Differences between Presidents’ and Sales Managers’ Perceptions of the Industry Environment and Firm Strategy in Small Industrial Firms: Relationship to Performance Satisfaction

The industrial sales force is the primary source of information about the competitive environment. Differences of perceptions of that environment between the national sales manager and the firm president in small industrial firms may reflect inadequate environmental information input into strategic decision-making. The sales force is a major element in implementation of strategy and differences between perceptions of firm strategy may reflect inadequate coordination and communication between the chief strategy decision-maker and the manager who is responsible for implementing that strategy in the market place. It would be expected that these differences in perceptions would impact negatively strategy formulation and execution resulting in unsatisfactory firm performance. This study surveyed the environmental and strategy perceptions of presidents and national sales managers in small to medium-sized industrial firms as well as presidents' satisfaction with firm profitability and marketing/sales effectiveness. The average absolute difference in environment perceptions has a negative relationship with satisfaction with profit. The average absolute difference in strategy perceptions has a negative relationship with marketing/sales effectiveness. This latter relationship is especially strong in an environment high in capital spending variation and for larger firms. The authors suggest implications for managers based on these results. ********** Journal of Small Business Management 2004 42(2), pp. 174-189 It is critical for survival for top managers to pay as much, if not more, attention to the external environment, compared to the internal firm environment (D'Aveni and MacMillan 1990). Attention to the external environment is a key feature of market-oriented firms, characterized by high levels of employee customer oriented behaviors, dissemination of competitive intelligence, and interfunctional coordination (Narver and Slater 1990). Narver and Slater, as well as other researchers (Pelham and Wilson 1996; Jaworski and Kohli 1993), found a positive impact of market orientation on firm performance. However, a study by Avlontis and Govnaris (1997) found that industrial firms were much lower than other types of firms in market orientation. The industrial sales force, in its boundary-spanning role, is the primary source of information about customers and competitors for the rest of the organization. Failure by sales force personnel, or its manager, to disseminate adequately this critical information to key functional managers and the firm's president negatively may impact the ability of these key managers to respond to changes in the competitive environment. It may seem logical that small business managers would be closer to their customers and would be more informed about competitive conditions compared to managers in large business with more complex organization structures. However, a study by Mohan-Neill (1995) found that smaller firms are less informed about environmental conditions than larger firms. This may reflect the lack of time and resources to scan information sources proactively for key environment data. Managerial differences in perceptions of intended firm strategy may reflect inadequate coordination and communication between the chief strategy decision-maker and the managers responsible for implementing that strategy. The sales force is responsible for implementation of strategy in the external environment, but even if the president's strategy is appropriately matched with environment demands, strategy implementation will suffer if sales managers pursue a different strategy emphasis. For instance, if the firm's president intends on a differentiation strategy and if this is reflected in product design, the sales force should implement this strategy by communicating the product's unique benefits. But if the sales manager perceives that the firm's strategy is based on low cost, he or she will emphasize selling on price in sales management programs. …