.037
.328
.388**
.000
.019
.411
1.000
-
.141*
.047
-.249**
.001
Export Market
Orientation
Pearson Correlation
Significance (1 tailed)
.332**
.000
.466**
.000
.158*
.030
.141*
.047
1.000
-
.184*
.015
Export Performance
(subjective measure)
Pearson Correlation
Significance (1 tailed)
.326**
.000
.031
.357
.296**
.000
-.249**
.001
.184*
.015
1.000
-
Note: **. Correlation is (highly) significant at the 0.001 level, and
*. Correlation is significant at the 0.01 or 0.05 levels
148
Domestic Moderators
The results from the correlation analysis of the domestic environmental moderators
are displayed in Table 6.13.
Unlike the results of the moderators in the export market, which showed that all
moderators had significant relationships with export market orientation, only two
domestic moderators show positive and significant relationships with domestic market
orientation. The first one is market turbulence (r = 0.300, p = 0.002). The other is
competitive intensity (r = 0.273, p = 0.004). It is inferred that firms that operate in a
high market turbulence and strong competitive intensity show a high level of market
orientation. Surprisingly, the results do not suggest any influence of buyer power and
technological turbulence on the level of domestic market orientation.
Interestingly, none of the domestic moderator variables have any significant
association with domestic business performance.
149
Table 6.13: Correlation Analysis of Domestic Environmental Moderators
1
2
3
4
5
6
Market Turbulence
Pearson Correlation
Significance (1 tailed)
1.000
-
.232*
.012
.249*
.007
-.134
.098
.300*
.002
-.013
.452
Competitive Intensity
Pearson Correlation
Significance (1 tailed)
.232*
.012
1.000
-
.204*
.024
.439**
.000
.273*
.004
.040
.350
Technological
Turbulence
Pearson Correlation
Significance (1 tailed)
.249*
.007
.204*
.024
1.000
-
.089
.196
-.038
.359
.092
.189
Buyer Power
Pearson Correlation
Significance (1 tailed)
-.134
.098
.439**
.000
.089
.196
1.000
-
.083
.214
-.129
.108
Market Orientation
Pearson Correlation
Significance (1 tailed)
.300*
.002
.273*
.004
-.038
.359
.083
.214
1.000
-
.211*
.020
Business Performance
Pearson Correlation
Significance (1 tailed)
-.013
.452
.040
.350
.092
.189
-.129
.108
.211*
.020
1.000
-
Note: **. Correlation is (highly) significant at the 0.001 level, and
*. Correlation is significant at the 0.01 or 0.05 levels
150
6.5 Chapter Summary
This chapter examined the reliability and validity of the constructs used in this study.
The reliability of the scales fall between 0.5223 to 0.8663 for the domestic market and
0.5493 to 0.8663 for the export market. However, the majority of scales have a
reliability of 0.60 to 0.85.
Most of the scales exhibit discriminant validity and convergent validity. The market
orientation construct, which comprises three components, does not establish
discriminant validity but does show strong convergent validity. Despite the problem
with discriminant validity, hypothesis testing was conducted at both levels: at the
market orientation level (main hypotheses) and at each component level (corollary
hypotheses).
This chapter also explored the data by using descriptive statistics. Correlation analysis
was performed to assess the relationship between variables. The empirical results
using Multiple Regression Analysis will be presented in Chapters Seven and Eight.
151
Chapter Seven
Empirical Results (Export Market)
7.1
Objectives and Structure of the Chapter
The objective of this chapter is to report the results of this study relating to market
orientation in export markets. The chapter is divided into four sections: Section 7.2
reports on the relationship between export market orientation and export performance.
Section 7.3 outlines the antecedents to export market orientation. Section 7.4 reports
on the moderator effect in the relationship between export market orientation and
export performance. The last section examines the relationship between export market
orientation and the quality of the decision to modify marketing strategies for export
markets.
Each section begins with a restatement of the relevant hypotheses, followed by the
regression equations, empirical results, and finally the conclusion. Multiple regression
is the primary analytical method employed in hypothesis testing in this study. All the
assumptions of the regression procedurenormality, linearity, homoscedasticity, and
multicollinearityhave been discussed in Chapter Five.
In assessing support or non-support for the research hypotheses, the following
guidelines are used. Firstly, if the sign of the beta coefficient (β) of the variable is in
the same direction as hypothesised and the contribution of the variable to the equation
is significant, then the hypothesis is considered supported. Secondly, if the sign of
the beta coefficient is as hypothesised but the contribution of the variable to the
equation is not significant, then the hypothesis is considered supported, not
significant. Thirdly, if the sign of the beta coefficient of the variable is opposite that
of the hypothesis and the contribution of the variable to the equation is significant,
then the hypothesis is considered not supported, but significant. Finally, if the sign
of the beta coefficient of the variable is opposite that of the hypothesis but the
contribution of the variable to the question is not significant, then the hypothesis is
considered not supported, not significant. The evaluation system is summarised in
Table 7.1.
152
Table 7.1 Assessment of Research Hypotheses
SIGN OF BETA
SIGNIFICANCE OF BETA COEFFICIENT
COEFFICIENT
Same
Significant
Not significant
Supported
Supported
Not significant
Opposite
Not supported
Not supported
But significant
Not significant
In addition, the regression procedures are subject to a one-tailed test of statistical
significance at three different levels: highly significant (p< 0.001); significant (p<
0.01) and (p< 0.05).
153
7.2 The Relationship between Export Market Orientation and Export
Performance
7.2.1 Hypotheses (Export Market Orientation and Export Performance)
Export performance in this study is measured by both subjective and objective means.
Hypothesis E1 and the corollary hypotheses E1a-E1c postulate relationships between
export market orientation (including its components) and export performance using
subjective measures. Hypotheses E2, E2a-E2c measure business performance by
using sales growth (objective measure). Hypotheses E3, E3a-E3c measure export
performance by using export intensity (objective measure). The hypotheses are
summarised below:
Hypotheses E 1:
Export performance increases when:
the degree of export market orientation increases;
E 1a:
the degree of export customer orientation increases;
E 1b:
the degree of export competitor orientation increases;
E 1c:
the degree of export inter-functional coordination increases.
Hypotheses E 2:
Export sales growth increases when:
the degree of export market orientation increases;
E 2a:
the degree of export customer orientation increases;
E 2b:
the degree of export competitor orientation increases;
E 2c:
the degree of export inter-functional coordination increases.
Hypotheses E 3:
Export intensity increases when:
the degree of export market orientation increases;
E 3a:
the degree of export customer orientation increases;
E 3b:
the degree of competitor orientation increases;
E 3c:
the degree of inter-functional coordination increases.
154
7.2.2
Regression Equation
The above hypotheses are expressed by the following equations.
Y1 = α + β 1* EMO + ei
Y2 = α + β 2*EX_CUST + ei
Y3 = α + β 3*EX_COMP + ei
Y4 = α + β 4*EX_INT + ei
Y5 = α + β 5* EMO + ei
Y6 = α + β 6*EX_CUST + ei
Y7 = α + β 7*EX_COMP + ei
Y8 = α + β 8*EX_INT + ei
Y9 = α + β 9* EMO + ei
Y10 = α + β 10*EX_CUST + ei
Y11 = α + β 11*EX_COMP + ei
Y12 = α + β 12*EX_INT + ei
Where, Y1-4 = Export Performance (subjective measure),
Y5-8 = Export Sales Growth (objective measure),
Y9-12 = Export Intensity (objective measure),
EMO = Export Market Orientation,
EX_CUST = Export Customer Orientation,
EX_COMP = Export Competitor Orientation,
EX_INT = Export Inter-functional Coordination
155
7.2.3
Empirical Results
Table 7.2 shows the results of the relationship between export market orientation and
export performance. Overall export performance is a combination of 7-item scale:
overall performance, relative overall performance, relative sales growth, relative
ROA, success of new services, customer retention, and word of mouth. The results
show that there is a significant relationship between export market orientation and
export performance (β = 0.184, p = 0.015).
The results also indicate that there is a positive relationship between export market
orientation and customer satisfaction (a combination of two item scale: customer
retention and word of mouth) (β = 0.315, p = 0.000). In contrast, there is no
relationship between export market orientation and export financial performance (a
combination of a 4-item scale: overall performance, relative overall performance,
relative sales growth, and relative ROA) (β = 0.015, p = 0.431).
Interestingly, if export performance is measured by objective means, such as export
sales growth and export intensity (a ratio of export sales to total sales), then the results
do not suggest any significant relationship between export market orientation and
export performance. To be precise, there is no relationship between export market
orientation and export sales growth (β = -0.002, p = 0.491), or between export market
orientation and export intensity (β = 0.101, p = 0.116).
It is observed that if export performance is measured individually by relative return on
assets (ROA), relative sales growth, success of new services, overall performance, or
relative overall performance, then the relationship between export market orientation
and export performance is not significant. In contrast, these relationships are highly
significant if export performance is measured individually by customer retention (β =
0.301, p = 0.000) and word of mouth (β = 0.301, p = 0.000). However, it is common
in the field that an assessment of business performance uses a multi-dimension scale
(eg Jaworski and Kohli 1993).
156
It is worth noting that only relative sales growth has a negative relationship with
export market orientation. All the other factors have a positive relationship with
export market orientation, as expected.
It is also observed that the independent variable, export market orientation, explains
only 2.7 per cent of the total variation (adjusted R2 = 2.7 per cent), which is quite low
compared to previous research (eg, Narver and Slater 1990, Jaworski and Kohli
1993). Nonetheless, the model fit is significant with the F statistic significant at the
0.05 level.
157
Table 7.2:
Relationship between Export Market Orientation and Export
Performance
Independent
Variable
Export Market
Orientation
Dependent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
Export
Performance
(7-item scale)
0.184
2.199
0.015
Export Financial
Performance
(4-item scale)
0.015
0.174
0.431
Export Customer
Satisfaction
(2-item scale)
0.315
3.925
0.000
Overall
Performance
0.038
0.451
0.326
Relative Overall
Performance
0.022
0.256
0.399
Relative Sales
Growth
-0.091
-1.077
0.142
Relative ROA
0.057
0.674
0.2505
Success of New
Services
0.047
0.556
0.2895
Customer
Retention
0.301
3.741
0.000
Word of Mouth
0.301
3.670
0.000
Export Sales
Growth
(objective measure)
-0.002
-0.023
0.491
Export Intensity
(objective measure)
0.101
1.201
0.116
158
Tables 7.3-7.5 show the relationship between export customer orientation, export
competitor orientation, export inter-functional coordination and export performance.
The results of these independent variables are similar to that of export market
orientation. It is found that there is a significant relationship between export customer
orientation and export performance (β = 0.246, p = 0.001), between export competitor
orientation and export performance (β = 0.159, p = 0.030), and between export interfunctional coordination and export performance (β = 0.166, p = 0.025), if export
performance is measured by a combining a 7-item scale (composite measure).
All market orientation componentsexport customer orientation, competitor
orientation,
and
inter-functional
coordinationindicate
highly
significant
relationships with customer satisfaction. In contrast, the results suggest that there are
no significant relationships between export customer orientation, competitor
orientation, inter-functional coordination and export financial performance.
Again, the same problem arises if a single item (such as relative ROA, overall
performance, and success of new services) is used to measure export performance.
Only customer retention and word of mouth are found to have significant
relationships with the predictor variables. However, an exceptional case is found in
the relationship between export inter-functional coordination and export performance.
The result shows that there is a negative relationship between export inter-functional
coordination and relative sales growth (β = -0.141, p= 0.044).
As with market orientation, it is observed that there are no relationships between
export customer orientation, competitor orientation, inter-functional coordination and
export performance measured by export sales growth and export intensity.
Although overall model fit for each simple regression equation is significant with the
F statistic at the 0.05 level, it is observed that the predictor variables, export customer
orientation, export competitor orientation, and export inter-functional coordination,
explain only 2-5 per cent of the total variation (adjusted R2 = 2-5 per cent).
159
Table 7.3:
Relationship between Export Customer Orientation and Export
Performance
Independent
Variable
Export
Customer
Orientation
Dependent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
Export Performance
(7-item scale)
0.246
2.986
0.001
Export Financial
Performance
(4-item scale)
0.068
0.816
0.203
Export Customer
Satisfaction
(2-item scale)
0.233
2.871
0.002
Overall Performance
0.073
0.882
0.189
Relative Overall
Performance
0.062
0.746
0.228
Relative Sales
Growth
-0.029
-0.353
0.362
Relative ROA
0.068
0.814
0.208
Success of New
Services
0.100
1.201
0.116
Customer Retention
0.210
2.583
0.005
Word of Mouth
0.252
3.072
0.001
Export Sales Growth
(objective measure)
-0.118
-1.421
0.078
Export Intensity
(objective measure)
0.123
1.482
0.071
160
Table 7.4: Relationship between Export Competitor Orientation and Export
Performance
Independent
Variable
Export
Competitor
Orientation
Dependent
Variables
Standardised
Coefficient
Beta
T value
Significance
(One Tail)
Export Performance
(7-item scale)
0.159
1.895
0.030
Export Financial
Performance
(4-item scale)
-0.023
-0.273
0.392
Export Customer
Satisfaction
(2-item scale)
0.256
3.173
0.001
Overall Performance
0.002
0.019
0.492
Relative Overall
Performance
-0.017
-0.207
0.418
Relative Sales
Growth
-0.103
-1.241
0.103
Relative ROA
0.035
0.423
0.336
Success of New
Services
-0.021
-0.254
0.400
Customer Retention
0.242
2.992
0.001
Word of Mouth
0.236
2.859
0.002
Export Sales Growth
(objective measure)
-0.085
-1.028
0.153
Export Intensity
(objective measure)
0.061
0.729
0.233
161
Table 7.5:
Relationship between Export Inter-functional Coordination
and Export Performance
Independent
Variable
Export Interfunctional
Coordination
Dependent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
Export
Performance
(7-item scale)
0.166
1.984
0.025
Export Financial
Performance
(4-item scale)
-0.003
-0.036
0.485
Export Customer
Satisfaction (2-item
scale)
0.265
3.300
0.000
Overall
Performance
0.016
0.190
0.424
Relative Overall
Performance
0.009
0.113
0.455
Relative Sales
Growth
-0.141
-1.714
0.044
Relative ROA
0.023
0.271
0.393
Success of New
Services
0.078
0.936
0.175
Customer
Retention
0.242
2.993
0.001
Word of Mouth
0.243
2.947
0.002
Export Sales
Growth
(objective measure)
0.059
0.706
0.241
Export Intensity
(objective measure)
0.057
0.687
0.246
162
7.2.4
Conclusion
•=
Hypotheses E1, E1a, E1b, and E1c are supported.
•=
Hypotheses E2, E2a, E2b are not supported and not significant.
•=
Hypotheses E2c, E3, E3a, E3b, and E3c are supported but not significant.
7.3 The Antecedents to Export Market Orientation
7.3.1 Hypotheses (Antecedents to Export Market Orientation)
The hypotheses for antecedents to export market orientation are summarised as
follow:
The level of export market orientation increases when:
Hypothesis E4:
management commitment to export operations increases.
Hypothesis E5:
management perceptions of export profitability and growth
increase.
Hypothesis E 6:
top management emphasis on being market oriented
increases.
Hypothesis E 7:
top management risk aversion decreases.
Hypothesis E 8:
interdepartmental conflict decreases.
Hypothesis E 9:
interdepartmental connectedness increases.
Hypothesis E 10:
formalisation decreases.
Hypothesis E 11:
centralisation decreases.
Hypothesis E 12:
reliance on market-based reward systems increases.
From the above hypotheses, the expected sign of the relationship between export
market orientation and antecedents is summarised in Table 7.6.
163
Table 7.6: Priori Expectations: Summary of Antecedents
Independent
Variables
Export
Market
Orientation
Export
Customer
Orientation
Export
Competitor
Orientation
Export Interfunctional
Coordination
Positive
Positive
Positive
Positive
Management
Commitment to
Export Operations
Positive
Positive
Positive
Positive
Top Management
Emphasis on being
Market Oriented
Positive
Positive
Positive
Positive
Top Management
Risk Aversion
Negative
Negative
Negative
Negative
Interdepartmental
Conflict
Negative
Negative
Negative
Negative
Interdepartmental
Connectedness
Positive
Positive
Positive
Positive
Formalisation
Negative
Negative
Negative
Negative
Centralisation
Negative
Negative
Negative
Negative
Reward Systems
Positive
Positive
Positive
Positive
Management
Perceptions about
Future Exports’
Profit and Growth
164
7.3.2
Regression Equation
The hypotheses in 7.3.1 are expressed by the following equation.
EMO = α+ β 1*MC + β 2*FPG + β 3*TME + β 4*MRA + β 5*ICF +
β 6*ICN + β 7*FM + β 8*CS + β 9*RS + ei
Where, EMO =
MC
7.3.3
=
Export Market Orientation
Management Commitment to Export Operations
FPG =
Future Exports’ Profit and Growth
TME =
Top Management Emphasis
MRA =
Top Management Risk Aversion
ICF
=
Interdepartmental Conflict
ICN
=
Interdepartmental Connectedness
FM
=
Formalisation
CS
=
Centralisation
RS
=
Reward Systems
Empirical Results
The regression results are shown in Table 7.7. The regression explains 39.5 per cent
of the variance in export market orientation. It is also highly significant with the F
statistic significant at the 0.001 level.
The results indicate that four of the nine hypothesised antecedents have significant
relationships with export market orientation. Management commitment to export
operations (β = 0.363, p = 0.000) and top management emphasis on being market
oriented (β = 0.309, p = 0.000) are highly significant. Centralisation (β = -0.194, p =
0.012) and reward systems (β = 0.267, p = 0.015) are significant (p < .01).
165
Table 7.7: Antecedents to Export Market Orientation
Dependent
Variable
Export Market
Orientation
Independent
Variables
Standardised
Coefficient
Beta
T value
Significance
(One Tail)
Management
Commitment to
Export Operations
0.363
3.420
0.000
Future Exports’
Profit and Growth
-0.099
-0.969
0.168
Top Management
Emphasis
0.309
3.625
0.000
Top Management
Risk Aversion
0.087
0.972
0.168
Interdepartmental
Conflict
-0.004
-0.049
0.480
Interdepartmental
Connectedness
0.012
0.136
0.446
Formalisation
0.132
1.557
0.062
Centralisation
-0.194
-2.294
0.012
Reward Systems
0.267
3.102
0.015
Adjusted R2 = 39.5 per cent
Results in Table 7.7 suggest that six antecedent variablesmanagement commitment
to export operations, top management emphasis on being market oriented,
interdepartmental conflict, interdepartmental connectedness, centralisation, and
reward systemsshow signs in the expected direction (see Table 7.6 for expected
signs). On the other hand, the other three hypothesised antecedent variablesfuture
exports’ profit and growth, top management risk aversion, and formalisationshow
relationships in the opposite direction. However, the low standardised regression
coefficient beta of these variables (FPG (β= -0.099, p = 0.168), MRA (β = 0.088, p =
0.168), and FM (β= 0.132, p = 0.062)) suggest that the dependent variable (export
166
market orientation) is insensitive to the degree of future exports’ profit and growth,
top management risk aversion and formalisation.
7.3.4
Conclusion
•=
Hypotheses E4, E6, E11, and E12 are supported.
•=
Hypotheses E5, and E7 and E10 are not supported and not significant.
•=
Hypotheses E8, E9 are support but not significant.
7.3.5 Hypotheses (Antecedents to Export Customer Orientation)
The hypotheses for antecedents to export customer orientation are summarised as
follow:
The level of export customer orientation increases when:
Hypothesis E4a:
management commitment to export operations increases.
Hypothesis E5a:
management perceptions of export profitability and growth
increase.
Hypothesis E6a:
top management emphasis on being market oriented
increases.
Hypothesis E7a:
top management risk aversion decreases.
Hypothesis E8a:
interdepartmental conflict decreases.
Hypothesis E9a:
interdepartmental connectedness increases.
Hypothesis E10a:
formalisation decreases.
Hypothesis E11a:
centralisation decreases.
Hypothesis E12a:
reliance on market-based reward systems increases.
7.3.6
Regression Equation
The above hypotheses are expressed by the following equation.
167
Ex-CUST
= α+ β 1*MC + β 2*FPG + β 3*TME + β 4*MRA+β
β 5*ICF +
β 6*ICN+ β 7*FM + β 8*CS + β 9*RS + eI
7.3.7
Where, EX-CUST
=
Export Customer Orientation
MC
=
Management Commitment to Export Operations
FPG
=
Future Exports’ Profit and Growth
TME
=
Top Management Emphasis
MRA =
Top Management Risk Aversion
ICF
=
Interdepartmental Conflict
ICN
=
Interdepartmental Connectedness
FM
=
Formalisation
CS
=
Centralisation
RS
=
Reward Systems
Empirical Results
The regression results are shown in Table 7.8. The regression explains 33.3 per cent
of the variance in export customer orientation. It is also highly significant with the F
statistic significant at the 0.001 level.
The results demonstrate that five of the nine variables are antecedents to export
customer orientation. Table 7.8 shows that top management emphasis on being market
oriented (β = 0.376, p = 0.000) is highly significant. Management commitment to
export operations (β = 0.279, p = 0.007), formalisation (β = 0.183, p = 0.018),
centralisation (β = -0.194, p = 0.014) and reward systems (β = 0.190, p = 0.018) are
significant.
Results in Table 7.8 also indicate that six antecedent variablesmanagement
commitment to export operation, top management emphasis on being market oriented,
interdepartmental conflict, interdepartmental connectedness, centralisation, and
reward systemsshow signs in the expected direction.
168
On the other hand, the other three variablesfuture exports’ profit and growth, top
management risk aversion, and formalisationshow relationships opposite to the
predicted direction. Nevertheless, the two predictor variables (future exports’ profit
and growth (β = -0.027, p = 0.4), and top management risk aversion (β = 0.017, p =
0.426)) do not have significant relationships with the dependent variable (export
customer orientation). By contrast, formalisation in fact shows a significant
relationship in the opposite direction (β = 0.183, p = 0.018).
Table 7.8: Antecedents to Export Customer Orientation
Dependent
Variable
Export
Customer
Orientation
Independent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
Management
Commitment to
Export Operations
0.279
2.501
0.007
Future Exports’ Profit
and Growth
-0.027
-0.253
0.400
Top Management
Emphasis
0.376
4.280
0.000
Top Management
Risk Aversion
0.017
0.186
0.426
Interdepartmental
Conflict
-0.022
-0.234
0.407
Interdepartmental
Connectedness
0.010
0.105
0.458
Formalisation
0.183
2.114
0.018
Centralisation
-0.194
-2.220
0.014
Reward Systems
0.190
2.120
0.018
Adjusted R2 = 33.3 per cent
169
7.3.8
Conclusion
•=
Hypotheses E4a, E6a, E11a, and E12a are supported.
•=
Hypotheses E5a and E7a are not supported and not significant.
•=
Hypotheses E8a and E9a are supported but not significant.
•=
Hypothesis E10a is not supported but significant.
7.3.9 Hypotheses (Antecedents to Export Competitor Orientation)
The hypotheses for antecedents to export competitor orientation are summarised as
follow:
The level of export competitor orientation increases when:
Hypothesis E4b:
management commitment to export operations increases.
Hypothesis E5b:
management perceptions of export profitability and growth
increase.
Hypothesis E6b:
top management emphasis on being market oriented
increases.
Hypothesis E7b:
top management risk aversion decreases.
Hypothesis E8b:
interdepartmental conflict decreases.
Hypothesis E9b:
interdepartmental connectedness increases.
Hypothesis E10b:
formalisation decreases.
Hypothesis E11b:
centralisation decreases.
Hypothesis E12b:
reliance on market-based reward systems increases.
7.3.10 Regression Equation
The above hypotheses are expressed as follow.
EX-COMP =
α
+ β 1*MC + β 2*FPG + β 3*TME + β 4*MRA +
β 5*ICF + β 6*ICN + β 7*FM + β 8*CS + β 9*RS + ei
170
Where, EX-COMP
=
Export Competitor Orientation
MC
=
Management Commitment to Export Operations
FPG
=
Future Exports’ Profit and Growth
TME
=
Top Management Emphasis
MRA
=
Top Management Risk Aversion
ICF
=
Interdepartmental Conflict
ICN
=
Interdepartmental Connectedness
FM
=
Formalisation
CS
=
Centralisation
RS
=
Reward Systems
7.3.11 Empirical Results
The regression results of the above equation are shown in Table 7.9. The regression
explains 29.6 per cent of the variance in export competitor orientation. It is also
highly significant with the F statistic significant at the 0.001 level.
The results indicate that management commitment to export operations (β = 0.328, p
= 0.000), top management emphasis on being market oriented (β = 0.297, p = 0.000),
and reward systems (β = 0.295, p = 0.001) are highly significant.
Results in Table 7.9 also reveal that five variablesmanagement commitment to
export
operation,
top
management
emphasis
on
being
market
oriented,
interdepartmental conflict, centralisation, and reward systemsappear with expected
signs.
However, the other four variablesfuture export profit and growth, top management
risk
aversion,
inter-department
connectedness
and
formalisationexhibit
a
relationship opposite to the predicted direction. The low standardised regression
coefficient beta of the these variables (FPG (β = -0.178), MRA (β = 0.081), ICN (β =
-0.070), and FM (β = 0.030)) suggests that the dependent variable (export competitor
orientation) is insensitive to the degree of future export profit and growth, top
management risk aversion, inter-departmental connectedness and formalisation.
171
Table 7.9: Antecedents to Export Competitor Orientation
Dependent
Variable
Export
Competitor
Orientation
Independent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
Management
Commitment to
Export Operations
0.328
2.840
0.000
Future Exports’
Profit and Growth
-0.178
-1.585
0.058
Top Management
Emphasis
0.297
3.282
0.000
Top Management
Risk Aversion
0.081
0.847
0.199
Interdepartmental
Conflict
-0.066
-0.684
0.248
Interdepartmental
Connectedness
-0.070
-0.724
0.235
Formalisation
0.030
0.341
0.367
Centralisation
-0.144
-1.588
0.058
Reward Systems
0.295
3.199
0.001
Adjusted R2 = 29.6 per cent
7.3.12 Conclusion
•=
Hypotheses E4b, E6b, and E12b are supported.
•=
Hypotheses E5b, E7b, E9b and E10b are not supported and not significant.
•=
Hypothesis E8b and E11b are supported but not significant.
172
7.3.13 Hypotheses (Antecedents to Export Inter-functional Coordination)
The hypotheses for antecedents to export inter-functional coordination are
summarised as follow:
The level of export inter-functional coordination increases when:
Hypothesis E4c:
management commitment to export operations increases.
Hypothesis E5c:
management perceptions of export profitability and growth
increase.
Hypothesis E6c:
top management emphasis on being market oriented increases.
Hypothesis E7c:
top management risk aversion decreases.
Hypothesis E8c:
interdepartmental conflict decreases.
Hypothesis E9c:
interdepartmental connectedness increases.
Hypothesis E10c:
formalisation decreases.
Hypothesis E11c:
centralisation decreases.
Hypothesis E12c:
reliance on market-based reward systems increases.
7.3.14 Regression Equation
The above hypotheses are expressed as follow.
EX-INT =
α+ β 1*MC + β 2*FPG + β 3*TME + β 4*MRA + β 5*ICF +
β 6*ICN + β 7*FM + β 8*CS + β 9*RS + ei
Where, EX-INT
=
Export Inter-functional Coordination
MC
=
Management Commitment to Export Operations
FPG
=
Future Exports’ Profit and Growth
TME
=
Top Management Emphasis
MRA
=
Top Management Risk Aversion
ICF
=
Interdepartmental Conflict
ICN
=
Interdepartmental Connectedness
FM
=
Formalisation
173
CS
=
Centralisation
RS
=
Reward Systems
7.3.15 Empirical Results
The regression results from the above equation are shown in Table 7.10. The
regression explains 29.3 per cent of the variance in export inter-functional
coordination. It is also highly significant with the F statistic significant at the 0.001
level.
The results indicate that top management emphasis on being market oriented (β =
0.334, p = 0.000) is highly significant. Management commitment to export operations
(β = 0.326, p = 0.003), future exports’ profit and growth (β = -0.221, p = 0.025),
formalisation (β = 0.153, p = 0.044) and reward systems (β = 0.179, p = 0.028) are
significant.
Results in Table 7.10 indicate that five variablesmanagement commitment to export
operation, top management emphasis on being market oriented, interdepartmental
connectedness, centralisation, and reward systemsreturn expected signs.
However, the other four variablesfuture exports’ profit and growth, top
management risk aversion, interdepartmental conflict and formalisationshow
relationships in the opposite direction. The low standardised regression coefficient
beta of the two variables (MRA (β = 0.063), and ICF (β = 0.077)) suggests that the
dependent variable (export inter-functional coordination) is insensitive to the degree
of top management risk aversion and interdepartmental conflict. On the other hand,
future exports’ profit and growth and formalisation show significant relationships in
the opposite direction (p<0.05).
174
Table 7.10: Antecedents to Export Inter-functional Coordination
Dependent
Variable
Export Interfunctional
Coordination
Independent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
Management
Commitment to
Export Operations
0.326
2.833
0.003
Future Exports’
Profit and Growth
-0.221
1.982
0.025
Top Management
Emphasis
0.334
3.695
0.000
Top Management
Risk Aversion
0.063
0.656
0.256
Interdepartmental
Conflict
0.077
0.803
0.212
Interdepartmental
Connectedness
0.085
0.890
0.188
Formalisation
0.153
1.726
0.044
Centralisation
-0.117
-1.301
0.098
Reward Systems
0.179
1.939
0.028
Adjusted R2 = 29.3 per cent
7.3.16 Conclusion
•=
Hypotheses E4c, E6c and E12c are supported.
•=
Hypotheses E7c, and E8c are not supported and not significant.
•=
Hypothesis E9c and E11c are supported but not significant.
•=
Hypotheses E5c, and E10c are not supported but significant.
175
7.3.17 Summary of Antecedents
Table 7.11 presents a summary of antecedents to export market orientation, export
customer
orientation,
export
competitor
orientation,
export
inter-functional
coordination.
Three of the nine predictor variablesmanagement commitment to export operation,
top management emphasis on being market oriented, and reward systemsare
statistically significant across four dependent variables. On the other hand, three of
the
variablestop
management
risk
aversion,
interdepartmental
conflict,
interdepartmental connectednessare not significant across all four variables.
The results also indicate that future exports’ profit and growth has a partially
significant and negative relationship with export inter-functional coordination, but not
with export market orientation, export customer orientation, and export competitor
orientation.
Likewise, formalisation has a partial and positive significant relationship with export
customer orientation and export inter-functional coordination, but not with export
market orientation and export competitor orientation. Centralisation has a negative
significant relationship with export market orientation and export customer orientation
but not with export competitor orientation and export inter-functional coordination.
176
Table 7.11: Summary of Antecedents to Export Market Orientation:
Standardised Regression Coefficients (β
β)
Dependent Variables
Independent Variables
Export
Market
Orientation
Export
Customer
Orientation
Export
Competitor
Orientation
0.363***
0.279**
0.328***
0.326**
NS
NS
NS
-0.221*
0.309***
0.376***
0.297***
0.334***
Top Management Risk
Aversion
NS
NS
NS
NS
Interdepartmental
Conflict
NS
NS
NS
NS
Interdepartmental
Connectedness
NS
NS
NS
NS
Formalisation
NS
0.183*
NS
0.153*
Centralisation
-0.194*
-0.194*
NS
NS
Reward Systems
0.267*
0.190*
0.295***
0.179*
40
33
30
30
Management
Commitment to Export
Operations
Future Exports’ Profit
and Growth
Top Management
Emphasis
Adjusted R2
(per cent)
Export Interfunctional
Coordination
*p < 0.05; **p < 0.01; ***p < 0.001; NS = Not Significant.
177
7.3.18 Comparison with Previous Research
Table 7.12 presents the comparison of regression results between this study and those
of Jaworski and Kohli (1993). The first two antecedent variablesmanagement
commitment to export operation and future exports’ profit and growthare new
variables introduced in this study. Therefore, there is no data available to compare
with the work done by Jaworski and Kohli (1993). Of the two new variables,
management commitment to export operations shows a highly significant level. In
addition, a comparison is made here between antecedents to export market orientation
and those of domestic market orientation (in Jaworski and Kohli’s study).
From the other seven sets of antecedents, five of the seven variables from this study
show similar results to those of Jaworski and Kohli (1993). Top management
emphasis on being market oriented and market-based reward systems are significant
in both studies. Centralisation is significant in this study and partially significant in
Jaworski and Kohli’s study. In addition, top management risk aversion and
formalisation are not significant in both studies.
A contrast, however, occurs with two variables, interdepartmental conflict and
interdepartmental connectedness, which are not significant in this study but are
significant in Jaworski and Kohli’s study.
178
Table 7.12: Antecedents to Export Market Orientation: Comparison of
Regression Results
Variables
Jaworski and Kohli’s
study
Current Study
Sample I
Sample II
NA
NA
0.363***
NA
NA
NS
0.24***
0.24***
0.309***
NS
NS
NS
Interdepartmental Conflict
-0.17*
-0.28***
NS
Interdepartmental
Connectedness
0.20**
0.22**
NS
Formalisation
NS
NS
NS
Centralisation
-0.22**
NS
-0.194*
Reward Systems
0.30***
0.31***
0.267*
63
58
40
Management Commitment to
Export Operations
Future Exports’ Profit and
Growth
Top Management Emphasis
Top Management Risk
Aversion
R2
(per cent)
*p < 0.05; **p < 0.01; ***p < 0.001; NA = Not Applicable; NS = Not Significant.
179
7.4 The Moderator Effect in The Relationship between Export Market
Orientation and Export Performance
7.4.1 Hypotheses (Moderators)
Hypothesis E13.1:
The greater the export market turbulence, the
stronger the relationship between export market
orientation and export performance.
Hypothesis E13.2:
The greater the export competitive intensity, the
stronger the relationship between export market
orientation and export performance.
Hypothesis E13.3:
The greater the export technological turbulence, the
weaker the relationship between export market
orientation and export performance.
Hypothesis E13.4:
The greater the export buyer power, the stronger the
relationship between export market orientation and
export performance.
7.4.2
Regression Equation
The above hypotheses are expressed below.
α + β 1 EMO + β 2 EMT + β 3 ECI+ β 4 ETT + β 5 EBP
Y =
+ β 6 EMO * EMT + β 7 EMO * ECI + β 8 EMO * ETT
+ β 9 EMO * EBP + ei
Where;
Y
=
Export Performance
EMO =
Export Market Orientation
EMT =
Export Market Turbulence
ECI
=
Export Competitive Intensity
ETT
=
Export Technological Turbulence
EBP
=
Export Buyer Power
180
EMO*EMT
=
Multiplicative Interaction Term of Export Market
Turbulence
EMO*ECI
=
Multiplicative Interaction Term of Export Competitive
Intensity
EMO*ETT
=
Multiplicative Interaction Term of Export Technological
Turbulence
EMO*EBP
If
=
Multiplicative Interaction Term of Export Buyer Power
β5, β6, β7, β8, β9 in the above model are significant, then that moderator is
considered to moderate the relationship between export market orientation and export
performance.
Framework for Identifying Moderator Variables
A moderator effect implies that the moderator variable (such as export market
turbulence, export competitive intensity, etc) modifies the form of the relationship
between the predictor variable (export market orientation) and the criterion variable
(export performance). There are a number of techniques for identifying moderator
effects. One of the most popular and useful techniques is moderated regression
analysis (Sharma, Durand and Gur-Arie 1981). This technique was also used in a
similar study by Slater and Narver (1994).
Sharma, Durand and Gur-Arie (1981:296) state that the procedure of identifying
moderator variables consist of four steps. These are described below.
Step One:
Determine whether a significant interaction is present between
the hypothesised moderator variable and the predictor variable
by Multiple Regression Analysis procedure (MRA). If a
significant interaction is found, proceed to step two. Otherwise,
go to step three.
Step Two:
Determine whether the moderator variable is related to the
criterion variable. If it is, that variable is a quasi moderator. If
not, that variable is a pure moderator.
181
Step Three:
Determine whether the hypothesised moderator variable is
related to the criterion or predictor variables. If it is related, that
variable is not a moderator but one of the following: an
exogenous, predictor, intervening, antecedent, or a suppressor
variable. If the hypothesised moderator variable is not related to
either the predictor or criterion variables, proceed to step four.
Step Four:
Split the total sample into subgroups on the basis of the
hypothesised moderator variable. The groups can be formed by
a median split, quartile, or other type of split. After segmenting
the total sample into subgroups, do a test of significance for
differences in predictive validity across subgroups. If significant
differences are found, that variable is not a moderator variable
and the analysis concludes.
7.4.3
Empirical Results
Following Sharma et al (1981) and Slater and Narver (1994), the moderator
hypotheses are tested with moderated regression analysis. If the interaction term is
statistically significant, a moderator effect is present. If the interaction term is not
significant, it will be then checked whether the hypothesised moderator is related to
either predictor or criterion variables. If there is a significant relationship, then it can
be concluded that that variable is not a moderator. If there is no relationship, testing
for homologizer effects will be performed by splitting the sample at the median of the
hypothesised moderator and performing regression analysis within the subgroups.
To test for moderators, interaction terms were created by multiplying the values for
market orientation by the values for each hypothesised moderator variable. Based on
Sharma et al (1981), the moderated variables were first tested with moderated
regression in the entire sample. Multiple regression analysis was performed by
regressing performance on (1) market orientation, (2) hypothesised moderator
variables and (3) the interaction terms.
182
Step One:
Find a pure moderator
Table 7.13 shows the overall results of the test. The independent variables explain
approximately 18 per cent of the variation. The analysis of the main effects shows that
export buyer power has a significant negative impact on overall export performance
(β = -1.413, p = 0.03). For the interaction effect, the result indicates that none of the
multiplicative interaction terms is significant. Therefore, it can be concluded that,
there is no pure moderator in this case.
Table 7.13 The Relationship between Export Performance, Export Market
Orientation and Environmental Moderators
Dependent
Variable
Export
Performance
Independent
Variables
Export Market
Orientation (EMO)
Standardised
Coefficient
Beta
-0.532
T
Value
Significance
(One Tail)
-0.992
0.161
Export Market
Turbulence (EMT)
-0.382
-0.573
0.284
Export Competitive
Intensity (ECI)
0.713
1.146
0.127
Export Technological
Turbulence (ETT)
0.068
0.110
0.456
Export Buyer Power
(EBP)
-1.413
-1.842
0.034
EMO*EMT
0.874
0.940
0.174
EMO*ECI
-1.209
-1.301
0.098
EMO*ETT
0.188
0.251
0.401
EMO*EBP
1.500
1.578
0.058
Adjusted R2 = 18.2 per cent
183
Step Two:
Determine whether (significant) moderator variable is related to
the criterion variable.
Step two is skipped because no interaction term is significant.
Step Three:
Determine whether that hypothesised moderator variable is
related to the criterion or predictor variable.
Results from Table 7.14 show that both export market turbulence and export
technological turbulence related to both the criterion (export performance), and the
predictor (export market orientation) variables. Therefore, neither export market
turbulence nor export technological turbulence is a moderator.
Likewise, export competitive intensity related to export market orientation (the
predictor variable), while export buyer power related to export performance (the
criterion variable) Thus, both export competitive intensity and export buyer
power are not moderator variables.
To summarise, the analysis indicates that none of the four-hypothesised
environmental variables—market turbulence, technological turbulence, competitive
intensity and buyer power—moderates the relationship between export market
orientation and export performance.
184
Table 7.14: Pearson Correlations of the Relationship between Export Market
Orientation, Export Performance, and Environmental Moderators
EMT
ECI
ETT
EBP
EP
EMO
EMT
ECI
ETT
EBP
r =0.332
r =0.328
r=1.000
r=0.340
r=0.342
r=-0.031
(0.00)
(0.00)
-
(0.00)
(0.00)
(0.35)
r=0.039
r=0.459
r=0.340
r=1.000
r=0.286
r=0.384
(0.32)
(0.00)
(0.00)
-
(0.00)
(0.00)
r=0.296
r=0.160
r=0.342
r=0.286
r=1.000
r= 0.013
(0.00)
(0.03)
(0.00)
(0.00)
-
(0.43)
r=-0.233
r=0.125
r=-0.031
r=0.384
r=0.013
r=1.000
(0.00)
(0.07)
(0.35)
(0.00)
(0.43)
-
Note: EP =
Export Performance
EMO = Export Market Orientation
EMT = Export Market Turbulence
ECI = Export Competitive Intensity
ETT = Export Technological Turbulence
EBP = Export Buyer Power
7.4.4
Conclusion
•=
Hypotheses E13.1, E13.4 are supported but not significant.
•=
Hypothesis E 13.2 and E13.3 are not supported and not significant.
185
7.5 Export Market Orientation and the Quality of the Decision to Modify
Marketing Strategies in Export Markets
7.5.1
Hypothesis (EMO and the Quality of the Decision)
Hypothesis E14:
The greater the export market orientation, the better the
quality of the decision to modify marketing strategies in
the export markets.
7.5.2 Regression Equation
The above hypothesis in 7.5.1 is expressed below.
Y =
Where: Y
=
α + β 1 EMO + eI
The Quality of the Decision (to Modify Marketing Strategies
in Export Markets)
EMO
7.5.3
=
Export Market Orientation
Empirical Results
The regression result is presented in Table 7.15. The regression explains 11.5 per cent
of the total variance (Adjusted R2 = 11.5 per cent). The model fit is also significant
with F statistic significant at the 0.01 level.
The result supports the hypothesis that the higher the degree of export market
orientation, the better the quality of the decision to modify marketing strategies in
export market (β = 0.354, p = 0.000).
186
Table 7.15
The Relationship between Export Market Orientation (EMO) and
the Quality of the Decision to Modify Marketing Strategies in
Export Markets (MMS).
Dependent Variable
Independent
Variables
The Quality of the
Export Market
Decision (MMS)
Orientation (EMO)
Standardised
Coefficient
Beta
T value
Significance
(One Tail)
0.354
3.534
0.000
Adjusted R2 = 11.5 per cent
7.5.4
•=
Conclusion
Hypothesis E14 is supported
7.6 Chapter Summary
This chapter has presented the empirical results and tested hypotheses. A summary of
the key findings is presented below:
1. There is a positive and significant relationship between export market
orientation and export performance; between export customer orientation
and export performance; between export competitor orientation and export
performance; between export inter-functional coordination and export
performance.
2. Management commitment to export operations, top management emphasis
on being market oriented, and reward systems are antecedents to export
market orientation, and all its components: export customer orientation,
export competitor orientation, and export inter-functional coordination.
187
3. Centralisation is found to have a negative relationship with export market
orientation and export customer orientation, while formalisation has a
positive impact only on export customer orientation and export interfunctional coordination.
4. None of the hypothesised moderator variables (export market turbulence,
export technological turbulence, export competitor intensity and export
buyer power) is found to have an impact on the relationship between
export market orientation and export performance.
5. A high degree of export market orientation leads to a better quality of
decision making about whether and to what extent the exporting company
should modify its marketing strategies in foreign markets.
The report in this chapter covers only market orientation in export markets. The next
chapter will discuss about market orientation in the Thai domestic market.
188
Chapter Eight
Empirical Results Part II (Domestic Market)
8.1 Objectives and Structure of the Chapter
The objective of this chapter is to report on the results of another part of the study,
market orientation in the domestic market. The structure of this chapter is similar to
that of the previous chapter. It is divided into three sections. Section 8.2 reports on the
relationship between domestic market orientation and domestic performance. Section
8.3 examines the antecedents to domestic market orientation. Section 8.4 reports on
the moderator effect in the relationship between domestic market orientation and
domestic performance.
In assessing support or non-support for the research hypotheses, the same guidelines
are used as in the previous chapter (see section 7.1 in Chapter Seven).
8.2 The Relationship between Domestic Market Orientation and Domestic
Business Performance
8.2.1 Hypotheses (Domestic Market Orientation and Domestic Performance)
Domestic performance is measured by both subjective and objective measures.
Hypothesis D1 and corollary hypotheses D1a-c postulate relationships between
domestic market orientation (including its components) and domestic performance
using subjective measures. Hypotheses D2, D2a-c measure business performance by
using sales growth (objective measure).
Hypothesis D1:
Domestic business performance increases when the degree
of domestic market orientation increases;
D1a:
the degree of domestic customer orientation increases;
D1b:
the degree of domestic competitor orientation increases;
D1c:
the degree of domestic inter-functional coordination increases.
189
Hypotheses D 2:
Domestic sales growth increases when
the degree of domestic market orientation increases;
8.2.2
D2a:
the degree of domestic customer orientation increases;
D2b:
the degree of domestic competitor orientation increases;
D2c:
the degree of domestic inter-functional coordination increases.
Regression Equation
The above hypotheses are expressed by the following equations.
Y1 = α + β 1* DMO + ei
Y2 = α + β 2*DO_CUST + ei
Y3 = α + β 3*DO_COMP + ei
Y4 = α + β 4*DO_INT + ei
Y5 = α + β 5* DMO + ei
Y6= α + β 6*DO_CUST + ei
Y7= α + β 7*DO_COMP + ei
Y8= α + β 8*DO_INT + ei
Where, Y 1-4 = Domestic Business Performance (subjective measure),
Y 5-8 = Domestic Sales Growth ( objective measure),
DMO = Domestic Market Orientation,
DO_CUST = Domestic Customer Orientation,
DO_COMP = Domestic Competitor Orientation,
DO_INT = Domestic Inter-functional Coordination
8.2.3
Empirical Results
Table 8.1 presents the results of the relationship between domestic market orientation
and domestic performance. The result shows the significant relationship between
domestic market orientation and domestic performance (combination of a 7-item
190
scale) (β = 0.211, p = 0.020). The result also suggests that higher degree of market
orientation results in higher degree of customer satisfaction (β = 0.320, p = 0.001).
It is observed that if domestic performance is measured individually (one-item scale)
by relative overall performance, relative sales growth, and success of new services,
then the relationship between domestic market orientation and domestic performance
is not significant. In contrast, these relationships are significant if domestic
performance is measured individually by overall performance (β = 0.191, p = 0.032),
relative ROA (β = 0.194, p = 0.030), customer retention (β = 0.316, p = 0.001) and
word of mouth (β = 0.211, p = 0.020).
Interestingly, if business performance is measured by objective measures such as sale
growth, then there is no significant relationship between market orientation and
domestic performance (β = 0.006, p = 0.475).
It is also observed that the independent variable, domestic market orientation, explains
only 3.4 per cent of the total variation (adjusted R2 = 3.4 per cent), which is
reasonably low compared to previous research (eg, Narver and Slater 1990, Jaworski
and Kohli 1993). Nonetheless, the model fit is significant, with the F statistic
significant at the 0.05 level.
Tables 8.2-8.4 show the relationship between domestic customer orientation and
domestic performance, between domestic competitor orientation and domestic
performance, and between domestic inter-functional coordination and domestic
performance. The results of these independent variables are similar to that of domestic
market orientation, except for domestic competitor orientation. It is found that there
are significant relationships between domestic customer orientation and domestic
performance (β = 0.278, p = 0.004) and between domestic inter-functional
coordination and domestic performance (β = 0.212, p = 0.022), when domestic
performance is measured by a 7-item scale (composite measure). However, the results
indicate a non-significant relationship between domestic competitor orientation and
domestic performance (β = 0.144, p = 0.086).
191
Table 8.1:
Relationship between Domestic Market Orientation and Domestic
Performance
Independent
Variable
Domestic
Market
Orientation
Dependent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
Domestic Performance
(7-item scale)
0.211
2.079
0.020
0.132
1.288
0.100
Customer Satisfaction
(2-item scale)
0.320
3.255
0.001
Overall Performance
(single item scale)
0.191
1.872
0.032
0.023
0.219
0.413
Relative Sales Growth
(single item scale)
0.067
0.649
0.259
Relative ROA
(single item scale)
0.194
1.896
0.030
-0.010
-0.097
0.461
Customer Retention
(single item scale)
0.316
3.212
0.001
Word of Mouth
(single item scale)
0.211
2.085
0.020
Domestic Sales Growth
(objective measure)
0.006
0.062
0.475
Domestic Financial
Performance
(4-item scale)
Relative Overall
Performance
(single item scale)
Success of New
Services
(single item scale)
192
All domestic market orientation componentsdomestic customer orientation,
domestic competitor orientation, and domestic inter-functional coordinationshow
significant relationships with customer satisfaction.
On the other hand, the results between the three components of market orientation and
financial performance are fragmented. Whilst the results do not suggest relationships
between domestic customer orientation (β = 0.024, p = 0.406), domestic competitor
orientation (β = 0.107, p = 0.150), and financial performance, they do show a
significant relationship between domestic inter-functional coordination and financial
performance (β = 0.194, p = 0.029).
The results also indicate that there is no significant relationship between all three
components of domestic market orientation and domestic sales growth (objective
measure).
For a single item measure of business performance, only customer retention is found
to have a significant relationship with all predictor variables. Word of mouth is found
to have a significant relationship with customer orientation, inter-functional
coordination but not with competitor orientation. Competitor orientation also has a
significant relationship with overall performance and relative sales growth, whilst
inter-functional coordination shows a significant relationship with overall
performance, relative sales growth and relative ROA.
Although overall model fit for each simple regression equation is significant, with the
F statistic at the 0.05 level, it is observed that the predictor variablesdomestic
customer orientation, domestic competitor orientation, and domestic inter-functional
coordinationexplain only 1-9 per cent of the total variation (adjusted R2 = 1-9 per
cent).
The patterns of the relationship between market orientation including its components
and business performance in domestic market are similar to those of export market.
193
Table 8.2:
Relationship between Domestic Customer Orientation and
Domestic Performance
Independent
Variable
Domestic
Customer
Orientation
Dependent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
Domestic Performance
(7-item scale)
0.278
2.728
0.004
Domestic Financial
Performance
(4-item scale)
0.024
0.232
0.406
Domestic Customer
Satisfaction
(2-item scale)
0.255
2.541
0.007
0.038
0.370
0.356
0.026
0.247
0.403
-0.081
-0.783
0.212
0.129
0.107
0.107
-0.025
-0.235
0.407
Customer Retention
(single item scale)
0.204
2.008
0.024
Word of Mouth
(single item scale)
0.216
2.132
0.018
-0.013
-0.124
0.451
Overall Performance
(single item scale)
Relative Overall
Performance
(single item scale)
Relative Sales Growth
(single item scale)
Relative ROA
(single item scale)
Success of New
Services
(single item scale)
Domestic Sales
Growth
(objective measure)
194
Table 8.3:
Relationship between Domestic Competitor Orientation and
Domestic Performance
Independent
Variable
Domestic
Competitor
Orientation
Dependent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
Domestic Performance
(7-item scale)
0.144
1.377
0.086
Domestic Financial
Performance
(4-item scale)
0.107
1.040
0.150
Domestic Customer
Satisfaction
(2-item scale)
0.256
2.553
0.006
0.208
2.052
0.021
-0.073
0.242
0.242
Relative Sales Growth
(single item scale)
0.194
1.905
0.030
Relative ROA
(single item scale)
0.126
1.221
0.112
0.006
0.054
0.478
Customer Retention
(single item scale)
0.350
3.601
0.000
Word of Mouth
(single item scale)
0.155
1.516
0.066
Domestic Sales Growth
(objective measure)
-0.030
-0.290
0.386
Overall Performance
(single item scale)
Relative Overall
Performance
(single item scale)
Success of New
Services
(single item scale)
195
Table 8.4:
Relationship between Domestic Inter-functional Coordination and
Domestic Performance
Independent
Variable
Domestic Interfunctional
Coordination
Dependent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
0.212
2.044
0.022
Domestic Financial
Performance
(4-item scale)
0.194
1.909
0.029
Domestic Customer
Satisfaction
(2-item scale)
0.244
2.428
0.009
0.233
2.308
0.011
0.184
1.806
0.037
Relative Sales Growth
(single item scale)
0.042
0.408
0.342
Relative ROA
(single item scale)
0.212
2.081
0.020
0.047
0.450
0.327
Customer Retention
(single item scale)
0.212
2.093
0.019
Word of Mouth
(single item scale)
0.190
1.869
0.032
0.070
0.669
0.252
Domestic
Performance
(7-item scale)
Overall Performance
(single item scale)
Relative Overall
Performance
(single item scale)
Success of New
Services
(single item scale)
Domestic Sales
Growth
(objective measure)
196
8.2.4
Conclusion
•= Hypotheses D1, D1a, D1c are supported.
•= Hypotheses D 2a, D2b are not supported and not significant
•= Hypotheses D1b, D2, D2c are supported but not significant.
8.3 The Antecedents to Domestic Market Orientation
8.3.1 Hypotheses (Antecedents to Domestic Market Orientation)
The level of domestic market orientation increases when:
Hypothesis D6:
top management emphasis on being market oriented increases.
Hypothesis D7:
top management risk aversion decreases.
Hypothesis D8:
interdepartmental conflict decreases.
Hypothesis D9:
interdepartmental connectedness increases.
Hypothesis D10:
formalisation decreases.
Hypothesis D11:
centralisation decreases.
Hypothesis D12:
reliance on market-based reward systems increases.
From the above hypotheses, the expected sign of the relationship between domestic
market orientation and antecedents are summarised in Table 8.5.
197
Table 8.5: Priori Expectations: Summary of Antecedents
Independent
Variables
Domestic
Market
Orientation
Domestic
Customer
Orientation
Domestic
Competitor
Orientation
Domestic
Interfunctional
Coordination
Positive
Positive
Positive
Positive
Negative
Negative
Negative
Negative
Negative
Negative
Negative
Negative
Connectedness
Positive
Positive
Positive
Positive
Formalisation
Negative
Negative
Negative
Negative
Centralisation
Negative
Negative
Negative
Negative
Reward Systems
Positive
Positive
Positive
Positive
Top Management
Emphasis
Top Management
Risk Aversion
Interdepartmental
Conflict
Interdepartmental
8.3.2
Regression Equation
The hypotheses in 8.3.1 are expressed by the following equation.
198
DMO = α + β 1*TME + β 2*MRA + β 3*ICF + β 4*ICN + β 5*FM +
β 6*CS + β 7*RS + ei
Where, DMO =
8.3.3
Domestic Market Orientation
TME =
Top Management Emphasis
MRA =
Top Management Risk Aversion
ICF
=
Interdepartmental Conflict
ICN
=
Interdepartmental Connectedness
FM
=
Formalisation
CS
=
Centralisation
RS
=
Reward Systems
Empirical Results
The regression results are shown in Table 8.6. The regression explains 28.1 per cent
of the variance in domestic market orientation. It is also highly significant, with the F
statistic significant at the 0.001 level.
The results indicate that three of seven hypothesised antecedents have a significant
relationship with domestic market orientation. Top management emphasis on being
market oriented (β = 0.333, p = 0.000) is highly significant (p < 0.001). Centralisation
(β = -0.246, p = 0.005) and reward systems (β = 0.252, p = 0.006) are significant (p <
.01).
Results in Table 8.6 also suggest that four of seven antecedent variablestop
management emphasis on being market oriented, interdepartmental connectedness,
centralisation, and reward systemsshow signs in the expected direction (see Table
8.5 for signs). On the other hand, the other three hypothesised antecedent
variablestop
management
risk
aversion,
interdepartmental
conflict
and
formalisationshow relationships in the opposite direction. However, the low
standardised regression coefficient beta of these variables (MRA (β = -0.033), ICF (β
= 0.154), FM (β = 0.125)) suggests that the dependent variable (domestic market
199
orientation) is insensitive to the degree of top management risk aversion, conflict and
formalisation.
Table 8.6: Antecedents to Domestic Market Orientation
Dependent
Variable
Domestic Market
Orientation
Independent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
0.333
3.596
0.000
Top Management
Risk Aversion
0.033
0.337
0.368
Interdepartmental
Conflict
0.154
1.527
0.065
Interdepartmental
Connectedness
0.012
0.121
0.452
Formalisation
0.125
1.364
0.088
Centralisation
-0.246
-2.600
0.005
Reward Systems
0.252
2.573
0.006
Top Management
Emphasis
Adjusted R2 = 28.1 per cent
8.3.4
Conclusion
•= Hypotheses D 6, D11 and D12 are supported.
•= Hypothesis D9 is supported but not significant.
•= Hypotheses D7, D8 and D10 are not supported and not significant.
200
8.3.5 Hypotheses (Antecedents to Domestic Customer Orientation)
The level of domestic customer orientation increases when:
Hypothesis D6a:
top management emphasis on being market oriented increases.
Hypothesis D7a:
top management risk aversion decreases.
Hypothesis D8a:
interdepartmental conflict decreases.
Hypothesis D9a:
interdepartmental connectedness increases.
Hypothesis D10a:
formalisation decreases.
Hypothesis D11a:
centralisation decreases.
Hypothesis D12a:
reliance on market-based reward systems increases.
8.3.6
Regression Equation
The above hypotheses are expressed by the following equation.
DO_CUST
= α+ β 1* TME + β 2* MRA + β 3*ICF + β 4*ICN +β
β 5*FM +
β 6*CS + β 7*RS + ei
Where, DO_CUST
=
Domestic Customer Orientation
TME
=
Top Management Emphasis
MRA =
Top Management Risk Aversion
ICF
=
Interdepartmental Conflict
ICN
=
Interdepartmental Connectedness
FM
=
Formalisation
CS
=
Centralisation
RS
=
Reward Systems
201
8.3.7
Empirical Results
The regression results are shown in Table 8.7. The regression explains 28.1 per cent
of the variance in domestic customer orientation. It is also highly significant, with the
F statistic significant at the 0.001 level.
According to the results, four of seven variables can be considered antecedents to
domestic customer orientation. Table 8.7 shows that top management emphasis on
being market oriented (β = 0.280, p = 0.001) and formalisation (β = 0.285, p = 0.001)
are highly significant. Centralisation (β = -0.272, p = 0.002) and reward systems (β =
0.202, p = 0.021) are significant.
The results in Table 8.7 also indicate that only three out of seven antecedent
variablestop management emphasis on being market oriented, centralisation, and
reward systemsshow signs in an expected direction.
On the other hand, the other four variablestop management risk aversion,
interdepartmental conflict, interdepartmental connectedness and formalisationshow
relationships in the opposite direction. However, the three predictor variables (top
management risk aversion (β = 0.083, p = 0.204); interdepartmental conflict (β =
0.122, p = 0.116), and interdepartmental connectedness (β = -0.004, p = 0.483)) do
not have a significant relationship with the dependent variable (domestic customer
orientation). The exception is formalisation, which shows the relationship in the
opposite direction at the highly significant level (β = 0.285, p = 0.001).
202
Table 8.7: Antecedents to Domestic Customer Orientation
Dependent
Variable
Domestic
Customer
Orientation
Independent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
Top Management
Emphasis
0.280
3.013
0.001
Top Management
Risk Aversion
0.083
0.830
0.204
Interdepartmental
Conflict
0.122
1.203
0.116
Interdepartmental
Connectedness
-0.004
-0.042
0.483
Formalisation
0.285
3.100
0.001
Centralisation
-0.272
-2.858
0.002
Reward Systems
0.202
2.049
0.021
Adjusted R2 = 28.1 per cent
8.3.8
Conclusion
•= Hypotheses D6a, D11a and D12a are supported.
•= Hypotheses D7a, D8a and D9a are not supported and not significant.
•= Hypothesis D10a is not supported but significant.
203
8.3.9 Hypotheses (Antecedents to Domestic Competitor Orientation)
The level of domestic competitor orientation increases when:
Hypothesis D6b:
top management emphasis on being market oriented increases.
Hypothesis D7b:
top management risk aversion decreases.
Hypothesis D8b:
interdepartmental conflict decreases.
Hypothesis D9b:
interdepartmental connectedness increases.
Hypothesis D10b:
formalisation decreases.
Hypothesis D11b:
centralisation decreases.
Hypothesis D12b:
reliance on market-based reward systems increases.
8.3.10 Regression Equation
The above hypotheses are expressed as follows.
DO_COMP =
α + β 1* TME + β 2* MRA + β 3*ICF + β 4*ICN +
β 5*FM + β 6*CS + β 7*RS + ei
Where, DO_COMP
=
Domestic Competitor Orientation
TME
=
Top Management Emphasis
MRA
=
Top Management Risk Aversion
ICF
=
Interdepartmental Conflict
ICN
=
Interdepartmental Connectedness
FM
=
Formalisation
CS
=
Centralisation
RS
=
Reward Systems
204
8.3.11 Empirical Results
The regression results of the above equation are shown in Table 8.8. The regression
explains only 12.3 per cent of the variance in domestic competitor orientation.
However, the model is significant, with the F statistic significant at the 0.01 level. (p
= 0.008).
The results indicate that top management emphasis on being market oriented (β =
0.276, p = 0.004), centralisation (β = -0.190, p = 0.036), and reward systems (β =
0.201, p = 0.033) are significant (p < 0.05).
Results in table 8.8 also indicate that four of seven variablestop management
emphasis on being market oriented, formalisation, centralisation, and reward
systemsappear with expected signs.
On the other hand, the other three variablestop management risk aversion,
interdepartmental
conflict,
and
interdepartmental
connectednessexhibit
the
relationship in the opposite direction. The low standardised regression coefficient beta
of the three variables [MRA (β = 0.030), ICF (β = 0.080), and ICN (β = -0.103)]
suggests that the dependent variable (domestic competitor orientation) is insensitive to
the degree of top management risk aversion, interdepartmental conflict, and
interdepartmental connectedness.
205
Table 8.8: Antecedents to Domestic Competitor Orientation
Dependent
Variable
Domestic
Competitor
Orientation
Independent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
0.276
2.700
0.004
Top Management
Risk Aversion
0.030
0.270
0.394
Interdepartmental
Conflict
0.080
0.721
0.236
Interdepartmental
Connectedness
-0.103
-0.951
0.172
Formalisation
-0.013
-0.133
0.447
Centralisation
-0.190
-1.821
0.036
Reward Systems
0.201
1.857
0.033
Top Management
Emphasis
Adjusted R2 = 12.3 per cent
8.3.12 Conclusion
•= Hypotheses D6b, D11b and D12b are supported.
•= Hypotheses D7b, D8b and D9b are not supported and not significant.
•= Hypothesis D10b is supported but not significant.
206
8.3.13 Hypotheses (Antecedents to Domestic Inter-functional Coordination)
The level of domestic inter-functional coordination increases when:
Hypothesis D6c:
top management emphasis on being market oriented
increases.
Hypothesis D7c:
top management risk aversion decreases.
Hypothesis D8c:
interdepartmental conflict decreases.
Hypothesis D9c:
interdepartmental connectedness increases.
Hypothesis D10c:
formalisation decreases.
Hypothesis D11c:
centralisation decreases.
Hypothesis D12c:
reliance on market-based reward systems increases.
8.3.14 Regression Equation
The above hypotheses are expressed as follow.
DO_INT
=
α + β 1* TME + β 2* MRA + β 3*ICF + β 4*ICN +
β 5*FM + β 6*CS + β 7*RS + ei
Where, DO_INT
=
Domestic Inter-functional Coordination
TME
=
Top Management Emphasis
MRA
=
Top Management Risk Aversion
ICF
=
Interdepartmental Conflict
ICN
=
Interdepartmental Connectedness
FM
=
Formalisation
CS
=
Centralisation
RS
=
Reward Systems
207
8.3.15 Empirical Results
The regression results from the above equation are shown in Table 8.9. The regression
explains 16.9 per cent of the variance in domestic inter-functional coordination. It is
also highly significant with the F statistic significant at the 0.001 level.
The results indicate that top management emphasis on being market oriented (β =
0.242, p = 0.008) and interdepartmental conflict (β = 0.226, p = 0.021) are significant
(p < 0.05).
Results in Table 8.9 suggest that only three variablestop management emphasis on
being market oriented, centralisation, and reward systemshave the expected signs.
In contrast, the other four variablestop management risk aversion, interdepartmental
conflict, interdepartmental connectedness and formalisationshow relationships in
the opposite direction. The low standardised regression coefficient beta of the three
variables (MRA (β = 0.031), ICN (β = 0.099), and FM (β = 0.086)) suggests that the
dependent variable (domestic inter-functional coordination) is insensitive to the
degree of top management risk aversion, interdepartmental connectedness and
formalisation. The exception is interdepartmental conflict, which shows a significant
relationship in the opposite direction (p<0.05).
208
Table 8.9: Antecedents to Domestic Inter-functional Coordination
Dependent
Variable
Domestic Interfunctional
Coordination
Independent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
Top Management
Emphasis
0.242
2.423
0.008
Top Management
Risk Aversion
0.031
0.287
0.387
Interdepartmental
Conflict
0.226
2.068
0.021
Interdepartmental
Connectedness
0.099
0.935
0.176
Formalisation
0.086
0.872
0.193
Centralisation
-0.161
-1.579
0.059
Reward Systems
0.130
1.231
0.110
Adjusted R2 = 16.9 per cent
8.3.16 Conclusion
•= Hypotheses D6c is supported.
•= Hypotheses D7c and D10c are not supported and not significant.
•= Hypotheses D9c, D11c and D12c are supported but not significant.
•= Hypothesis D8c is not supported but significant
209
8.3.17 Summary of Antecedents
Table 8.10 presents a summary of antecedents to domestic market orientation,
domestic customer orientation, domestic competitor orientation, and domestic interfunctional coordination.
Only top management emphasis on being market oriented is statistically significant
across four dependent variables. On the other hand, two other predictor variables, top
management risk aversion and interdepartmental connectedness, are not statistically
significant across four dependent variables.
The results also indicate that centralisation has negative relationships with all except
inter-functional coordination, while interdepartmental conflict has a significant
relationship only with domestic inter-functional coordination.
Formalisation has a positive significant relationship only with domestic customer
orientation. Reward systems, on the other hand, have a highly positive significant
relationship with all except domestic inter-functional coordination.
210
Table 8.10: Summary of Antecedents to Domestic Market Orientation:
Standardised Regression Coefficients (β
β)
Dependent Variables
Domestic
Customer
Orientation
Domestic
Competitor
Orientation
0.333***
0.280***
0.276**
0.242**
Top Management Risk
Aversion
NS
NS
NS
NS
Interdepartmental Conflict
NS
NS
NS
0.226*
Interdepartmental
Connectedness
NS
NS
NS
NS
Formalisation
NS
0.285***
NS
NS
Centralisation
-0.246**
-0.272**
-0.190*
NS
Reward Systems
0.252**
0.202*
0.201*
NS
28.1
28.1
12.3
16.9
Independent Variables
Top Management
Emphasis
Adjusted R2
(per cent)
Domestic
Market
Orientation
Domestic
Interfunctional
Coordination
*p < 0.05; **p < 0.01; ***p < 0.001; NS = Not Significant.
211
8.3.18 Comparison with Previous Researches and Those of Export Market
Table 8.11 presents the comparison of regression results between this study and those
of Jaworski and Kohli (1993). As mentioned in the previous chapter, the first two
antecedent variables—management commitment to export operations, and future
export’s profit and growth—are new variables introduced in this study and pertaining
to export markets only. Of the two new variables, management commitment to export
operations shows a highly significant level.
Of the other seven sets of antecedents in domestic market, five variables from this
study show similar results to those of Jaworski and Kohli (1993). Top management
emphasis on being market oriented, and market-based reward systems are significant
in both studies. Centralisation is significant in this study and partially significant in
Jaworski and Kohli’s study. In addition, top management risk aversion and
formalisation are not significant in either study.
On the other hand, interdepartmental connectedness and interdepartmental conflict are
not significant in this study but are significant in both of Jaworski and Kohli’s
samples.
Table 8.11 also reveals that all antecedents to domestic market show similar results to
those of export market. Top management emphasis on being market oriented,
centralisation, and reward systems are significant in both markets. Top management
risk aversion, interdepartmental conflict and interdepartmental connectedness are not
significant in both markets.
212
Table 8.11: Antecedents to Market Orientation: Comparison of Regression
Results
Jaworski and Kohli
Current Study
Variables
Sample I
Sample II
Domestic
Export
Management Commitment
to Export Operations
NA
NA
NA
0.36***
Future Exports’ Profit and
Growth
NA
NA
NA
NS
.24***
.24***
0.33***
0.31***
NS
NS
NS
NS
Interdepartmental Conflict
-.17*
-2.8***
NS
NS
Interdepartmental
Connectedness
.20**
.22**
NS
NS
Formalisation
NS
NS
NS
NS
Centralisation
-.22**
NS
-0.25**
-0.19**
Reward Systems
.30***
.31***
0.25**
0.27**
63
58
28
40
Top Management
Emphasis
Top Management Risk
Aversion
Adjusted R2
(per cent)
*p < 0.05; **p < 0.01; ***p < 0.001; NA = Not Applicable; NS = Not Significant.
213
8.4 The Moderator Effect in the Relationship between Domestic Market
Orientation and Domestic Performance
8.4.1 Hypotheses (Moderators)
Hypothesis D13.1:
The greater the domestic market turbulence, the
stronger the relationship between domestic market
orientation and domestic performance.
Hypothesis D13.2:
The greater the domestic competitive intensity, the
stronger the relationship between domestic market
orientation and domestic performance.
Hypothesis D13.3:
The greater the domestic technological turbulence,
the weaker the relationship between domestic market
orientation and domestic performance.
Hypothesis D13.4:
The greater the domestic buyer power, the stronger
the relationship between domestic market orientation
and domestic performance.
8.4.2
Regression Equation
The above hypotheses are expressed below.
α + β 1 DMO + β 2 DMT + β 3 DCI+ β 4 DTT + β 5 DBP
Y =
+ β 6 DMO * DMT + β 7 DMO * DCI + β 8 DMO *
DTT + β 9 DMO * DBP + ei
Where;
Y
=
Domestic Performance
DMO =
Domestic Market Orientation
DMT =
Domestic Market Turbulence
DCI
=
Domestic Competitive Intensity
DTT
=
Domestic Technological Turbulence
DBP
=
Domestic Buyer Power
214
DMO*DMT
=
Multiplicative Interaction Term of Domestic Market
Turbulence
DMO*DCI
=
Multiplicative Interaction Term of Domestic
Competitive Intensity
DMO*DTT
=
Multiplicative Interaction Term of Domestic
Technological Turbulence
DMO*DBP
=
Multiplicative Interaction Term of Domestic Buyer Power
If β5, β6, β7, β8, β9 in the above model are significant, then that moderator is
considered to moderate the relationship between domestic market orientation and
domestic performance.
Framework for identifying moderator variables
The framework for identifying moderator variables is explained in Chapter Seven
(Section 7.4.2).
8.4.3
Empirical Results
Step one:
Table 8.12 shows the overall results of the test. The independent variables in domestic
market explain only 8.9 per cent of the variation compared to 18 per cent in export
market. The analysis of the main effects shows that no variable is significant (at the
significant level p< 0.05). However, for the interaction effect, the results indicate
that the multiplicative interaction term of domestic competitive intensity and
domestic performance (DMO*DCI) is significant (β
β = 2.170, p = 0.047).
215
Table 8.12: The Relationship between Domestic Performance, Domestic Market
Orientation and Environmental Moderators
Dependent
Variable
Independent
Variables
Standardised
Coefficient
Beta
T Value
Significance
(One Tail)
-0.360
-0.548
0.280
0.214
0.465
0.321
-1.481
-1.578
0.059
0.457
0.492
0.312
Power (DBP)
-0.327
-2.92
0.385
DMO*DMT
-0.618
-1.007
0.158
DMO*DCI
2.170
1.691
0.047
DMO*DTT
-0.299
-0.296
0.384
DMO*DBP
0.045
0.033
0.486
Domestic
Domestic Market
Performance
Orientation (DMO)
Domestic Market
Turbulence (DMT)
Domestic
Competitive
Intensity (DCI)
Domestic
Technological
Turbulence (DTT)
Domestic Buyer
Adjusted R2 = 8.9 per cent
Step Two:
To check whether competitive intensity is a pure or quasi moderator, a Pearson
correlation was run to determine whether competitive intensity was related to the
criterion variable. If it is, then it is a quasi moderator variable. If not, it is a pure
moderator (Sharma et al 1981). Results from Table 8.13 show that competitive
intensity is not related to domestic performance (criterion variable). Therefore,
domestic competitive intensity is a pure moderator. At this stage, we can conclude
that domestic competitive intensity moderates the relationship between domestic
market orientation and domestic performance.
216
Step Three:
For those hypothesised moderator variables (market turbulence, technological
turbulence, and buyer power) which their interaction terms are not significant, Sharma
et al (1981) recommend checking to see whether these hypothesised moderator
variables are related to the criterion (domestic performance) or the predictor (domestic
market orientation) variables.
Results from Table 8.13 show that domestic market turbulence is related to predictor
variable (domestic market orientation). Therefore, it can be concluded that domestic
market turbulence is not a moderator. However, the results also indicate that there
are no significant relationships between other moderator variables (domestic
technological turbulence, domestic buyer power) and the predictor (domestic market
orientation) or the criterion (domestic performance) variables. We then proceed to
Step 4 for further analysis.
Table 8.13: Pearson Correlations of the Relationship between Domestic Market
Orientation, Domestic Performance, and Environmental
Moderators
DP
DMO
DMT
DCI
DTT
DBP
DMT
r =-0.009
(0.46)
r =0.296
(0.00)
r=1.000
-
r=0.242
(0.01)
r=0.248
(0.00)
r= -0.141
(0.08)
DCI
r=0.034
(0.37)
r=0.259
(0.00)
r=0.242
(0.01)
r=1.000
-
r=0.182
(0.04)
r=0.454
(0.00)
DTT
r=0.091
(0.19)
r= -0.052
(0.31)
r=0.248
(0.00)
r=0.182
(0.04)
r=1.000
-
r= 0.087
(0.20)
DBP
r= -0.127
(0.19)
r= 0.800
(0.22)
r=-0.141
(0.08)
r=0.454
(0.00)
r= 0.087
(0.34)
r=1.000
-
Note: DP
= Domestic Performance
DMO = Domestic Market Orientation
217
DMT
DCI
DTT
DBP
Step Four:
= Domestic Market Turbulence
= Domestic Competitive Intensity
= Domestic Technological Turbulence
= Domestic Buyer Power
Subgroup Analysis: Test for Homologizer
Sharma et al (1981) argued that there is a type of moderator called a homologizer.
This type of moderator influences the strength of a relationship but it will not interact
with the predictor variable and is not significantly related to either the predictor or
criterion variables (Sharma et al 1981:292).
To test for a homologizer, Zedeck (1971) recommended splitting the sample into
homogeneous subgroup analysis (for example, high market turbulence and low market
turbulence). By doing this, the predictive efficacy of the model for the specific
subgroups should be increased.
Homologizer effects in this study were tested by first splitting the sample into halves
(for example, high and low domestic market turbulence, high and low domestic
competitive intensity, etc) based on a ranking procedure in the SPSS program. Cases
were ranked as being above or below the median of each hypothesised moderator
variable. For example, the high domestic buyer power group is cases, which are above
the median of domestic buyer power and vice versa for the low domestic market
orientation group.
Secondly, correlation analyses were run between subgroups of each moderator.
Thirdly, Fisher’s Z transformation was used to test the significance between
correlation coefficients for subgroups. The test procedure in Fisher’s transformation
uses the formula below:
Z
=
Z r1 - Z r2
√ N1/3 + N2/3
218
Domestic Technological Turbulence
r1 = 0.286
Z1 = 0.29857
N1 = 53
r2 = 0.169
Z2 = 0.17167
N2 = 40
Z
=
Z1 - Z2
√ N1/3 + N2/3
=
0.29857 – 0.17167
0.2168
Z
=
0.5853
Since Z (0.05) = 1.65 (one-tailed test), it is concluded that there is no difference
between the two groups of domestic technological turbulence. Thus, there is no
homologizer effect for domestic technological turbulence.
Domestic Buyer Power
r1 = 0.284
Z1 = 0.28768
N1 = 54
r2 = 0.107
Z2 = 0.11045
N2 = 39
Z
=
Z1 - Z2
√ N1/3 + N2/3
219
Z
=
0.28768 – 0.11045
0.2177
Z
=
0.8141
Since Z (0.05) = 1.65 (one-tailed test), it is concluded that there is no difference
between the two groups of domestic buyer power. Therefore, there is no
homologizer effect for this moderator variable.
8.4.4
Conclusion
•= Hypothesis D 4.2 is supported.
•= Hypotheses D 4.1 is not supported and not significant.
•= Hypothesis D 4.3 and D 4.4 are supported but not significant.
8.5 Chapter Summary
This chapter has presented the empirical results and tested hypotheses pertaining to
domestic market. A summary of the key findings is presented below:
1. There are significant and positive relationships between domestic market
orientation and domestic performance; between domestic customer orientation and
domestic performance; and between domestic inter-functional coordination and
domestic performance if domestic performance is measured by subjective
measures. Surprisingly, we do not find a significant relationship between domestic
competitor orientation and domestic performance. In addition, there is no
significant relationships between domestic market orientation (including its
components) and domestic sales growth (objective measures).
220
2. For antecedents to domestic market orientation, only top management emphasis
on being market oriented is found to have a significant relationship with domestic
market orientation and all its components (domestic customer orientation,
domestic competitor orientation, and domestic inter-functional coordination).
Market-based reward systems and centralisation are antecedents to all except
domestic inter-functional coordination.
3. Formalisation is an antecedent to only domestic customer orientation, while,
interdepartmental conflict is an antecedent to domestic inter-functional
coordination only.
4. Top management risk aversion and interdepartmental connectedness, on the other
hand, are not found to be antecedents to domestic market orientation, domestic
customer orientation, domestic competitor orientation, and domestic interfunctional coordination.
5. As far as moderators are concerned, this study found only one moderator:
domestic competitive intensity. A higher domestic competitor intensity will lead
to a stronger relationship between domestic market orientation and domestic
performance.
6. Domestic market turbulence, domestic technological turbulence, and domestic
buyer power have no impact on the relationship between domestic market
orientation and domestic performance.
The next chapter discusses the findings, limitations of this study, and future research
directions.
221
Chapter Nine
Discussion
9.1
Objectives and Structure of the Chapter
The previous chapters (Chapter 7 and 8) reported on the empirical results of both
export and domestic markets. The aims of this chapter are to discuss research findings
and the limitations of this study.
The chapter begins with a discussion on the consequences of market orientation,
which includes the market orientation-business performance relationship, and the
market orientation-decision to modify marketing strategies in foreign markets
relationship. This is followed by a review on moderators of the market orientationperformance relationship and antecedents to market orientation. The chapter
concludes with the limitations and recommendations for future research.
9.2
Consequences of Market Orientation
Market Orientation and Business Performance
The reason why market orientation has received a great deal of attention from many
researchers in the past decade is because it is believed that being market oriented can
provide a solid foundation for a sustainable competitive advantage for a company
(Narver and Slater 1990; Hunt and Morgan 1995). The concept of a sustainable
competitive advantage provides a strong base for expectation that market orientation
can offer a firm the ability to outperform its competitors and enhance its business
performance in the long run (Pelham and Wilson 1996; Hunt and Morgan 1995). In
this study, we hypothesise that business performance increases when the degree of
market orientation increases.
As hypothesised, market orientation has significant and positive effects on the overall
business performance in both domestic and export markets. The results of this study
imply that long-term competitive advantage and superior performance can be
222
achieved by being equipped to respond to market needs and anticipate future needs
(Day 1994). The impact of market orientation on business performance in the Thai
sample is consistent with many studies including Narver and Slater (1990), Ruekert
(1992), Jaworski and Kohli (1993), Slater and Narver (1994), Pitt, Caruana, and
Berthon (1996), Deshpande and Farley (1999), and Kwon and Hu (2000).
It is interesting to note that the levels of both export and domestic market orientation
in the Thai survey seem to have no effect on financial outcomes of performance.
These findings are in line with the study done by Balabanis, Stables and Phillips
(1997) that stated that the efforts to develop a market orientation take some time to
yield rewards. Balabanis et al (1997) studied 58 British charity organisations. Using a
longitudinal study, they found that the level of present market orientation of an
organisation has no impact on the charities’ performance, but that past market
orientation affects the charities’ performance. The authors argued that there is a lag
effect between market orientation and performance. This may also be the case for
Thai firms as well.
Using a cross-sectional study it is sometimes hard to capture the financial outcome of
market orientation. Many studies reported a non-significant relationship between
market orientation and financial performance (ROA, ROI, sales growth). Those
studies include Appiah-Adu (1998) and Greenley (1995), while Diamantopoulos and
Hart (1993) revealed a weak association between market orientation-relative sales
growth and relative profit margin. In addition, this survey was conducted during a
financial and economic crisis in Thailand. The business atmosphere at that time was
pessimistic. Firms struggled to survive, let alone expected high sales growth and high
profit. Therefore, it is not surprising to see the non-significance in the relationship
between market orientation and financial performance of both export and domestic
markets.
Using only financial performance to represent business performance can be
misleading. For example, ROA (return on assets) measures the ability of a firm to
utilise assets. Market-oriented firms may do well in terms of bringing revenues due to
customer retention (customers keep coming to buy products or services) but the same
firm may not manage ‘the cost of operations’ well. This can result in low ROA.
223
Furthermore, the results in this research do not suggest any relationship between
export market orientation and objective measures of performance such as export sales
growth and the export intensity of Thai companies. Export intensity (the ratio between
export sales and total sales) is one of the most popular performance measures in the
export performance literature. However, it could be argued that export intensity may
be a faulty representation of export performance. Firstly, the export intensity measure
implies that firms which export more than they sell locally have a higher performance
than those who sell more in the local market than in foreign markets. For example, by
definition the export intensity index suggests that firms whose total sales are derived
entirely from exports are better performers than firms that export only, say, 50 per
cent of their total sales. This judgment, however, may not be fair. It is possible that
one firm may have enjoyed a rapid increase in sales in both markets, whereas another
firm may have higher export intensity but not perform particularly well in export
markets. Secondly, export intensity tells us more in fact about commitment than
performance per se. By linking higher export market orientation with greater export
intensity, the assumption is that as export market orientation increases, export
intensity increases. However, this may not necessarily be the case. Therefore, the
relationship between the level of market orientation and export intensity has to be
treated with some caution.
Absolute sales growth (objective measure) is another popular performance measure in
the export performance literature. However, most researchers in the market
orientation literature prefer subjective to objective measures. They often use relative
sales growth instead of absolute sales growth. Jaworki and Kohli (1993) used both
subjective and objective measures in their study, but received unreliable responses to
the objective measures. In addition while their results did not capture the relationship
between market orientation and objective measures of performance such as market
share and ROE (return on equity), their results showed a highly significant
relationship between market orientation and overall performance (subjective
measure). Greenley (1995) also reported a non-significant relationship between
market orientation and absolute sales growth. Likewise, the results from this study
show no support for the relationship between market orientation and sales growth
(objective measures) in both domestic and export markets.
224
However, in this survey it is found that market orientation has a significant impact on
customer retention and word of mouth. This finding is consistent with other studies
(Kohli and Jaworski 1990; Siguaw et al 1994; Kumar et al 1998) which argued that a
market orientation leads to satisfied customers who spread positively to other
potential customers and who tend to keep coming back to the organisation. Being
market oriented, therefore, obviously helps to boost customer satisfaction. Customer
satisfaction, in turn, results in customer retention and word of mouth, for as Fornell
(1992) argued, customer satisfaction is evident by customer loyalty. Anderson,
Fornell and Lehmann (1994) also suggested that increasing customer satisfaction
though market-oriented activities can contribute to increases in a firm’s profitability.
This argument is supported by one of the respondents in Kohli and Jaworski’s study
(1990: 13) who stated that “customer satisfaction, positive word of mouth, repeat
business is enhanced. Customer retention is better for us, it is much less expensive”.
Similarly, Siguaw, Brown and Widing (1994) argued that the decision to adopt a
market orientation could be an economical one since it helps to reduce costs
associated with losing both employees and customers. In the long run, it is possible to
expect that past market orientation should result in a better future financial
performance.
One final note, however, care should be taken when interpreting the relationship
between market orientation-business performance due to the problem of low adjusted
R2. The results showed that market orientation, an independent variable, explains less
than 5 percent of total variation in business performance. In other words, the
implication is that the business performance of Thai firms is heavily influenced by
explanatory variables other than market orientation. The low adjusted R2 may be
partly due to low reliability and low variation in the response measure (Cohen and
Cohen 1981). This study used a five-point instead of a seven-point Likert scale, which
may cause a low variation in the response measure. Moreover, the reliabilities of most
scales in this study are generally lower than previous studies (see section 6.2 in
Chapter Six). It is interesting to note that most of the studies in Western countries
show a much higher adjusted R2 (e.g., 41 per cent in Narver and Slater (1990), 23 per
cent in Pitt et al (1996), 32 per cent in Pulendran (1996), and 36 per cent in Caruana,
Ramaseshan and Ewing (1999)).
225
Customer Orientation, Competitor Orientation, and Inter-functional Coordination
and Business Performance
Narver and Slater (1990) proposed that market orientation comprises three distinct
componentscustomer orientation, competitor orientation, and inter-functional
coordinationand argued that each component is equally important. However, when
factor analysis was performed in this study, the results suggested only one factor, not
three as expected. There are two different points of view concerning the market
orientation construct in the literature. The first group of researchers argued that
market orientation should be considered as one single construct (eg, Kumar et al
1998). Another group of researchers viewed market orientation as three different
components (eg, Han, Kim and Srivastava 1998; Lukas and Ferrell 2000). Despite
non-discriminant validity in this study, the regression analyses were performed to test
corollary hypotheses.
The findings indicated that these three independent variables (customer orientation,
competitor orientation and inter-functional coordination) have a significant
relationship with business performance. In fact, the results of these three components
are similar to those of market orientation overall, which shows positive and
significant relationships with overall performance (a combination of 7-item scale),
customer retention and word of mouth but not with financial performance and success
of new services or products.
This study confirms that the components of market orientationcustomer orientation,
competitor orientation, inter-functional coordinationbehave in the same way as the
major construct: market orientation. It can be concluded that being customer oriented,
competitor oriented and inter-functionally coordinated can enhance business
performance in both export and domestic markets.
Market Orientation and the Decision to Modify Marketing Strategies in Foreign
Markets
The issue of standardisation versus adaptation of marketing activities has been
debated since the mid-1960s (Buzzel 1968). However, this issue received much
226
attention when Professor Theodore Levitt published his controversial article on global
marketing (Levitt 1983). Levitt stirred the issue by predicting that global
standardisation was inevitable given the trends in consumer preferences and
production and marketing methods.
Supporters of standardisation argue that the world markets are approaching
homogeneity and therefore require standardised approaches to sourcing, production,
and marketing programs (Levitt 1983; Ohmae 1985). The benefits of standardisation
include cost saving through economies of scale, which create a competitive position
in the global market, and the creation of a consistent product image and positioning
worldwide (Tespstra 1987; Cavusgil, Zou and Naidu 1993; Shoham 1996).
On the other hand, a number of researchers have argued that there is a need to adapt
marketing strategies in foreign markets. The rationale behind this idea is that there are
differences among nations in terms of cultures, market development, political and
legal systems, and customer values (Cavusgil et al 1993). Hence, marketing programs
should be modified to fit the idiosyncrasies of different markets (Buzzell 1968; Wind
1986; Douglas and Wind 1987).
Nevertheless, the debate about standardisation and adaptation has recently reached the
general conclusion that to standardise or not to standardise is not really the issue.
Standardisation-adaptation should be viewed as a continuum rather than a dichotomy.
The key issues are to what extent should firms standardise and how to what degree
should they tailor their global marketing strategies (Porter 1986; Kotler 1986;
Douglas and Wind 1987). This contingency approach has been adopted by many
researchers who argue that while consumer needs might become more homogeneous,
a single universal marketing strategy is not feasible across all countries (Kotler 1986;
Wang 1996).
In short, the literature has often debated the extent to which firms should standardise
their marketing activities and explored the conditions in which standardisation or
adaptation is appropriate in foreign markets (Cavusgil, Zou, and Naidu 1993). Our
research, however, does not attempt to answer those questions. Rather, it addresses
what we believe is the more insightful question of how confident managers are when
227
deciding to implement marketing activities in other countries and what makes
managers gain confidence when dealing with this issue. Our interest is not in
determining whether standardisation or adaptation is appropriate. Our view is that the
more export market-oriented a firm is the better it will be able to make correct
decisions on adaptation and adaptation issues.
As hypothesised, the results in this study revealed a positive relationship between
being market oriented and the quality of the decision making regarding whether and
to what extent firms should customise their marketing strategies in other countries. In
other words, market-oriented activities (such as customer focus, competitor
orientation, and inter-functional coordination) help managers gain confidence in
applying suitable marketing strategies in other markets.
Market-oriented activities help firms to have a better understanding of both customers
and competitors and the knowledge about the market as a whole. Market-oriented
firms are the ones who know their customers and competitors well. Strategic decisionmaking is based on consultation with, and a concern for, clients. If firms continue to
stay close to their customers, it is likely that they can make a better decision in
implementing marketing strategies in any market (Kotler 1986; Avlonitis and
Gounaris 1999).
9.3
Environmental Moderators
The strategic management literature has long supported the concept that the external
environment plays a moderator role in the organisation-performance relationship (e.g.,
Hambrick 1983). Previous studies on the market orientation-performance relationship
have identified a number of variables that are likely to moderate this relationship (e.g.,
Kohi and Jaworski 1990; Greenley 1995; Kumar et al 1998). These variables include
market turbulence, competitive intensity, technological turbulence and buyer power.
In this study, we are interested to find out whether the market orientation-business
performance relationship is robust or depended on market environmental conditions.
The results for moderator effects in this study are discussed below.
228
Market Turbulence
Contrary to the hypothesis, market turbulence was not shown to be empirically
significant in both domestic and export markets. These findings are consistent with
the study done by Jaworski and Kohli (1993) who found that market turbulent has no
impact on the market orientation–business performance relationship. Kwon and Hu
(2000) studied the influence of moderators on the market orientation-export
performance relationship and concluded that the relationship between market
orientation-export performance remains significant regardless of market conditions,
market growth and competitive intensity.
The results of the moderated regression analysis in relation to market turbulence
contradict the results of Slater and Narver (1994), Greenley (1995), Pulendran (1996)
and Pulendran, Speed, and Widing (2000). Pulendran, Speed and Widing (2000)
argued that market turbulence strengthens the relationship between market orientation
and business performance. In other words, higher levels of market turbulence are
associated with a stronger relationship between market orientation and business
performance. Yet results from Slater and Narver’s (1994) and Greenley’s (1995)
findings suggested that the relationship between market orientation and business
performance is weakened in conditions of high market turbulence.
Technological Turbulence
Like market turbulence, technological turbulence was not found to be an empirically
significant moderator of the relationship between market orientation and business
performance in either export or domestic markets. These findings are consistent with
Jaworski and Kohli (1993:124) who found that the relationship between market
orientation and performance appears to be robust among contexts characterised by
varying levels of technological turbulence.
The results of Greenley (1995) and
Pulendran, Speed and Widing (2000) also add support to the finding that suggests that
this variable has no moderating effect.
229
In addition, the non-significance of this moderator variable in this study can be partly
explained by the nature of Thai exporting firms, of which the majority are not
technologically driven (see Table 2.7 in Chapter Two for industries participating in
this survey). Most of the firms responding to the survey were from agricultural
products (14 per cent), followed by food processing (13 per cent), plastics products
(10 per cent), and textile (8 per cent).
Buyer Power
This study hypothesised that buyer power weakens the relationship between market
orientation and business performance. However, the findings reveal that buyer power
does not moderate the market orientation-business performance relationship in either
the domestic or export markets. The results are consistent with Greenley (1995) who
found no support for this variable. Slater and Narver (1994) found limited support for
an environmental moderator effect (including buyer power) on the strength of the
market
orientation-performance
relationship.
Like
market
turbulence
and
technological turbulence, the non-significant results of buyer power in both markets
are not surprising.
The non-significance of these hypothesised moderatorsmarket turbulence,
technological
turbulence
and
buyer
powercan
be
partly
explained
by
methodological constraints. Firstly, the lack of support in this study may relate to
limited power of the statistical test due to small sample sizes (147 in the export
market and 97 in the domestic market). Secondly, the low reliabilities of the scales
(see Table 6.1 in Chapter 6) may also contribute to the non-significant relationships
between the hypothesised moderators of market orientation-business performance.
Many other researchers have found no support or limited support for moderator effect
on the strength of the market orientation-performance relationship. They have
accordingly suggested that firms should adopt market-oriented culture and create an
organisational climate to facilitate superior customer value regardless of the
environment in which they operate (Deshpande and Webster 1989; Jaworski and
Kohli 1993; Slater and Narver 1994). The results from this study confirm that the
relationships between market orientation and business performance in both domestic
230
and export markets do not depend on market turbulence, technological turbulence and
buyer power.
Competitive Intensity
Unlike other hypothesised moderator variables, competitive intensity shows mixed
results. Competitive intensity appears to influence the market orientation-business
performance link in the domestic market. The findings suggest that a high competitive
intensity will lead to a stronger relationship between domestic market orientation and
the domestic performance. However, the results from the export market do not reveal
the significance of this variable as a moderator.
A majority of previous studies found that competitive intensity does not moderate the
market orientation-business performance relationship (Jaworski and Kohli 1993;
Slater and Narver 1994; Greenley 1995; Kumar et al 1998; Pulendran, Speed and
Widing 2000; Kwon and Hu 2000). On the other hand, Appiah-Adu (1998) concluded
that market orientation seems to bring a greater positive influence on sales growth
when the competitive intensity levels are medium to high.
Pelham and Wilson (1996) argued that firms engaging in a hostile competitive
environment have two options. The first is to respond by placing more emphasis on
market-oriented activities and behaviours. The second is to respond by increasing
emphasis on cost-control system and price-cutting. Of the two, market orientation
offers a better source of sustainable competitive advantage. As Pelham and Wilson
(1996: 38) argue,
It is harder for managers to install market-oriented norms, compared to
cost-cutting norms. It is harder to understand the relationship between
market orientation and performance, compared to low-cost efforts.
Competitive pricing is a necessary condition for firm survival, but
emphasis on low prices does not offer the same firm a source of
sustainable competitive advantage because of the relative ease of copying
competitor’ price-oriented strategies (Pelham and Wilson 1996:38).
231
This is probably the reason why firms operating in an environment in which
competitive intensity is high tend to enjoy superior business performance if they are
more market-oriented. However, it is not entirely clear why competitive intensity only
moderates the market orientation-performance in the domestic market but not in the
export market. These results call for additional research to examine the impact of
competitive intensity on the relationship between market orientation and business
performance.
9.4
Antecedents to Market Orientation
This study examines the issues of what makes some firms more market-oriented than
others. Which factors act as catalysts and which act as deterrents to market-oriented
activities? We hypothesised nine variables as antecedents to export market orientation
and seven variables as antecedents to domestic market orientation. Those antecedents
are management commitment towards export operations, future exports’ profit and
growth, top management emphasis on being market oriented, risk aversion, conflict,
connectedness, centralisation, formalisation and reward systems. Antecedents to
domestic market orientation share the same variables as those of export market
orientation except the first two variables, management commitment towards export
operations and future exports’ profit and growth.
The results from this study indicate that four out of nine antecedents have significant
effects on the level of export market orientation among Thai firms. They are
management commitment towards export operations, top management emphasis on
being market oriented, centralisation, and market-based reward systems. Antecedents
to domestic market orientation are the same as those of the export market. The only
exception is management commitment towards export operation, which is not
applicable to the domestic market.
Management Commitment towards Export Operations
As hypothesised, management commitment towards export operations had positive
effects on export market orientation and its three components: export customer
orientation; export competitor orientation; export inter-functional coordination. These
232
results suggested that when management commit to export ventures they are more
likely to put effort as well as financial resources into understanding their customers,
keeping up with competitors, and coordinating internal functions to serve export
customers better. This finding lends support to the notion that substantial management
commitment makes it possible for a firm to vigorously pursue opportunities in the
export market through better understanding of the market environment (including
customers and competitors) which lead to better export performance.
Management Perceptions towards Export Profitability and Growth
Although hypothesised, management perceptions towards export profitability and
growth did not have significant impact on export market orientation and its
components except export inter-functional coordination.
An explanation for the non-significance of perceptions concerning future export
profitability and growth might relate to the economic conditions at the time of the
survey. The overall Thai economy experienced a sudden decline at a sharp rate from
1997. Thai exporters had problems competing with other low cost-oriented countries
like China and Vietnam. The national export growth for Thailand in 1995-6 was less
than 1 percent. Therefore, it is possible that management of export companies at the
time of this survey may have had a pessimistic view of their future export profit and
growth.
Secondly, by definition, market orientation is seen as a corporate culture which has a
set of shared values and beliefs in putting customers first in business planning
(Deshpande and Webster 1987). Although there is no evidence at this stage to prove
whether domestic market orientation occurs before export market orientation, one
may argue that if firms practice market-oriented activities domestically, they will
most likely do so for export markets as well. Pelham and Wilson (1996: 29) defined a
corporate culture as “the same pattern of beliefs and norms are shared throughout a
company”. It is noteworthy that the correlation analysis between export market
orientation and domestic market orientation in this study is very high. It is possible
that the level of export market orientation can be high regardless of future exports’
233
profit and growth. In other words, management perceptions of future exports’ profit
and growth may not act as a strong deterrent to export market-oriented activities.
Top Management Emphasis on being Market Orientation
As hypothesised, management emphasis on being market oriented was positively
related to market orientation and its three components in both export and domestic
markets. The results from this study are consistent with those of Jaworski and Kohli
(1993), Bhuian (1998), and Pulendran, Speed, and Widing (2000).
Several researchers also suggest that top management play a critical role in shaping an
organisation’s values and orientation (Webster 1988; Felton 1959). Top management
reinforcement of the importance of market orientation is empirically found in this
study to encourage employees to focus on customer’s need and competitor movement,
and to work closely together to respond to market need.
Top Management Risk Aversion
Although top management risk aversion was hypothesised here to have negative
effects on the level of market orientation, no such relationship was demonstrated in
the empirical findings in both domestic and export markets. In other words, top
management risk aversion would appear to have no effect on the level of market
orientation, customer orientation, competitor orientation and inter-functional
coordination.
These results are not surprising since other researchers (Jaworski and Kohli 1993 and
Pulendran, Speed and Widing 2000) also found that risk aversion has no effect on the
level of market orientation. So far, only Avlonitis and Gounaris’s (1999) findings
suggest that risk tolerance leads to the development of market orientation.
The non-significant relationship between risk aversion and market orientation is partly
caused by the low reliability of the scale. The scale used to measure risk aversion in
this study has a coefficient alpha of 0.6047 compared to 0.85 in the original study
(Jaworski and Kohli 1993). The problem of low internal consistency of this scale is
234
also reported in Bhuian (1998)’s study, which was conducted in Saudi Arabia. This
may be caused by the reverse-coded questions used in the scale. The low reliability of
the scale may lead to the impact of this variable on market orientation returning a
non-significant result.
Inter-departmental Conflict
Contrary to the hypotheses, the findings from this study suggest that interdepartmental conflict did not significantly impact on the level of market orientation
and its component in both domestic and export markets. The only exception is
domestic inter-functional coordination which showed a positive and significant
relationship with domestic market orientation. The results from this study are
inconsistent with Jaworski and Kohli (1993), Bhuian (1998) and Pulendran, Speed
and Widing (2000) who suggest that conflict inhibits the level of market orientation.
There are at least two reasons why ‘conflict’ did not have significant effects on
market orientation in the Thai sample. Firstly, it may be due to the low reliability of
the scale used. Again, this scale, using reverse-coded questions, demonstrated a low
reliability (0.6855) compared to 0.87 in the previous study by Jaworski and Kohli
(1993). It is interesting to note that ‘reverse-coded questions’ do not work well in the
Thai sample. They tend to cause low reliability, which in turn sometimes leads to a
variable being non-significant.
The second reason might relate to the nature of the Thai culture. Thais value face
saving and avoid conflict. Therefore, any disagreement cannot be explicit. Usually
problems are resolved through compromise. Consequently, one cannot always expect
to see a high level of conflict reported in a Thai sample, even though it may exist.
Inter-departmental Connectedness
Contrary to our hypotheses, inter-departmental connectedness did not appear to be
related to the degree of market orientation and its components in both domestic and
export markets. The results in this study are inconsistent with those of Fritz (1996)
and Pulendran, Speed and Widing (2000) that show that connectedness plays a
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significant role in predicting the level of market orientation achieved. It is still unclear
why inter-departmental connectedness does not relate to the level of market
orientation among Thai firms. Part of the problems may again relate to low reliability
and reverse-coded questions. In addition, Jaworski and Kohli (1993) found only
partial support for this variable. We agree with Jaworski and Kohli that additional
research should be done to examine the link between connectedness and market
orientation.
Formalisation
Although hypothesised, formalisation did not show a significant relationship with the
main construct of market orientation in both domestic and export markets. On the
other hand, the results reveal significant relationships between export customer
orientation and export market orientation, between export inter-functional
coordination and export market orientation, and between domestic customer
orientation and domestic market orientation.
The non-significance of the this variable (with the main construct, export and
domestic market orientations) in this study is not surprising since other researchers
(Jaworski and Kohli (1993) and Pulendran, Speed, and Widing (2000)) also found no
impact of this variable on the degree of market orientation.
The non-significance of this variable may be explained by its nature. Jaworski and
Kholi (1993) argued that formalisation might have both negative and positive impacts
on market orientation. Formalisation may negatively affect market orientation if
emphasis on rules results in an organisation that is less adaptive to the environment,
but may positively affect market orientation if rules enhance customer satisfaction.
Additionally, Narver and Slater (1991) suggest that programmatic methods (e.g.,
changing structure or staffing) may not be effective in improving market orientation.
Centralisation
A market-oriented company relies on employees at all levels to take initiative to solve
problems for customers. Customers will be served better and faster if front line staff is
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given some authority to respond or act without having to ask permission from
supervisors all the time. Therefore, it is predicted that centralised organisational
system impedes the market-oriented activities.
This study confirms that centralisation has a negative and significant effect on the
level of market orientation in both domestic and export markets as hypothesised. The
results from this study are consistent with many studies including Jaworski and Kohli
(1993), Fritz (1996), Bhuian (1998) and Avlonitis and Gounaris (1999), which
emphasise that decentralisation facilitates the inter-departmental coordination in the
organisation and therefore results in a higher degree of market orientation.
Reward Systems
Reward systems can influence the way employees behave (Jaworski 1988). Webster
(1988) argued that if employees are appraised based on sales volume and short-term
profit, then they are likely to focus on these principles and neglect other more
important factors such as customer satisfaction, which should be a primary goal of an
organisation. Hence, reward systems based on short-term financial performance (i.e.,
unit sold) can jeopardise market orientation in the long run (Kohli and Jaworski
1990). On the other hand, reward systems based on customer satisfaction should
facilitate market-oriented activities.
As hypothesised, the results from this study demonstrated that market-based reward
systems significantly increase the level of market orientation in both domestic and
export markets. Organisations that reward employees based on customer satisfaction
tend to be more market oriented. Such reward systems also appear to facilitate
customer and competitor orientations. The results are also consistent with Jaworski
and Kohli (1993), and Pulendran, Speed, and Widing (2000).
Other studies also found that customer-oriented reward systems can reduce role
conflict and ambiguity (Sigauw, Brown and Widing 1994) and facilitate job
satisfaction (Jaworski and Kohli 1993; Kohli and Jaworski 1990).
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9.5
Limitations and Recommendations for Future Research
The limitations of this research should be kept in mind when interpreting the findings.
These limitations, however, provide some opportunities or areas of improvement for
future researchers to consider.
The limitations of this study can be divided into four areas. The first set of limitations
concerns potential bias in sample population and sample size. The second set
concerns research design, methodology and data analysis technique. Another
shortcoming of this research involves the measures used. Last but not least, the
importance of the economic climate in Thailand during the survey should be
considered as well.
Sample Population and Sample Size
The sample population used in this study may not represent all exporters from
Thailand. The sample was drawn from “The Thailand’s Exporters Selected List 199798”. This list is published by the Department of Export Promotion, under the Ministry
of Commerce. The aim of this book is to promote Thai export products. Exporters
who want to participate in the project provide the information obtained in this book
voluntarily. The majority of companies in the list are, therefore, local Thai
manufacturing and trading firms. Foreign-owned subsidiary companies tend to be left
out of the list. This is because these firms are usually set up to produce for their
headquarters or affiliated companies. They may not need to seek additional external
customers. Hence, there is no incentive for them to advertise their names in the book.
Since this thesis is interested in local Thai firms, the Exporters Selected List was
deemed appropriated. Local firms share similar characteristics such as the Thai
management style, limited capital and limited networks. Even their corporate cultures
may be different from those of Western firms. It is an interest of this study to compare
the results drawn from local Thai business communities with results from other
cultures.
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However, it is also recognised that foreign-owned firms play a critical role in the
market orientation in Thailand. Future research, therefore, should incorporate foreignowned manufacturing companies in their samples.
Another limitation relates to sample size. Although the sample size (147) in this study
is adequate, larger samples will provide more confidence in the results and options to
use more sophisticated data analysis technique such as structural equation modelling.
One way of increasing the sample size could be to allocate more resources to the
survey. Especially in Thailand, methods such as follow-up calls, drop off survey
instead of mail survey, and completed questionnaire pick-up instead of mail back are
proven to increase response rate and sample size. However, all these activities involve
greater expense and additional resources that were not available for this particular
research.
Research Design, Methodology and Data Analysis Technique
This study employed a cross-sectional research design where data were collected at a
single point in time. Though this can provide several insights through a ‘snap shot’
view of business, it does not address the continual process that occurs in the
implementation of market orientation. As Kohli and Jaworski (1990: 6) noted, “a
change in orientation takes place slowly”. Lichtenthal and Wilson (1992) identify
some reasons why market orientation is a time-consuming process.
In the short or intermediate run, capital equipment commitments, limits of
technology, financing constraints, the need to retrain labour, and even
established union rules prohibit rapid adjustment of the product service
benefit bundle the firm offers (Lichtenthal and Wilson 1992: 205).
Furthermore, a cross-sectional approach does not detect causal effects of variables.
Measuring constructs that are dynamic in nature, therefore, cannot be adequately
assessed in a cross-sectional study. A longitudinal study would provide a clearer
picture of how firms become market oriented and how market-oriented culture
influences business performance.
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Another limitation of this study is the reliance on individual managers to provide their
views on the activities of the business unit. The ‘key informant’ approach of
collecting data presents some weaknesses. Firstly, self-report data may be inclined to
perceptual or attitudinal biases, or even lack of information, which can reduce the
reliability and validity of the data. In addition, a key informant’s position within the
organisation may be a source of distortion. People from different positions may view
things differently. One of the possible solutions for future research is to use a multiple
informant technique to gain a more rounded perspective.
Multiple regression was the major data analysis technique used in this study.
Although this technique is suitable for the type of research questions and hypotheses
in this study, it has some weaknesses. It can only examine a single relationship at a
time. This problem can be solved by using a more comprehensive technique such as
structural equation modelling (SEM). SEM is an extension of several multivariate
techniques and is especially useful when a dependent variable becomes an
independent variable in subsequent dependence relationship. In other words, it allows
interrelated dependence relationships. SEM also allows the representation of
unobserved concepts or latent variables in structural relationships (Hair et al 1998).
The opportunity for future research is to employ SEM as a data analysis technique and
to compare results with previous research that has mainly used the multiple regression
analysis technique.
Measures
Issues of validity and reliability affected some of the variables used in this study.
Firstly, in order to maintain comparability with previous research some items that
show individual reliabilities below accepted thresholds were retained in the construct.
Secondly, market orientation constructs do not meet the discriminant validity
criterion. In other words, factor analysis cannot discriminate ‘customer orientation’
from ‘competitor orientation’, and ‘inter-functional coordination’. However,
theoretically, the three components are distinct from each other. The analysis,
therefore, was conducted at both a main construct level (market orientation), and at
individual component level (customer orientation, competitor orientation, interfunctional coordination).
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Secondly, the low reliabilities of many scales (antecedents and moderator variables)
borrowed from Jaworski and Kohli (1993) contributed to non-significance of many
variables. As previously discussed, the low reliabilities of these scales are related to
reverse-coded questions. Thus, future research should avoid this issue. Similarly,
Bhuian (1998) reported low reliabilities of scales borrowed from Jaworski and Kohli
(1993). Furthermore, they reported that confirmatory factor analysis did not hold
when assessing these scales. They also noted that the fit indexes of all the
measurement models could be described as moderate to poor. Therefore, these scales
should be tested in different countries before we can generalise the results with
confidence.
Others
The research was conducted during an especially severe economic crisis in Thailand.
Hence, the finding may not reflect the ‘normal’ business environment. An opportunity
therefore exists to conduct research during more ‘normal’ times to confirm the results
reported here. That said, to the extent that the crisis affected all Thai firms, one can
still determine with reasonable confidence the effect of varying levels of market
orientation.
9.6
Chapter Summary
This chapter discussed the results of the test of the relationship between market
orientation and business performance in both domestic and export markets. General
support was found in this study that market orientation is an important determinant of
overall business performance.
The discussion then turned to the moderating effect of the environmental variables on
the market orientation-performance relationship. Generally, the findings from the
Thai sample concluded that environmental moderators have no impact on the market
orientation-business performance relationship in both domestic and export markets.
The exception is competitive intensity, which moderates the relationship between
domestic market orientation and domestic performance.
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Next, the antecedents to market orientation were examined. Overall, the results are
consistent with previous research. Market orientation in this study is found to be
facilitated by top management commitment towards export operations, top
management emphasis on being market orientation, organisational system such as
decentralisation, and market-based reward systems.
Finally, some weaknesses in this research and recommendations for future research
were addressed.
The next and final chapter discusses the contributions of this study and managerial
implications. The chapter closes with the overall conclusions from the thesis.
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Chapter Ten
Conclusions
10.1
Objectives and Structure of the Chapter
The objectives of this final chapter are to highlight the contributions that have been
made by this study and to provide recommendations to both managers and researchers
interested in market orientation.
The chapter begins with a brief overview of the thesis. Each chapter is reviewed and
the rationale for study is highlighted once again. Next, the contributions this thesis
makes to the market orientation and export performance literature is discussed. The
chapter concludes with a discussion on managerial implication of the research.
10.2
Overview of the Thesis
The thesis began with an outline of the origins of the research, the research questions
and the research objectives. Here the point was made that the principal concern of this
thesis was how the business performance of Thai companies in both domestic and
export markets could be analysed by using the market orientation theoretical
framework. Furthermore, the thesis attempts to explain why some firms are more
successful than others. It also investigates how firms can become more marketoriented and whether the relationship between market orientation and business
performance is moderated by business environment.
Chapter Two provided background to Thailand, the country under study. The
economic development and export history of Thailand since 1850 was briefly
surveyed. Against this background, an overview of the sample was presented. This
included a guide to the key characteristics of participating firms and their
management.
Chapter Three presented our efforts to bring together two important research streams:
export performance and market orientation. The argument was made that these two
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streams of research have progressed independently of each other. What stands out in
the export performance literature is the multiplicity of views with respect to the
determinants of export performance and the nature of relationships between these
factors and export performance. One of the weaknesses of the export performance
literature is that there is no model of export success that can be said to be generally
favoured in the literature. On the other hand, the notion that market orientation is an
important factor related to business performance has been widely acknowledged for a
decade. In various domestic settings there has been a strong empirical support
suggesting that a higher level of market orientation will lead to a higher business
performance. This in turn suggests that it is important to try to forge a link between
the export performance and the market orientation literatures.
Having reviewed the extant literatures, we then proposed a conceptual framework and
testable model for this thesis in Chapter Four. Following this, we specified a range of
hypotheses regarding the relationship between market orientation and business
performance, antecedents to market orientation and environmental moderators.
The purpose of Chapter Five was to explain the choice of methodology for answering
the research questions and hypotheses outlined in Chapter Four. In this chapter the
research methodology including research design, data collection process and survey
instrument were presented in detail. Data was collected using mail survey and the key
informant technique. Data was later analysed using multiple regression techniques.
Chapter Six reported on the reliability and validity of the measures. Additionally, it
presented general descriptive statistics and correlation analyses of all relationships in
this study.
The empirical results for the export and domestic markets were reported separately in
two chapters. Chapter Seven presented the empirical results from the export market
and Chapter Eight the domestic market. Following this, Chapter Nine analysed these
results and offered explanations for insignificant and unexpected outcomes. It also
outlined the limitations of the study and provided recommendations for future
research.
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We can now finally turn to the contributions that this thesis has made to both the
export performance and market orientation literatures. We can also consider the
managerial implication of the results.
10.3
Contributions of the Study
As outlined in Chapter One, this thesis seeks to achieve two principal research
objectives. The first objective is to replicate the market orientation framework of
Narver and Slater (1990), and the antecedents to market orientation and the
environmental moderators of Jaworski and Kohli (1993) and to do so in the context of
Thai exporting firms. The second objective is to extend the existing literature
regarding the antecedents to export market orientation by adding two new variables,
which arise from the export performance literature.
This research makes contributions to the body of knowledge in at least three areas.
The first concerns the specific context of this study. To the author’s knowledge, this is
the first piece of empirical research to study the relationship between market
orientation and business performance in Thailand. The findings from this study
confirm that market orientation is an important determinant of business performance
in both domestic and export markets. Furthermore, it indicates that the marketorientation concept is not culturally bound. It has previously been proven to work well
in many Western countries including the United States, the United Kingdom and
Australia. This research supports the findings in Western countries and shows that
market orientation can be applied as effectively in a culturally different country like
Thailand. Based on the evidence from research in the past and from the results of this
study, we can infer that market orientation may well be a universal concept.
The second contribution involves forging a link between market orientation and the
export performance. The origins of this research began when we realised that, despite
the comparatively large volume of literature on market orientation in the domestic
market and the large volume on export performance literature, the relationship
between market orientation and export performance had not been adequately
investigated. The majority of empirical research emphasised the importance of market
orientation only in domestic markets. Thus far, there has been very little research on
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the impact of a market orientation in an international business context (eg, Kwon and
Hu 2000; Sundqvist et al 2000; Diamantopoulos and Cadogan 1996). Diamantopoulos
and Cadogen (1996), using in-depth interview method, investigated only 11 exporting
firms. As a result, our understanding about how the market orientation concept can
apply to the international business context and how it impacts export performance is
still limited. This thesis has helped to reduce the gap and hopefully will provide a
stimulus to other researchers to investigate the nature of market orientation in a
variety of different international markets.
Moreover, the uniqueness of this thesis is that it provides a comparison of market
orientation of the same company in both domestic and foreign markets. This has never
been done before in previous research. The thesis confirms not only that market
orientation can apply to international activities but also that it has a positive impact on
export performance as well as domestic performance.
It follows that Thai firms can enhance their business performance by engaging in
market-oriented activities, for they will have a positive impact on customer
satisfaction and ultimately benefit their profit and shareholder value in the long run.
Likewise, Thai companies that are exporting overseas should consider market
orientation as a strategy that will help them to be successful in their international
business activities.
The third contribution regards the antecedents to export market orientation. This
research has extended the work of Jaworski and Kohli (1993) on the antecedents to
market orientation. Jaworski and Kohli (1993) found that top management emphasis
on being market-oriented, decentralisation, interdepartmental connectedness and
market-based reward systems enhance the level of market orientation while
interdepartmental conflict inhibits market-oriented activities. Similarly, this research
found that these variables are significantly related to the level of both export market
orientation and domestic market orientation. The exceptions reported in this study are
interdepartmental conflict and connectedness.
Going a step further, this study has incorporated two new variables as antecedents to
export market orientation: management commitment to export operations and
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management perception towards exports’ profit and growth. Of the two, management
commitment to export operations is found to have direct effect on export market
orientation. Finally, this research would appear to be the first empirical study of the
antecedents to export market orientation.
10.4
Managerial Implications
The results of the present study provide some insight into how the management of
Thai firms can enhance their business performance outcomes and how they can
implement
market-oriented
activities.
The
following
are
the
principal
recommendations that arise from this research.
Market Orientation and Business Performance
A market-oriented culture can offer a sustainable competitive advantage through the
creation of superior customer value, which in turn creates superior performance for
firms (Slater and Narver 1994; 1999). The results from this research confirm that
market-oriented activities contribute to greater customer satisfaction, which in turn is
manifested in positive word of mouth and customer retention. What holds true for the
domestic market also holds true for the export marketthat is market orientation
enhances overall business performance in both domestic and export markets. It is,
therefore, advisable for any organisation to adopt market orientation and to seek to
increase the level of market orientation.
The heart of market orientation is its customer focus (Deshpande, Farley and Webster
1993; Day 1990). In practical terms, market-oriented firms are those who listen and
respond to customers (Deshpande and Farley 1998; Shapiro 1988; Webster 1988).
Maintaining a close relationship with customers should be an aim of the organisation.
Firms should therefore encourage employees (not only sales persons but staff from
other departments as well) to spend time with customers to truly know them and
understand their needs. It is necessary, therefore, to encourage staff rather than only
sales personnel (i.e. production or finance departments) to visit customers from time
to time. It is also beneficial to invite customers to join any recreation activities hosted
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by the company such as the annual New Year party. Another alternative is to sponsor
customers to join staff for holidays. This will help to create a strong rapport between
customers and staff.
For the export market, we recommend a pro-active approach in which the firm
encourages staff from various departments to regularly visit foreign customers. This
will help staff to understand the needs of foreign customers and understand their
expectations, for these may not be the same as local customers. It would appear
imperative for Thai exporting firms to encourage their staff to learn English. The
overseas mission will not be successful if the majority of staff does not communicate
in English because that is the lingua franca of international business.
Equally important, a firm should know its competitors very well. It should be able to
evaluate competitors’ short-term strengths and weaknesses and long-term capabilities
and strategies (Slater and Narver 1994). Aaker (1999) suggested that the knowledge
of competitors’ strengths and weaknesses is useful for strategy development, for the
latter often focuses on exploiting a competitor’s weakness or neutralising or
bypassing a competitor’s strength. Top management, therefore, should create an
environment whereby employees from all functions are alert to competitor activities.
Rewards may be given to those who share information about competitors.
Last but not least, market-oriented firms coordinate resources and personnel
throughout the organisation to create superior value for customers. In fact, Kohli and
Jaworski (1990:3) reported the view of executives who emphasised the importance of
“a variety of departments recognising customer needs and responding to those needs”.
Such harmonisation of resources is the responsibility of the whole business, not of a
single department (Shapiro 1988). In other words, all functions should work together
to serve customers.
Creating value for buyers is analogous to a symphony orchestra in
which all members contribute according to a general plan and in which
the contribution of each subgroup is tailored and integrated by a
conductor-with a synergistic effect (Slater and Narver 1994:3).
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Firms, therefore, should encourage communication and collaboration among various
departments.
Moderators of Market Orientation-Performance Relationship
The overall findings from this study suggest that market orientation is important to
any organisation regardless of the environmental conditions (i.e., market turbulence,
technological turbulence or buyer power) in which it operates. This is true for both
export and domestic markets. Although our study reveals that market orientation is
especially important under the conditions of extremely high competitive intensity in
the domestic market, firms should focus on the improvement of market-oriented
activities regardless of environmental settings. As Slater and Narver (1994:160)
suggested, it is better to invest in becoming market-oriented while the environment is
somewhat munificent rather than to wait until it has become hostile.
How to Become a Market-oriented Organisation
Export market orientation can be enhanced by top management commitment to export
operations. Top management needs to show both attitudinal and behavioural
commitment to export markets. For example, top management should allocate
adequate funds to develop export markets, make visits to foreign markets, and show
that exporting is a priority activity. All of these demonstrate the firm’s commitment to
export operations.
Secondly, both export and domestic market orientations tend to be facilitated by the
reinforcement that comes from top managers continually reminding employees that it
is important for them to be sensitive and responsive to market needs. Moreover,
market orientation should not only be a firm philosophy but the reality of everyday
business life. Providing budgets to improve customer services, training courses for
staff to serve customers better, and establishing working environments that emphasise
teamwork will all create positive signals to employees that top management are
serious about being market-oriented.
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Thirdly, decentralised organisational systems help to foster market-oriented activities.
Firms should also consider increasing the responsibilities given to junior managers.
Avlonitis and Gounaris (1999) found that firms that allow greater autonomy to their
divisions and functions are better in collecting and disseminating market information.
In addition, it helps to improve the responsibility and the skills of their junior
managers.
Finally, it appears that market-based reward systems play an important role in
obtaining market orientation. Top management can make a market-oriented culture
more pervasive by encouraging employees to listen and respond to customers. For
example, sales performance should be evaluated not only by supervisors within the
company but by clients as well. Factory staff should be rewarded based on zero
defects (better production line techniques and operations) not on cost cutting.
Likewise, the salaries of research and development staff should be a combination of
salary and incentives based on innovativeness.
Management Characteristics and Firm Competencies
Additional insight can be gained from the information presented in Chapter Two.
First, the sample data seem to indicate that Thai firms whose top manager had
overseas experiences (either by working or studying abroad) enjoyed better
performance than those firms whose top manager had no overseas experience. If
possible, it is advisable for firms to recruit an increasing number of overseas-trained
staff for the export department.
Secondly, the ability to speak a language other than Thai appears to be associated
with higher export performance. An organisation, therefore, should assign someone
who can communicate well in other languages, especially English, to handle export
customers. In addition, the sample data suggest that travelling overseas is unavoidable
for managers of exporting firms. In fact, the data reveal that the best way to win
export customers is to participate in trade shows or exhibitions. Important too is
sending staff to visit foreign markets.
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Generally, exporters from Thailand think that their competitive advantages are
‘product quality’, ‘delivery time’ and ‘production capacity’. Thai products are no
longer able to compete based on a ‘low price strategy’. Obviously, there are many
countries like China or Vietnam that can produce at lower cost than Thailand. Hence,
the message to Thai exporters is that they need to constantly improve their product
quality and make sure that they deliver products on time.
10.5
Conclusions
Our research provides additional support for the importance of a market orientation
not only in a domestic context but also in international business context. Our findings
reveal that market orientation is likely to have a greater impact on overall business
performance on customer satisfaction (customer retention and word of mouth) in both
markets.
Although our findings do not capture the relationship between market
orientation and financial performance (such as relative sales growth, relative ROA,
relative overall performance), we argue that this is due to a lag effect between market
orientation and financial performance. The efforts to develop a market orientation
take some time to yield rewards (Balabanis et al 1997) and it is possible that a crosssectional study may not be able to capture well the financial outcome of market
orientation.
However, our overall findings are consistent with other research from different parts
of the world that show the importance of being market-oriented organisation. Market
orientation has been proven to help firms in other counties enhance their business
performance. In the same way, it also helps Thai firms to gain competitive advantage
and improve theirs business performance both when they compete at home and
internationally.
The results from our research also show that market-oriented activities not only result
in customer satisfaction but also help managers make better decisions regarding the
choice of standardisation versus adaptation of marketing activities in foreign markets.
In other words, managers from highly market-oriented companies tend to be more
confident in applying their marketing strategies in other countries than managers from
low market-oriented ones.
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Our study found that environmental moderators have no impact on the market
orientation-business performance relationship in both export and domestic markets.
The only exception is competitive intensity, which is found to strengthen the market
orientation-performance relationship in the domestic market (but not the export
market). Overall, we support the notion that market orientation is an important
determinant of business performance regardless of the environmental conditions in
which firms operate.
Our research also revealed that the role of top management is seen as vital in
engendering both domestic and export market orientation. It is especially for export
market orientation that if top management shows commitment towards export
operations a signal is sent to the entire organisation that export markets and export
customers are important. Therefore, it is most likely that the whole organisation will
be geared to respond to export customers’ need. Employees need to see not only
commitment from top management but also the reinforcement from top management
regarding the importance of being market-oriented. Continuous encouragement and
reminders of the importance of responding to both present and future market needs
create a vision for employees and a sense of belonging to an organisation which helps
to promote market-oriented activities.
Top management can facilitate market-oriented activities further by rewarding
employees on the basis of their efforts in improving customer satisfaction. The
market-based reward systems help to motivate employees to serve customers better.
In addition, our findings also show that a decentralised organisational system appears
to foster market-oriented activities. In the competitive business world, a marketoriented firm needs to respond to its customers faster than competitors. Companies
that allow greater autonomy to their front line staff are better in responding to
customers’ demand and competitors’ move. Decentralised organisational structures
encourage frontline staff to take initiatives and respond to market changes more
quickly.
Finally, it should be noted that this study raises a number of questions which should
be emphasised in future studies. Firstly, the market orientation scale (Narver and
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Slater 1990) and most of antecedents to market orientation as well as the moderator
scales found in Jaworski and Kohli (1993) need additional work to improve their
reliability and validity in varied contexts. According to our factor analysis, the MO
scale (Narver and Slater 1990) does not allow for the discrimination of the three
components of MO. In addition, antecedents and moderator variables (Jaworski and
Kohli 1993) show medium to low reliabilities. The results of our hypotheses might be
different if more reliable and valid measures were used.
Secondly, although this study provides comparison of both domestic and export
market orientations, we could not conclude at this stage which one comes first. Future
research, therefore, should endeavour to investigate the relationship between the two.
Is domestic market orientation an antecedent to export market orientation or vice
versa?
Thirdly, future export market orientation studies should further explore antecedents to
export market orientation by including other factors, such as firm characteristics and
the individual characteristics of the firm’s managers and employees.
Finally, although we found that market orientation is an important determinant of
business performance in both domestic and export markets, the low adjusted R2 in this
study suggests that there are other important factors that also contribute to the
business performance of a firm. It is possible that resource based view can offer a
good explanation of business performance. Future studies may compare perhaps the
resource-based view with market orientation when explaining the business
performance of a firm. Moreover, there may be a link between the resource-based
view and the market orientation since being market-oriented costs money and
resources. Alternatively, future research may investigate the link between these two.
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