Market orientation and customer satisfaction: Evidence from British machine tool industry

Industrial Marketing Management 33 (2004) 135–144

Market orientation and customer satisfaction: Evidence from British

machine tool industry

Satyendra Singha,*, Ashok Ranchhodb,1

aDepartment of Administrative Studies, University of Winnipeg, 515 Portage Avenue, Winnipeg, Canada, R3B 2E9bSouthampton Business School, Southampton Institute, East Park Terrace, Southampton, SO14 OYN, UK

Received 1 September 2001; received in revised form 1 February 2003; accepted 1 April 2003

Abstract

This paper examines empirically the relationship between market orientation and business performance in the context of British machine

tool industry. An industry-specific market orientation scale was developed. Factor analysis revealed that there were four latent dimensions

underlying the market orientation: customer orientation, competitor orientation, departmental responsiveness, and customer satisfaction

orientation. Findings suggest that customer orientation and customer satisfaction orientation have a stronger impact on performance than the

other dimensions, and that competitor orientation has a U-shape relationship with performance. Departmental responsiveness did not appear

to be significantly related to the business performance. Managers could use the multidimensional conceptualization to develop particular

kinds of orientations required for better performance.

D 2003 Elsevier Inc. All rights reserved.

Keywords: Market orientation; Customer orientation; Competitor orientation; Customer satisfaction; Business performance

1. Introduction

The environments of most businesses are currently

characterized by increasing competition and environmental

turbulence. Most firms have had to find ways of dealing

with this stark reality or face the possibility of extinction. As

a consequence of the increasing efforts by managers to

develop a competitive edge in their respective business

sectors, the management literature is filled with conceptual

propositions for sound business practices and strategies for

success in today’s competitive marketplace (Day & Wens-

ley, 1988). In this context, marketing philosophy has

received considerable attention from practitioners as well

as academic researchers because marketing is regarded as a

driving force for business strategies and operations.

Although earlier research on market orientation tended to

focus on cross-sectional studies in order to contribute to

theory building and examining the universal importance of

the concept, recent empirical efforts have tended to be

industry specific (Chee & Peng, 1996; Liu, 1995; Morgan

0019-8501/$ – see front matter D 2003 Elsevier Inc. All rights reserved.

doi:10.1016/S0019-8501(03)00056-7

* Corresponding author. Tel.: +1-204-786-9424.

E-mail addresses: [email protected] (S. Singh),

[email protected] (A. Ranchhod).1 Tel.: +44-23-8031-9541.

& Morgan, 1991). One particular feature of the literature is

that most studies have focused on the relationship between

market orientation and performance, with the majority of

studies reporting a positive association between the two

variables. Clearly, findings from studies on the consequen-

ces of a market orientated stance are important since they

can provide managers with the knowledge associated with

factors required for developing a market-oriented culture.

This study intends to contribute to the existing literature

on market orientation in a number of ways: Firstly, an

industry-specific market-oriented scale was developed and

tested; secondly, the characteristics of underlying factors of

market orientation and performance in the UK machine tool

sector were examined; thirdly, from a theoretical viewpoint,

the degree to which market orientation factors were related

to performance were considered; and finally, from an

empirical perspective, this study has avoided the conven-

tional focus on single-authored measures of market orienta-

tion, and rather adopted a multifaceted view of the concept.

Similarly, the performance measures are based on a multi-

dimensional view of financial and other organisational

performance indicators.

In the following sections, a brief review of the literature

on the market orientation concept and its applicability in the

machine tool industry is presented together with an argu-

S. Singh, A. Ranchhod / Industrial Marketing Management 33 (2004) 135–144136

ment as to how it may influence business performance.

Background information on the industrial context, the

research methodology adopted for the development of the

measures, the sampling frame, and data collection procedure

are presented later. In the analysis section, a variety of

statistical techniques are used to confirm the reliability of

the redeveloped market orientation scale and some aspects

of validity are examined. Multiple regression analysis and

one-way ANOVA results are utilized in assessing the

influence of factors underlying market orientation on busi-

ness performance. Next, the findings of the study in relation

to the previous research are discussed. The paper concludes

by discussing the implications of the findings to machine

tool business executives and practitioners, as well as the

limitations of the current study.

2. Rationale for the study

A review of the literature reveals that the majority of the

most recent industry-specific market orientation studies

appear to be either on service firms or cross industry in

nature (Appiah-Adu & Singh, 1988; Deshpande & Webster,

1989; Jaworski & Kohli, 1993). It appears that there has

been no empirical research in this area in the British

machine tool sector; therefore, this study seeks to examine

the market orientation–performance link in this sector. This

sector is also acknowledged as an indicator for the health of

the entire manufacturing industry as many other industry

sectors rely on the machine tool industry for the supply of

innovative and new machines.

Despite the growing interest in market orientation and

recent advances made in its measurement, few attempts

have been made to tailor the constructs to a particular sector.

In this particular study, an attempt is made to reconcile the

three dominant market orientation constructs (Deng & Dart,

1994; Jaworski & Kohli, 1993; Narver & Slater, 1990) in

order to redevelop an industry-specific market orientation

domain. In this context, Jaworski and Kohli (1993) suggest

that such integration would be beneficial for the purpose of

future empirical research. Applying the construct within the

machine tool industry and investigating the operational

modifications were regarded as a means of taking the

research forward.

The British research studies were cross sectional in

nature (Diamantopoulos & Hart, 1993; Greenley, 1995; Pitt,

Caruna, & Berthon, 1996). The samples were drawn from

all sectors of the UK industry, e.g., consumer products,

consumer services, industrial products, and industrial serv-

ices. These undifferentiated sectarian studies create their

own problems of the difficulty surrounding the understand-

ing of the effects of environmental variables, such as

technology change, market growth, etc. Therefore, by car-

rying out this research within the machine tool industry,

some of the environmental variables, such as market

growth, buyer power, seller concentration, competitive

intensity, and technology, among others, have the same

control effects for all the players in the sector. This is

particularly true in the machine tool industry, as this is

characterized by a large number of small- and medium-sized

enterprises (SMEs) making a wide variety of types and sizes

of products (Thorn, 1996). This industry is divided into two

subsectors: the computer numerical control (CNC) machine

tools and non-CNC machine tools manufacturers.

3. Market orientation definition and the research

instrument

Different authors have developed different market ori-

entation scales. Some market orientation scales are based on

a set of marketing activities (Deng & Dart, 1994; Jaworski

& Kohli, 1993; Narver & Slater, 1990), whereas others are

based on organisational strategy (Ruekert, 1992). Kohli and

Jaworski (1990) have conceptualized the market orientation

scale as a combination of three components, i.e., informa-

tion generation, information dissemination, and responsive-

ness. They have further bifurcated responsiveness into two

sets of activities: response design and response implementa-

tion. On the other hand, Narver and Slater (1990) have

hypothesized market orientation as one dimension construct

consisting of three behavioral components—customer ori-

entation, competitor orientation, and interfunctional coordi-

nation—and two decision criteria—a long-term focus and a

profit objective. Finally, Deng and Dart (1994) have con-

ceptualized the market orientation construct as a combina-

tion of four factors that are very similar to Narver and

Slater’s construct. These components are customer orienta-

tion, competitor orientation, interfunctional coordination,

and profit organisation.

Although these three market orientation constructs are

different in terms of the selection of items representing the

construct, there is clearly an overlap on a conceptual and

operational basis. Cadogan and Diamantopoulos (1995)

have performed a comparative analysis between the compo-

nents of Kohli and Jaworski (1993) and Narver and Slater

(1990) and have shown the conceptual and operational

overlap between these two constructs.

The domain specification in the context of market

orientation seems to be complex, as there is no single

definition of the philosophy of market orientation. The

literature reveals that there are a number of meanings

ascribed to market orientation. For example, Konopa and

Calabro (1971) place greater emphasis on customer than

production- and cost-related activities. Whereas according

to Felton (1959) and McNamara (1972), involvement of

marketing executives in the strategic decision making pro-

cess and integrating activities within marketing function is

regarded as being crucial to companies wanting to be market

oriented. Although, these authors differ in their preferred

conceptualizations, it is evident that there are three main

underling dimensions: customer orientation—information

2 The complete comparative analysis and the development of the

industry-specific market orientation scale can be obtained from the author

upon request.3 FAME is a financial database on CD-ROM containing information on

270,000 major public and private British companies from the Jordan Watch

and Jordan survey database. Up to 5 years of detailed financial information

and some descriptive details are also available on the database.

S. Singh, A. Ranchhod / Industrial Marketing Management 33 (2004) 135–144 137

generation pertaining to customers; competitor focus—

information generation pertaining to competitors; and

responsiveness—dissemination of information obtained per-

taining to customers across the functional departments with

a view to meeting customer needs as quickly as possible by

having good interfunctional coordination within the depart-

ments.

In the study, we believe (after interviewing 24 marketing

directors of machine tool companies and an extensive

literature search) that emphasis on customer satisfaction in

order to deliver a high-quality product has increased over

the last decades in industrial marketing. This reflects the

need for retaining customers and the development of long-

term relationships with them. For some companies, loyal

customers are paramount for existence (Davis, Sharp, &

Schlack, 1993). Retaining customers can have a significant

positive impact on the profitability of companies. Studies

have shown that retaining an additional 2–5% customers

can improve profits significantly in the same manner as

cutting costs by 10% (Power, Driscoll, & Bohn, 1992;

Reichheld & Sasser, 1990). Most researchers and practi-

tioners agree that satisfaction occurs when purchase expect-

ations are met, i.e., attributes associated with products are

the ones desired by customers (Oliver & Swan, 1989;

Wilkie, 1990). This implies that companies should be, in

addition to being customer and competitor oriented, sat-

isfaction oriented as well in order to meet purchase expect-

ations. Dissatisfaction is the result of unconfirmed

expectations. Marketers who understand the impact of

customer satisfaction on business performance will want

to secure future sales orders on the basis of the recommen-

dations of currently satisfied end users of the products

because what happens in the current buying decision will

affect future purchase decisions.

Therefore, in the context of machine tool industry, we

define market orientation as the set of activities coordinated

in such a way that derives customer satisfaction through

superior performance of products (machines) and related

services (training, maintenance, etc.) while still being com-

petitive (price, responsiveness, delivery, etc.) in the market

place.

This study intends to combine the components of market

orientation definitions (Deng & Dart, 1994; Jaworski &

Kohli, 1993; Narver & Slater, 1990) in order to specify a

new domain of market orientation, excepting profit

emphasis. This is because we believe that profit is the

outcome of adoption of the market orientation concept, and

therefore it should be treated as the behavioral component of

market orientation (Levitt, 1960; Narver & Slater, 1990).

In this study, a comparative analysis was performed

among the three previously mentioned market orientation

constructs (Deng & Dart, 1994; Jaworski & Kohli, 1993;

Narver & Slater, 1990). The aim was to detect any overlap

among these constructs so duplication of items could be

deleted and new items tapping the market orientation

domain could be added. Hence, for this study, a pool of

items was generated after conducting a comparative analysis

among the three different market orientation scales. Care

was taken to examine the domain of each construct as

closely as possible while choosing the items for the new

scale. Criteria of uniqueness and ability to convey different

shades of meaning to informants were also used (Churchill,

1979). Several items were reverse coded in order to min-

imize the response set bias.

4. Research methodology

Initially, 45 items were generated as a result of the

comparison made among these scales (Deng & Dart,

1994; Jaworski & Kohli, 1993; Narver & Slater, 1990). It

was a huge scale to start with. Since these market orientation

scales of Narver and Slater (1990) and Jaworski and Kohli

(1993) are American and Deng and Dart’s (1994) scale is

Canadian, it was important to make these items compatible

with the UK business culture. Because of the centrality of

market orientation, each item was critically tested for clarity

and appropriateness in personally administered pretests with

a panel of five professors and lecturers in England. These

professors and lecturers were asked to critique the question-

naire. They were also asked to indicate the items that were

ambiguous in nature or difficult to understand as well as

offer any suggestions for change that they deemed appro-

priate. A seven-point Likert-type scale was used (1 =

strongly disagree and 7 = strongly agree) to enable respond-

ents to indicate the degree to which their company had

adopted the practices described in each of the 45 items.

Based on the feedback received from them, it was discov-

ered that some of the items needed rephrasing. Two items

were eliminated, as they did not seem to be related to the

machine tool industry. Following these pretest interviews,

43 items2 were retained in the final questionnaire pertaining

to market orientation. This was followed by a second phase

of pretests by administering postal questionnaires to 30

machine tool manufacturers in the UK. Five completed

questionnaires were returned with suggestions for only

minor refinements.

5. Sample and data

The populations were drawn from the British machine

tools and equipment directory, which consisted of 105

companies, and from the FAME-CD-ROM3 database listed


in the Standard Industrial Classification (SIC) code 3541

(252 companies) and SIC code 3542 (201 companies). After

comparing these two directories, 82 companies were deleted

as they were found in more than one of the databases.

Furthermore, 42 companies were removed from the data-

base as a result of these companies being in a state of

liquidation, leaving a net effective database of 434 compan-

ies. A questionnaire and a personal letter were mailed to the

managing director/CEO of each of the 434 manufacturers of

machine tools located in the UK. Participants were assured

of their confidentiality. They also had the default option of

returning the survey anonymously, or if they wished could

participate further in the research project (they could do so

by placing a tick in the box provided at the end of the

questionnaire). A second wave of mailing was carried out

after 6 weeks. A total of 93 usable questionnaires (73 from

first mailing and 20 from second mailing) and 27 unusable

responses (e.g., we do not manufacture machine tool,

addressees gone away, company in receivership) were

received at the end of 9 weeks. The overall usable response

rate from first mailing was 18% (73/407) and from second

mailing was 6% (20/334) leading to a total response rate of

24%. To assess nonresponse bias, the last wave method was

used (Filion, 1975, 1976). The method projects the trend in

responses across the first two waves; the last respondent

method assumes that the nonrespondents are like the pro-

jected last respondent in the second wave. The nonrespond-

ents were assumed to respond as those in the second wave.

A series of chi-square tests indicated no significant differ-

ences between first wave respondents and the second wave

respondents on any of the measures analyzed (e.g., type of

industry, i.e., CNC, non-CNC, or both, �2 = 0.79, P>.05;

British or non-British firms, �2 = 0.46, P>.05; firm size, i.e.,

number of employees, �2 = 1.07, P>.05). These suggest that

the sample did not suffer from any unduly nonresponse bias.

Pitt et al. (1996) found a response rate of 18% when they

conducted a similar survey to measure market orientation in

the UK. Variance inflation factor (VIF) analysis indicated

Table 1

Characteristics of the sample

Characteristics Percentage of

the sample

Type of business British 70

Joint venture 30

Category of machines CNC machines 40

Non-CNC machines 30

CNC and non-CNC machines 30

Turnover in British Less than 10 million 65

sterling Between 10 and 25 million 13

More than 25 million 22

Employees Less than 99 62

Between 100 and 200 23

More than 200 15

Respondents CEOs 57

Board level directors 26

Senior managers 17

that there were no significant parameter distortions due to

multicollinearity (Neter, Wasserman, & Kunter, 1985). In

fact, the VIF score was below three (The characteristics of

the sample are presented in Table 1).

6. Characteristics of the sample frame

6.1. Market orientation measure

The data obtained through the postal questionnaire were

subjected to a factor analysis in order to discover the

underlying dimensions of market orientation. It was also

intended to check if there were distinct factors that were

consistent with the components of market orientation theory.

For the purpose of the study, items having a mean score of

more than 4.9 on a seven-point Likert-type scale were

retained for the calculation of composite score for the market

orientation scale. Addition of items with less than mean score

of 4.9 did not contribute to enhancing the variance signific-

antly in the factor analysis. These items are listed in

Appendix 1. As expected, two distinct factors were related

to customers and competitors; hence, the name given to the

first factor was customer orientation (F1) and to the second

factor was competitor orientation (F2). The third distinct

factor correlated to a set of items pertaining to responsive-

ness, which is quite consistent with the theory. Hence, the

name given to the factor was responsiveness (F3). The fourth

factor is related to customer satisfaction orientation (F4). The

set of data produced a four-factor solution, which accounted

for nearly 67% of the variance. The descriptive statistics and

reliability of these factors are reported in Appendix 2.

6.2. Firm performance measure

Five performance indicators were considered to measure

business performance. This is a multifaceted construct

represented by customer retention (P_CUSRET), market

share (P_MKTSHR), new product success (P_NPS), return

on investment (P_ROI), and sales growth (P_SG). These

five items were measured on a seven-point Likert-type scale

with 1 = strongly disagree and 7 = strongly agree (Likert,

1967). However, performance can be measured in a number

of ways, such as short- or long-term financial or organisa-

tional benefits. As the questionnaire to replicate the ques-

tions on performance as used by other authors (Appiah-Adu

& Singh, 1988; Deng & Dart, 1994; Jaworski & Kohli,

1993), questions on the sustainability of profits for the

future were not asked. However, respondents were asked

to score on performance-related items relative to their own

expectations over the last 3 years. This was undertaken

because it has been shown that respondents were more

likely to provide accurate estimates of profitability over a

3-year time frame than a 1-year time frame (Cadogan &

Diamantopoulos, 1995). Further, a 3-year time frame pro-

vides an indication of stability of companies in term of

Table 3

Business performance = f (factors underlying market orientation)

Factors � S.E. (2 ) t value P value

F1 (customer orientation) .29 .08 2.71 .03

F2 (competitor orientation) .21 .12 2.42 .05

F3 (responsiveness) .04 .07 0.17 .79

F4 (customer satisfaction) .24 .09 2.53 .04

R2=.39 F= 9.17

Adjusted R2=.37 � = 93


profitability (a source of future income), as there has been a

recent tendency by companies to finance expensive

machines through the sales force of financing institutions

after a deal has been struck. With respect to the measure-

ment of customer retention, which serves as a surrogate

indicator for customer satisfaction, respondents were asked

to indicate their level of satisfaction with the machine in the

last 3 years. For this variable, the 3-year time frame was

chosen for two reasons: firstly, given the cost of machines, it

was reasonable to measure their cumulative performance (in

terms of the benefits) of the machine over a longer period of

time; and secondly, a 3-year period avoids the recency

effect, as respondents could be influenced more by the

superior performance of a new machine (1-year old) than

old machine (3-year old). In this study, a subjective

approach was employed due to difficulty in obtaining

objective data from documentary sources. An objective

approach could not be employed because of the reluctance

of firms to divulge information, which was classified as

confidential. Researchers, who adopted both concepts,

reported a strong association between objective measures

and subjective responses (Robinson & Pearce, 1988; Ven-

katraman & Ramanujam, 1986). Jaworski and Kohli (1993)

utilized both methods and obtained reliable responses for

their subjective dimensions.

Principal component analysis was used to extract a single

factor solution (eigenvalue more than one was the criterion

used). Results of the analysis are presented in Table 2. The

measure, consisted of five items, has Cronbach’s Alpha

value equal to .88 and standardized Cronbach’s Alpha value

equal to .87. The scores for the scale were within the

acceptable range and greater than the suggested cutoff level

of .70 (Cronbach, 1975; Nunnally, 1978). It can also be seen

that there is a little difference between alpha and stand-

ardized alpha (this compensates for the effects of the number

of items in the scale), thus lending credence to the reliability

of the measure. The mean raw score of these five items was

used to represent the business performance factor.

6.3. Analysis of data

In order to test for the relationship between each factor

representing market orientation and business performance, a

multiple regression analysis was performed. The main

Table 2

Business performance (BP) reliability analysis

Performance indicators Item-to-item correlation � if item deleted

P_CUSTREN .49 .89

P_MKTSHR .76 .85

P_NPS .50 .89

P_ROI .75 .86

P_SG .77 .85

Cronbach �=.88 Standardised Cronbach �=.87Eigenvalue = 3.86 Variance explained (factor analysis) = 64.5%

Factor mean (BP) = 5.47 BP factor standard deviation � = 1.19

purpose of the analysis was to detect the significant factors

that accounted for the explanation of variance in the

business performance variable. The results of the analysis

suggested that the regression model accounted for 37% of

variance in the business performance variable (Table 3).

Although multiple regression analysis is a suitable technique

for examining the relationship between a dependent variable

and several independent variables, it seemed appropriate to

use subgroup analysis to test for the equality of means

across groups. In order to do this, each factor was split into

three mutually exclusive low (LO), medium (MI), and high

(HI) subgroups. Cutoff values on each factor were selected

in such a way that each group had almost the same number

of respondents. Table 4 reports the results of the one-way

ANOVA. For easy visual inspection, subgroup sample

means are presented in Fig. 1.

6.4. Validity of the measure

Criterion-related validity is concerned with the extent to

which the score on the measuring instrument is related to an

independent measure of the relative criteria. Criterion-

related validity was evaluated by examining multiple regres-

sion correlation coefficients between the scores on the

market orientation scale and a measure of the extent to

which a company was market oriented. Respondents were

asked to indicate the extent to which they thought their

companies were market oriented on a seven-point Likert-

type scale (1 = not at all and 7 = very much). The significant

positive correlation (.71, P < .00) between the market ori-

entation scale and the perceived market orientation of

companies suggests that the market orientation scale has a

high degree of criterion-related validity.

Furthermore, in order for the scale to meet convergent

and discriminant validity, we would expect, in the factor

analysis, that all the items representing a concept should

load strongly on one factor to satisfy the requirement of the

Table 4

ANOVA analysis, mean of market orientation underlying factors

Factors F1 (customer

orientation)

F2 (competitor

orientation)

F4 (customer

satisfaction)

LO 4.49 * 5.58 4.78 *

MI 5.38 * 5.11 5.24 *

HI 6.02 * 5.71 6.11 *

* Significant at P < .05 level.

Fig. 1. Relationship between level of orientations and business performance.


convergent validity and weakly on all other factors to satisfy

the requirements of the discriminant validity (Balkrishnan,

1996). By using this approach, the scale was refined by

eliminating items that either did not load strongly on any

factor or loaded on more than one factor.

7. Results and discussion

Table 3 suggests that customer orientation factor (F1) has

a significant (P < .05) and positive (.29) effect on business

performance. More specifically, Table 4 suggests that

medium and high customer focus activities lead to more

profitable business than a low customer focus. The machine

tool industry usually has a set of three customers: basic

machine tool users (non-CNC machine tools); sophisticated

machine tool users (hand-held machine tools); and very

sophisticated machine tool users (CNC machine tools).

Therefore, machine tool manufacturers usually have differ-

ent customer orientation strategies for different sets of

machine tool users. For example, companies manufacturing

highly technologically advanced machines will devote more

attention to customer focus than companies which manufac-

turer basic machine tools. This implies that companies that

are successful in creating a niche market perform relatively

better as a result of being more customer oriented. Therefore,

it is vital for a company to cultivate a culture required to

achieve and maintain superior performance of machines by

developing high-quality machines that are specific to client

needs. Certainly, knowledge of customers’ needs is of

paramount importance to the survival and growth of com-

panies, particularly SMEs (Berkowitz, Crane, Kerin, Hartley,

& Rudelius, 2003). It also makes sense for SMEs to develop

good segmentation strategies by becoming specialist niche

players. By doing this, they can develop closer customer

relationships, and as a consequence is likely to score well

customer orientation scores. The customer relationships built

can extend to joint product testing, production of ‘‘tailored’’

machines, as well as speed of communications.

Competitor orientation (F2) has a significant (P < .05) and

positive (.21) effect on business performance. Our findings

show that both customer and competitor orientations are

positively related to business performance, which is contrary

to the rationale that the companies that spend too much of

their resources focusing on competitors have insufficient

resources for attention to customers. However, our results

contribute to our understanding of the circumstances under

which companies would like to pursue both of these orienta-

tions. Because machine tool companies are typically small to

medium size, with limited financial resources specializing in

a narrow area of production, they tend to focus on functions

that are seen to be necessary for immediate survival; there-

fore, one of the strategies often adopted by small companies

is to become a subcontractor or original equipment manufac-

turer (OEM) to a large firm. This relationship is only possible

when the small company is very customer oriented, i.e., it

must take into account of all the needs and requirements set

by the large firm in question. However, due to the high

competitive intensity in the market, the subcontractor agree-

ments are short term. Thus, periodically large firms organize

a competition between the small companies; consequently,

the company with the best performance with respect to the

customer’s (large firm’s) needs gets the business. The results

therefore indicate that companies that are both customer and

competitor oriented do perform well. It is important, there-

fore, for companies to take a balanced strategy; and that for

smaller companies, it is important not only to be customer

oriented but also competitor oriented. A lack in one of these

areas may be detrimental to successfully winning competitive

tenders from larger companies. Certainly, when companies

are successful in winning a contract, they turn their attention

to being customer oriented because of the nature of the one-

to-one subcontract arrangement. A telephone interview with

one of the respondents confirmed that this kind of strategy is

gaining popularity is Europe. Further, one of the ways of

being competitor oriented while being customer oriented is

the practice adopted by some companies that encourage their

customers to shop around for a better price with the promise

that if they find a better price, the company will not only

match the price but also give x percent rebate on the purchase.

In essence, companies pay their customers to do research for

their competitors’ products, which is much cheaper than

hiring a full-time research staff to perform the same function,

therefore leading to a better company performance.

Table 3 and Fig. 1 indicate more compelling findings that

low and high competitor focus activities contribute more to

business performance than medium competitor focus activ-

ities. Although these differences are not significant but

marginal in that the costs of becoming competitor oriented

outweigh the benefits when the level of competitors’ ori-

entation is medium. These findings offer support for the

view that companies become progressively less competitor

oriented following the receipt of an order. This is because

there is now more need to be customer oriented (to execute

the order) than to be competitor oriented, as there are no

further competitive activities till next competition for sub-

mission of tenders. The reduction in competitive activities is

shown by the graph with negative gradient while the

customer orientation gradient is positive. As companies

make progress through the execution of the orders, they


tend to step up their competitive activities while still

maintaining full focus on customer orientation in order to

have positive impact on performance. This trend is demon-

strated by positive gradients for both customer and compet-

itor orientations. It appears that companies do not lose focus

of their customers at any time, but do adjust their level of

competition-oriented activities given the resources they

have to compete in the marketplace.

One plausible reason could be that machine tool compan-

ies take a longer period of time to develop customer

orientation than companies in other industry sectors (cf.

service industry). Therefore, by the time a firm is equipped

to derive benefits from becoming competitor oriented, the

nature of the competition may have changed drastically.

Hence, it is important to assess the external environmental

variables (e.g., technology change, market growth) before a

company attempts to commit resources to become or sustain

such orientation. Another possible reason could be that

companies are not able to gain a competitive advantage

quickly enough due to the need to invest heavily in capital

items. This can have an adversarial effect on the performance

of a company.

The significance of the effect of competitor orientation

upon performance calls for a better appreciation of the

variables that influence the relationship. For example, while

some businesses may adopt a more competitor-oriented

strategy, others may pursue cost- or price-cutting measures

in order to neutralize environmental pressures, such as

market dynamism, or differing levels of strength in the

economy. Such benefits are expected to be short term;

however, in the long term, this approach has no effect on

profitability (Appiah-Adu & Singh, 1988). This external

emphasis may enable companies to find more opportunities

in the environment compared to their relatively less market-

oriented competitors.

Responsiveness among departments (F3) has a nonsigni-

ficant effect on business performance. It appears that these

companies in the sample did not place too much importance

on being responsive within their functional departments.

This fact is supported by the findings of the study by

Robinson and Pearce (1984), which suggest that often

various functions in small companies are carried out, if

not by a single person, at most by very few people who have

limited time and whose focus is more operational than

strategic. Because the study tends to include small- and

medium-sized companies, which are less likely to need

formal coordination between activities, responsiveness was

taken as read. Further in most cases, where companies have

limited financial and human resources and have inability to

compete on a broad front or in a market where no substantial

economies of scale exist, they resort to a focus strategy

(Porter, 1985) and provide a better service in limited seg-

ments. Certainly, a focus strategy will require less interfunc-

tional department coordination than a strategy that caters

broad range of customers’ needs from different segments. It

is particularly true for companies operating in a very

specialized area, such as machine tool where there are

relatively few customers or where companies are subcon-

tractors to larger companies whose needs’ are well identified

by the small companies. Therefore, it appears that SMEs

depend heavily on either their own sales force or on their

principal companies’ sales force for the generation of

information pertaining to customer’s need, which may

compensate for the lack of coordination among various

departments, and therefore saving of resources as a result

of less formal coordinated activities. Further, from R&D

point of view, since most of the machine tool manufactures

are OEMs, subcontractors, or suppliers to value-added

resellers, they are often highly directed by their principals

as to the incorporation of new innovations (results of the

principals’ R&D project) to their manufacturing technology,

leaving a little room for getting involved with other depart-

ments or administrative procedures, as they might indirectly

related to execution of the contracts.

Customer satisfaction orientation (F4) has a significant

(P < .05) and positive (.24) effect on business performance.

From Table 4, it appears that medium and high customer

satisfaction-oriented companies tend to perform better than

low customer satisfaction-oriented companies. This finding

is consistent with the conventional wisdom that customer

orientation is likely to lead customer satisfaction, a factor

that has an influence on repeat purchase (Heskett & Jones,

1994). In the machine tool industry, it is common that most

of the sales volume is determined by repeat orders, and that

these repeat orders are generated through satisfied custom-

ers. Companies cannot expect to obtain a good customer

satisfaction rating by merely selling machines. In some

instances, satisfaction can also be obtained through provid-

ing extra functional capability by selling attachments to the

existing machines. This is often done to increase operational

efficiency.

Further, customer satisfaction can be derived through the

superior performance of machines and through the services a

company can offer to its clients after sale (Singh & Ranch-

hod, 1988). Service after sales is an important source of

revenue. Therefore, it is important that a machine has a good

life span of operational capabilities coupled with quality

service after sales, and that companies build customer loyalty

as customers might be looking for service, upgrade, or

replacement for machine tools. This kind of relationship,

which leads to customer loyalty, is particularly important for

companies as customers can give a natural feedback to their

manufacturers who should strive to provide robust products

that are able to perform under a variety of conditions.

Research has shown that even if loyal customers buy com-

petitor’s product to take advantage of a special deal, they

generally return to their original company for their next

purchase (Deighton & Henderson, 1994). Also, loyal cus-

tomers are more receptive to line extensions and other new

products offered by the same company, and they are more

likely to forgive an occasional product or service failure

(Bejou & Palmer, 1998). However, what gives more cause


for concern is that the majority of dissatisfied customers do

not express their dissatisfaction with the performance of

products or the delivery of services, they just move their

custom elsewhere, destroying all the effort and investment

put into improving customer satisfaction. On the other hand,

customers who complain and receive a satisfactory response

become more loyal to the company than those who have

never complained because they now feel confident that the

company will take extra care to resolve the problem. This

implies that feedback from customers is vital, and that

companies should use all their available tools, such as forms

of feedbacks, reports of complains, findings of market

research, among others. The premise is that customers

should be encouraged to give feedback via any employee

or free phone number that can be passed on to concerned

authority for corrective action as necessary.

Thus, as companies become increasingly customer- and

competitor-focused and driven by customer demands, the

need to meet the customers’ expectations and retain their

loyalty while maintaining long-term relationship becomes

more critical. The results of the study suggest that low

customer satisfaction leads to a poor business performance,

i.e., satisfied customers are much more profitable to com-

panies than occasional buyers.

8. Conclusions and implications

The aims of the research were to redevelop a concise

industry-specific market orientation scale and to investigate

underlying dimensions that represented the market orienta-

tion concept. From this sample, the findings suggest that

there are four underlying dimensions, out of which three are

significant. These dimensions were labeled as customer

orientation, competitor orientation, responsiveness, and cus-

tomer satisfaction orientation. Regression analysis was

employed to analyze the effect of each individual orientation

on business performance. The findings are consistent with

our expectations that customer orientation, competitor ori-

entation, responsiveness, and customer satisfaction orienta-

tion are significant factors, and that they are positively

related to business performance. However, the factor,

responsiveness within department, was not found to be

significantly and positively related to the business perform-

ance. This is rather a strange result, as one would have

expected responsiveness to be a critical element in customer

satisfaction. It may be that departmental responsiveness has

been taken for granted by companies that are content with

the general customer orientation strategies. ANOVA re-

vealed that business performance is better when companies

are more customer, competitor, and customer satisfaction-

oriented by coordinating activities effectively within a

company across various departments.

The implications for managers are that it pays to be

customer oriented. They should develop a customer-ori-

ented culture (e.g., keeping the whole business informed

about major customers; products lines that are driven by

market research; quick to modify products as per customers’

needs; identify the needs of end users; and interact fre-

quently with other departments) before they endeavor to

become competitor oriented. Competitor orientation should

only be a part of the general activity without recourse to

extra expenditure. If companies are prepared to be fully

competitor oriented, then they should be ready to endure

initial revenue losses. The findings indicate the benefits for

companies that have a medium to high competitor orienta-

tion. Clearly, there is a need for cost-benefit analysis to be

undertaken by managers before a competitor orientation

strategy is pursued (e.g., assess the quality of existing

products and services; collect industry information through

informal means; seek opportunities to gain competitive

advantages; and getting marketing people involved with

product development teams) as these bring profit only in the

long term. With regard to customer satisfaction, it is vital

that a medium to high level of customer satisfaction is

obtained by providing customers with custom-made

machines and high-quality service after sales. This high-

lights the fact that companies may be better in investing in

relationships with customers rather than being overtly

focused on competitors. This can be implemented by

assessing the customers’ product preferences and by talking

to end users, agents, and distributors.

9. Study limitations and future research

As with most research efforts, this study has limitations

too. One of the limitations of the research is that respondents

were asked to score subjectively on a seven-point Likert-

type scale. These evaluations are subject to personal bias

and judgmental errors. However, financial constraint

necessitated us to use this methodology. Future research

could include a multiple respondent methodology and use

objective data from company reports to ascertain financial

performance. It would also have been useful to measure the

extent to which market orientation strategies contributed to

repeat purchases. Further, customer satisfaction could be

measured as the percentage sales from repeat buying. It is

important to mention that the study provides only a snapshot

picture at a single point in time, which means that the

recommendations are valid only if external environmental

variables are unaffected, e.g., government regulations, for-

eign exchange, economic cycle, competitiveness of the

developing nations to produce these machines at a lower

cost. It will be interesting to see if these variables moderate

the relationship between the various dimensions of market

orientation and business performance. It is also desirable to

develop a model using LISREL to detect the causal effect of

these dimensions on performance. The modest sample size

places limitations on the confidence in our findings. Repe-

tition of the study with a bigger sample would help validate

the findings, as we have not found responsiveness to be

Appendix A (continued)

No. Items Mean S.D.

13. We are generally quick to respond to competitor

campaigns targeted at our customer base (W/JK).

4.91 1.32

14. The activities of the different departments in this

business unit are well coordinated (JK).

5.03 1.14

15. Customers’ complaints fall on deaf ears in this

business unit (R/JK).

5.85 1.61

16. Even if we came up with a great marketing plan,

we probably would not be able to implement it in

a timely fashion (R/JK).

5.10 1.52

17. When we find out that customers are unhappy

with the quality of services, we take corrective

action immediately (JK).

5.88 1.26

18. When we find that customers would like us to 5.94 1.15


significantly related to the business performance. Nonethe-

less, the findings of the consequences of market orientation

on performance do shed some light on the understanding of

the impact of market-oriented activities. We do hope that

our study gives food for thought to practicing managers

about how customer, competitor, and customer satisfaction

focus can contribute to enhancing performance of their

companies in the short and long term in the light of external

environmental variables. Finally, the findings offer an

insight into the machine tool industry but fall somewhat

short of full generalizations. However, the industry-specific

construct could be used as a test bed for further research into

other manufacturing industry sectors in other countries.

modify a product or service, the departments

involved make concerted efforts to do so (JK).

19. In our company, there is little distinction between

‘‘sales’’ and ‘‘marketing’’ (W/DD).

5.16 1.58

20. In our company, marketing’s most important job is

to promote our product and services to our

customers (DD).

5.22 1.34

21. In our company, marketing’s most important job is

to identify and help meet the needs of our

customers (DD).

5.44 1.19

Acknowledgements

The authors gratefully acknowledge the helpful com-

ments from the editor and the reviewers. We would like to

thank Professor Erkki Laitinen, University of Wasa,

Finland, and Professor Angela Davis, University of

Winnipeg, Canada, for bringing their insights into the paper.
22. The company targets specific opportunities in
order to gain competitive advantage (W/NS).

5.41 1.22

23. In our organisation, all departments contribute to

create customer value (W/NS).

5.63 1.17

24. The marketing people in our organisation interact 5.39 1.41
Appendix A
No. Items Mean S.D.

1. We meet customers at least once a year to find out

what product or services they will need in the

future (W/JK).

5.57 1.60

2. Individuals from our manufacturing department

interact directly with customers to learn how to

serve them better (JK).

5.15 1.54

3. We are slow to detect changes in our customers’

product preferences (R/JK).

4.99 1.49

4. We collect industry information through informal

means, e.g., lunch with industry friends, talks with

trade partners, etc. (JK).

5.05 1.23

5. We are slow to detect fundamental shifts in our

industry, e.g., competition, technology regulation

(R/JK).

4.97 1.74

6. Marketing personnel in our business unit spend

time discussing customers’ future needs with other

functional departments (JK).

5.01 1.29

7. When something important happens to a major

customer or market, the whole business unit

knows about it in a short period (JK).

5.61 1.14

8. There is a minimal communication between the

marketing and manufacturing departments

concerning market development (R/JK).

5.15 1.55

9. Departments are slow to disseminate competitor

information among each other (W/R/JK).

4.96 1.29

10. For one reason or another, we tend to ignore

changes in our customers’ product or service

needs (R/JK).

4.98 1.61

11. We periodically review our product development

efforts to ensure that they are in line with what

customers want (JK).

5.52 1.20

12. The product lines we sell depend more on internal

politics than real market needs (R/JK).

5.87 1.23

frequently with other departments such as

manufacturing, finance, distribution, etc. (DD).

25. In our organisation, the marketing people have a

strong input into the development of new products

(W/DD).

5.04 1.52

W= reworded, R = reverse coded, JK = item from Jaworski and Kohli

(1993) scale, DD= item from Deng and Dart (1994) scale, and NS= item

from Narver and Slater (1990) scale.

Appendix B. Factor matrix and varimax rotation

(correlation coefficients less than .40 have been

suppressed)

Item no. F1 F2 F3 F4

18 .78

17 .76

12 .70

21 .65

24 .64

9 .62

7 .58

11 .57

23 .56

2 .52

14 .51

10 .50

4 .65

16 .65

22 .63

25 .52

15 .51

(continued on next page)

Appendix B (continued)

Item no. F1 F2 F3 F4

1 .81

8 .78

19 .66

6 .75

13 .74

3 .67

5 .66

20 .63

Eigenvalue 7.91 4.12 2.46 2.21

Variance (%) 31.67 16.54 9.86 8.81

Factor mean 5.45 5.29 5.28 5.02

S.D. 1.27 1.42 1.55 1.38

Cronbach’s � .81 .76 .71 .74

Standardized � .80 .76 .70 .74

n 12 5 3 5

F1 = customer orientation; F2 = competitor orientation; F3 = responsiveness;

F4 = satisfaction orientation.


References

Appiah-Adu, K., & Singh, S. (1988). Market orientation and performance:

An empirical studies of British SMEs. Journal of Entrepreneurship,

7(1), 27–47.

Balkrishnan, S. (1996). Benefits of customer and competitor orientation in

industrial markets. Industrial Marketing Management, 25, 257–269.

Bejou, D., & Palmer, A. (1998). Service failure and loyalty. Journal of

Services Marketing, 12(1), 7–22.

Berkowitz, E. N., Crane, F. G., Kerin, R. A., Hartley, S. W., & Rudelius, W.

(2003). Marketing. New York: McGraw-Hill.

Cadogan, J. W., & Diamantopoulos, A. (1995). Narver and Slater, Kohli

and Jaworski and the market orientation construct: Integration and in-

ternationalisation. Journal of Strategic Marketing, 3(1), 77–88.

Chee, L. K., & Peng, N. K. (1996, January). Customer orientation and

buyer satisfaction: The Malaysian housing market. Asia Pacific Journal

of Management, 101–116.

Churchill Jr., G. A. (1979). A paradigm for developing better measures of

marketing constructs. Journal of Marketing Research, 16(1), 64–73.

Cronbach, L. J. (1975). Beyond the two disciplines of scientific psycholo-

gist. American Psychologist, 30, 116–127.

Davis, D., Sharp, B., & Schlack, M. (1993, March). Can digital sustain

edge? Datamation, 24–31.

Day, G. S., & Wensley, R. (1988). Assessing advantage: A framework

for diagnosing competitive superiority. Journal of Marketing, 52(2),

1–20.

Deighton, J., & Henderson, C. (1994). The effects of advertising on brand

switching and repeat purchasing. Journal of Marketing Research, 31(1),

28–43.

Deng, S., & Dart, J. (1994). Measuring market orientation: A multi-

factor, multi-item approach. Journal of Marketing Management, 10(8),

725–742.

Deshpande, R., & Webster Jr., F. E. (1989). Organisational culture and

marketing: Defining the research agenda. Journal of Marketing, 53(1),

3–15.

Diamantopoulos, A., & Hart, S. (1993). Linking market orientation and

company performance: Preliminary evidence on Kohli and Jaworski’s

framework. Journal of Strategic Marketing, 1(2), 93–121.

Felton, A. P. (1959). Making the marketing concept work. Harvard Busi-

ness Review, 37(4), 55–65.

Filion, F. L. (1975). Estimating bias due to nonresponses in mail surveys.

Public Opinion Quarterly, 39(4), 482–492.

Filion, F. L. (1976, July). Explaining and correcting for non-response

biases using follow ups of non respondent. Pacific Sociological Review,

401–408.

Greenley, G. E. (1995). Market orientation and company performance:

Empirical evidence from UK companies. British Journal of Manage-

ment, 6(1), 1–13.

Heskett, J. L., & Jones, T. O. (1994). Putting the service profit chain to

work. Harvard Business Review, 72(2), 105–111.

Jaworski, B. J., & Kohli, A. K. (1993). Market orientation: Antecedents and

consequences. Journal of Marketing, 57(3), 53–70.

Kohli, A. K., & Jaworski, B. J. (1990). Market orientation: The construct,

research prepositions and managerial implication. Journal of Marketing,

54(2), 1–18.

Konopa, L. J., & Calabro, P. J. (1971, Spring). Adoption of the marketing

concept by large North Eastern Ohio manufacturers. Akron Business

and Economic Review, 9–13.

Levitt, T. (1960). Marketing myopia. Harvard Business Review, 38(4),

45–56.

Likert, R. (1967). The human organisation: Its management and value.

New York: McGraw-Hill.

Liu, H. (1995). Market orientation and firm size: An empirical examination

in UK firms. European Journal of Marketing, 29(1), 57–71.

McNamara, C. P. (1972). The present status of the marketing concept.

Journal of Marketing, 36(1), 50–57.

Morgan, R. E., & Morgan, N. A. (1991). An exploratory study of market

orientation in the UK engineering profession. International Journal of

Advertising, 10(4), 333–347.

Narver, J. C., & Slater, S. F. (1990). The effect of market orientation on

business profitability. Journal of Marketing, 54(4), 20–35.

Neter, J., Wasserman, W., & Kutner, M. H. (1985). Applied statistical

models. Illinois: Irwin.

Nunnally, J. (1978). Psychometric testing. New York: McGraw-Hill.

Oliver, R. L., & Swan, J. E. (1989). Equity and disconfirmation perceptions

as influences on merchant and product satisfaction. Journal of Consum-

er Research, 16(3), 372–383.

Pitt, L., Caruana, A., & Berthon, P. R. (1996). Market orientation and

business performance: Some European evidence. International Market-

ing Review, 13(1), 5–18.

Porter, M. (1985). Competitive advantage. New York: Free Press.

Power, C., Driscoll, L., & Bohn, E. (1992, August). Smart selling. Business

Week, 46–48.

Reichheld, F. F., & Sasser Jr., W. E. (1990). Zero defections: Quality comes

to services. Harvard Business Review, 68(5), 105–111.

Robinson, R., & Pearce, J. A. (1984). Research thrusts in small firm stra-

tegic planning. Academy of Management Review, 9(1), 128–137.

Robinson, R., & Pearce, J. A. (1988). Planned patterns of strategic behav-

iour and their relationship to business unit performance. Strategic Man-

agement Journal, 9(1), 43–60.

Ruekert, R. W. (1992). Developing a market orientation: An organisational

strategy perspective. International Journal of Research in Marketing,

9(3), 225–245.

Singh, S., & Ranchhod, A. (1988, September). Reassessing market orien-

tation: An empirical test in the machine tool industry. British Academy

of Management Conference, Nottingham, UK (p. 16).

Thorn, R. (1996). Industrial marketing with special reference to machine

tool industry in the UK. Cheshire: Advanced Manufacturing Technol-

ogy Research Institute.

Venkatraman, N., & Ramanujam, V. (1986). Measurement of business per-

formance in strategy research: A comparison of approaches. Academy of

Management Review, 11(4), 801–814.

Wilkie, W. L. (1990). Consumer Behaviour. New York: Wiley.

Market orientation and customer satisfaction: Evidence from British machine tool industry

Documents

Transcript of Market orientation and customer satisfaction: Evidence from British machine tool industry