Market Orientation and Other Potential Influences on Performance in Small and Medium-Sized Manufacturing Firms

This article seeks to provide managers in small manufacturing firms with results regarding significant factors related to performance. Results indicate that, compared to strategy selection, firm size, or industry characteristics, market orientation has the strongest positive relationship with measures of performance. The most influential market orientation elements are fast response to negative customer satisfaction information, strategies based on creating value for customers, immediate response to competitive challenges, and fast detection of changes in customer product preferences. Results also indicate the crucial role of market orientation in implementing an emphasis on a growth/differentiation strategy, compared to a low cost strategy. The strength of the market orientation-performance and strategy-performance relationships are stronger under certain industry conditions. The relationships between performance and both market orientation and relative emphasis on growth/differentiation strategy are strong er among the smaller firms in the sample. There were few significant relationships between industry conditions and performance. Possible reasons for these patterns of relationships are discussed. Marketing academics have long held the belief that firms should embrace the philosophy of the marketing concept, which holds that customer needs should drive the firm's decisions. Acceptance or rejection of this philosophy by the top managers of small or medium-sized firms is not an academic exercise, since the personal values of owner/managers influence the strategies they adopt, and ultimately, the performance of their businesses (Thompson 1986; Strickland 1993). Marketing academics suggest that firms who adopt this philosophy and convert it to actions should see superior performance (Levitt 1960). However, contrary to this belief, there are firms who manage to be successful without embracing this concept by emphasizing technical or production capabilities. Webster's (1981) survey of CEOs of large industrial firms indicated a dominant technology culture, resulting in a predominant production orientation geared toward internal efficiency. With a production orientation, the charge to the marketing and sales functions is to push current products, often with price incentives, to maximize plant capacity. Many firms rode strong product and technology focuses to high levels of performance in the high growth environments of the 1970s and early 1980s. Recently however, the globalization of competition, deregulation, and the emergence of more sophisticated customers have resulted in a more intense competitive environment. This new environment has pushed academics (Walker and Ruekert 1987; Lusch and Laczniak 1987) and many US firms to rediscover the marketing concept (Deshpande, Farley, and Webster 1993). Webster (1988) illustrated the dangers of paying too little attention to external conditions in firms characterized by production or technical orientations. Day's study (1994) reinforced this argument with results indicating that the failure of Total Quality Management (TQM) programs in most companies may be due to these efforts being directed internally, concentrating only on the manufacturing function. Although academics have taught the marketing concept for decades and believe that it is the key to Long-term firm success, they have not been very successful in introducing this concept into the operating environments of most businesses. Kohli and Jaworski (1990) helped develop our understanding of the concept of market orientation and the behaviors hat implement the marketing concept. They provided a theoretical foundation for the expectation that this orientation should lead to higher firm performance. Narver and Slater (1990) provided the first empirical evidence linking market orientation and profitability in the strategic business units of a large firm. Jaworski and Kohil (1993) also documented the Link between market orientation and overall firm performance for large firms. …