Market orientation and organizational performance

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See discussions, stats, and author profiles for this publication at: http://www.researchgate.net/publication/279191519 RELATIONSHIP BETWEEN MARKET ORIENTATION AND ORGANIZATIONAL PERFORMANCE (Special Reference to Small and Medium Scale Manufacturing Organizations in Sri Lanka) ARTICLE · JUNE 2015 DOWNLOADS 28 VIEWS 51 1 AUTHOR: Umesh Gunarathne University of Ruhuna 4 PUBLICATIONS 0 CITATIONS SEE PROFILE Available from: Umesh Gunarathne Retrieved on: 02 July 2015

Transcript of Market orientation and organizational performance

  1. 1. ResearchGateSee discussions,stats,and author profiles for this publication at:http: //www. researchgate. net/ publication/279191519RELATIONSHIP BETWEEN MARKET ORIENTATION AND ORGANIZATIONAL PERFORMANCE (Special Reference to Small andMedium Scale Manufacturing Organizations in Sri Lanka)ARTICLE - JUNE 2015DOWN LOADS VIEWS 28 51 1 AUTHOR: Umesh Gunarathne l University ofRuhuna 4 PUBLICATIONS 0 CITATIONSSEE PROFILEAvailable from:Umesh Gunarathne Retrieved on:02 July 2015
  2. 2. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka I . , Published at Research Gate - June 2015 l RELATIONSHIP BETWEEN MARKET ORIENTATION AND ORGANIZATIONAL PERFORMANCE(Special Reference to Small and Medium Scale Manufacturing Organizations in Sri Lanka)By Umesh Gunarathne W. H.D. P.MF/2010/2708Department of MarketingMay 2015 Dissertation Presented to the Faculty of Management and Finance of University of Ruhuna in Partial Fulfillment of the Requirements for the Degree of Bachelor of Business Administrationin MarketingUmesh Gunarathne W. H.D. P. -2015
  3. 3. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka I . .Published at Re. 'earch Gate - June 2015AcknowledgementI would like to take this opportunity to thank several people who have been truly important over the past few months,especially in the preparation of my dissertation.This dissertation would not have been possible without the guidance and the help of several individuals who in one way or another contributed and extended their valuable assistance in the preparation andcompletion of this study. First and foremost,Iheartily grateful to my supervisor,Dr.T. S.L. W Gunawardhana,Senior Lecturer,Department of Marketing for his admirable guidance,supervision,continuous encouragement and support.In addition to that he provided me with a very good academicand work environment,which helped me in developing my ideas. Then,I am very grateful to Branch Manager of the Regional Development Bank City Branch,Matara for spending valuable time to help me in order to collect data from the respondents.I must also express my full gratitude to the managers who allowed me to collect data in their firms as well as those I met and who confirmed the practicalimportance of my research. Secondly,I would like to very thankful all the Lectures of Department of Marketing,Faculty of Management and Finance,University of Ruhuna who encourage me tocomplete this research study without any hesitation. I also thank my all University friends especially including best friends Danuka Sasanga,Dileesha Jayawardhana,Nadeeshanka Abeywickrama,Nuwan Kumarasinghe,Tharika Seuwandi,and Sammani Hapugoda for always being present in the good as well as in the bad moments,and who were really encouraging duringthis special period of my life. Finally,I would like to record my everlasting love and gratitude to my parents,my sisters and cousins,and relatives who has assisted me in numerous ways to make thisstudy success. Umesh Gunarathne W. H.D. P. -2015
  4. 4. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka ' 4,Published at ResearchGate - June 2015Table of Contents Page 1. INTRODUCTION . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .1 1.1. Chapter Introduction . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . . 1 1.2. Background of the Study . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .2 1.3. Problem Identication . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .4 1.3.1. Research Question . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....5 1.4. Objectives of the Study . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .5 1.5. Significance of the Study . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .6 1.6. Chapter Outline . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . . 8 2. LITERATURE REVIEW . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....9 2.1. Chapter Introduction . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .9 2.2. Organizational Performance . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . . 10 2.3. Market Orientation . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . . 12 2.3.1. Different views of Market Orientation . ... ... ... ... ... ... .. . . 15 2.3.1.1. Kholi and Jaworskis View . ... ... ... ... .....15 2.3.1.2. Slater and Narvers View . ... ... ... ... ... .....16 2.3.2. Customer Orientation . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . . 19 2.3.3. Competitor Orientation . ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .21 2.3.4. Inter Functional Coordination . ... ... ... ... ... ... ... ... ... ... ... . . .22 2.3.5. Social Benefit Orientation . ... ... ... ... ... ... ... ... ... ... ... ... ... . . .24 2.4. Market Orientation and Organizational Performance . ... ... ... ... .....25 2.5. Conceptual Framework . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . . 35 2.6. Hypotheses Development . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....36 2.6.1. Customer Orientation & Organizational Performance 36 2.6.2. Competitor Orientation & Organizational Performance . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . . 37 2.6.3. Inter Functional Coordination & Organizational Performance . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . . 37 2.6.4. Social Benefit Orientation & Organizational Performance . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . . 3 8 3Umesh Gunarathne W. H.D. P. -2015
  5. 5. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka ' 4,Published at ResearchGate - June 20153. RESEARCH METHODOLOGY . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....40 3.1. Chapter Introduction . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .40 3.2. Philosophy . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....41 3.3. Research Design . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....433.3.1. Exploratory Vs.Conclusive Research . ... ... ... ... ... ... .....433.3.2. Quantitative Vs.Qualitative Research . ... ... ... ... ... ... .....423.4. Research Context . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .45 3.5. Determination of Population and Sample . ... ... ... ... ... ... ... ... ... ... .....47 3.5.1. Population . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .473.5.2. Sampling and Sample . ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....483.5.2.1. Sampling . ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .483.5.2.2. Sample . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .493.5.3. Extent . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .503.6. Data Collection . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .50 3.6.1. Primary data and Data Collection . ... ... ... ... ... ... ... ... ... . . .503.6.1.1. Primary Data Collection Method . ... .....513.6.2. Secondary Data . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .513.7. Questionnaire Design . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .52 3.8. Pilot Study . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....53 3.9. Data Collection . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .54 3.10. Measurement and Scaling . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....55 3.10.1. Primary Measurements . ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .553.10.2. Organizational Performance . ... ... ... ... ... ... ... ... ... ... ... .....553.10.3. Customer Orientation . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .563.10.4. Competitor Orientation . ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .583.10.5. Inter functional Coordination . ... ... ... ... ... ... ... ... ... ... ... .. . .593.10.6. Social Benefit Orientation . ... ... ... ... ... ... ... ... ... ... ... ... ... . . .604. DATA ANALYSIS . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .62 4.1. Chapter Introduction . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .62 4.2. Demographic Factor Analysis . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....63 4.2.1. Position of the Respondents . ... ... ... ... ... ... ... ... ... ... ... ... . . .634.2.2. Age Composition of the Sample . ... ... ... ... ... ... ... ... ... .....64Umesh Gunarathne W. H.D. P. -2015
  6. 6. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka V 4,Published at ResearchGate - June 20154.2.3. Gender Composition of the Sample . ... ... ... ... ... ... ... ... . . .664.2.4. Educational Level of the respondents . ... ... ... ... ... ... ... . . .674.3. Background Data Analysis . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .68 4.3.1. Line of the Business . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .684.3.2. Main Production of the Business . ... ... ... ... ... ... ... ... ... .. . .704.3.3. Established Year of the Business . ... ... ... ... ... ... ... ... ... .. . .714.4. Measurement Model . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .72 4.4.1. Conrmatory Factor Analysis . ... ... ... ... ... ... ... ... ... ... ... . . .724.5. Validity and Reliability . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .85 4.6. Structural Model . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . . 88 4.7. Hypothesis Testing . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .89 5. DISSCUSSTION AND CONCLUSION . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....91 5.1. Chapter Introduction . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .91 5.2. Summary of the Study . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .92 5.3. Findings of the Study . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .93 5.4. Contribution of the Study . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .94 5.4.1. Managerial Contribution . ... ... ... ... ... ... ... ... ... ... ... ... ... .....945.4.2. Theoretical Contribution . ... ... ... ... ... ... ... ... ... ... ... ... ... .....955.5. Limitations and Future research . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....97 5.5.1. Limitations . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....975.5.2. Future Research . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .98ReferencesUmesh Gunarathne W. H.D. P. -2015
  7. 7. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka V 4Published at ResearchGate - June 2015List of Tables Table 2.1: Summary of previous research findings . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....26 Table 3.1: Determinants of manufacturing organizations selection . ... ... ... ... ... ... ... .. . .47 Table 3.2: Results of the Pilot Test . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .54 Table 3.3: Measurement items of Organizational Performance . ... ... ... ... ... ... ... ... ... .. . .56 Table 3.4: Measurement items of Customer Orientation . ... ... ... ... ... ... ... ... ... ... ... ... ... . . .57 Table 3.5: Measurement items of Competitor Orientation . ... ... ... ... ... ... ... ... ... ... ... ... . . .58 Table 3.6: Measurement items of Inter Functional Coordination . ... ... ... ... ... ... ... ... .....59 Table 3.7: Measurement items of Social benefit Orientation . ... ... ... ... ... ... ... ... ... ... .....61 Table 4.1: Demographic Data Position of the Respondents . ... ... ... ... ... ... ... ... ... ... .. . .63 Table 4.2: Demographic Data Age Composition of the Sample . ... ... ... ... ... ... ... ... . . .64 Table 4.3: Demographic Data Gender Composition of the Sample . ... ... ... ... ... ... .. . .66 Table 4.4: Demographic Data Educational Level of the Respondents . ... ... ... ... ... . . .67 Table 4.5: Background Data Line of the Business . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .68 Table 4.6: Background Data Main Production . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .70 Table 4.7: Background Data Established Year of the Business . ... ... ... ... ... ... ... ... .....71 Table 4.8: Confirmatory Factor Analysis (Original Model) . ... ... ... ... ... ... ... ... ... ... ... .. . .73 Table 4.9: Confirmatory Factor Analysis (Final Model) . ... ... ... ... ... ... ... ... ... ... ... ... ... . . . 82 Table 4.10: Assessment of the Reliability . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .85 Table 4.11: Results of PLS path model Estimation . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....86 Table 4.12: Discriminant Validity of the Constructs . ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....87 Table 4.13: Summery of the Hypotheses Testing . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....90Umesh Gunarathne W. H.D. P. -2015
  8. 8. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka V IPublished at ResearchGate - June 2015Figure 2.1: Figure 2.2: Figure 2.3: Figure 3.1: Figure 3.2: Figure 3.3: Figure 4.1: Figure 4.2: Figure 4.3: Figure 4.4: Figure 4.5: Figure 4.6: Figure 4.7: Figure 4.8: Figure 5.1: Figure 5.2:List of Figures Kholi and Jawoskis view on Market Orientation . ... ... ... ... ... ... ... ... ... ... .. . . 16 Narver and Slaters view on Market Orientation . ... ... ... ... ... ... ... ... ... ... .....17 Developed Conceptual Framework . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....35 Basic research Designs . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .43 Sampling Techniques . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....48 Primary Measurement Scales . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....55 Demographic Data Position of the Respondents . ... ... ... ... ... ... ... ... ... ... . . .64 Demographic Data Age Composition of the Sample . ... ... ... ... ... ... ... .....65 Demographic Data Gender Composition of the Sample . ... ... ... ... ... ... . . .66 Demographic Data Educational Level of the Respondents . ... ... ... ... .....67 Background Data Line of the Business . ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....69 Background Data Main Production . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....70 Background Data - Established Year of the Business . ... ... ... ... ... ... ... ... .. . .72 Structural Model . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . . 88 Slater and Navers view of Market Orientation (MKTOR model) . ... .....95 NEWMKTOR model . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .....96Umesh Gunarathne W. H.D. P. -2015
  9. 9. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka V I Published at ResearchGate - June 2015 List of AppendicesAppendix 1: Covering LetterAppendix 2: Survey Questionnaire (English)Appendix 3: Survey Questionnaire (Sinhala Translation) Appendix 4: Detailed Pilot Study ResultsAppendix 5: Standardized Loading Values (Original Model) Appendix 6: T values (Original Model)Appendix 7: Standardized Loading Values (Final Model) Appendix 8: T Values (Final Model)Umesh Gunarathne W. H.D. P. -2015
  10. 10. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015DeclarationI hereby declare that this dissertation is my own work and effort and that,to the best of my knowledge and belief,it contains no material previously published or written by another person nor material which has been accepted for the award of any other degree or diploma of the university or other institute of higher learning,except wheredue acknowledgment has been made in the text. Signature of the student:Name of the student:Registration number of the student: Date: Umesh Gunarathne W. H.D. P. -2015
  11. 11. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015CertificationThis is to certify that this dissertation submitted by Gunarathne W. H.D. P.U (MF/2010/2708) in partial fulfillment of the requirement for the Degree of Bachelor of Business Administration in Marketing at the Faculty of Management and Finance of the University of Ruhuna is a record of the own work carried out by the studentunder my supervision.This dissertation has been submitted with my approval. SupervisorDr.Thusitha Gunawardhana Department of MarketingFaculty of Management and FinanceUniversity of RuhunaHead,Department of Marketing Faculty of Management and FinanceUniversity of Ruhuna10 Umesh Gunarathne W. H.D. P. -2015
  12. 12. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015AbstractStudying the relationship between Market Orientation and Organizational Performance has become a popular research topic in recent years.However,there is a lack of research conducted related to this topic in Sri Lankan Context.This Research addresses the relationship between Market Orientation and Organizational performance in Small and Medium scale manufacturing organizations in Sri Lanka.Based on the literature review developed four hypotheses that can be tested in this research study.Descriptive research design has undertaken and 240 respondents were in the sample.After developing the questionnaire,conducted a pilot test in order to measure the accuracy of the questionnaire.Data was analyzed by using both smart PLS and SPSS software and Demographic data analysis,CFA and SEM are used to analyze the data and test the hypotheses.Results shows that sub variables of market orientation (Competitor orientation,Inter functional Coordination and Social Benefit Orientation) are positively correlated with Organizational Performance while Customer Orientation is negatively correlated with the Organizational Performance insmall and medium scale manufacturing industry in Sri Lanka. Managerial and theoretical implications are made based on the major findings and discussed the importance of the customer orientation for an organization in detail.The research study contributes to the managers for making and implementing market oriented strategies specially highlighting the importance of the customer centric approach.Future researchers can apply NEWMAKTOR model which is developedthrough this research study to measure the Market Orientation in different contexts. Key Words:Competitor Orientation,Customer Orientation,Inter FunctionalCoordination,Market Orientation,Organizational Performance and Social BenefitOrientationll Umesh Gunarathne W. H.D. P. -2015
  13. 13. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015CHAPTER 1 INTRODUCTION1.1. Chapter IntroductionThis is the rst chapter of present research study and it introduces the topic to be covered by the study.The purpose of this chapter is to put forward an overview of the research and its contents.The reasons why this research area was undertaken,the main objectives of the study and the research gap also are detailed in this chapter.This chapter has been concluded with a contraction on the structure of the research study on the relationship between Market Orientation and OrganizationalPerformance. Further,second section of this chapter attempts to get an approach to the research study and it describes the background of the research study in detail.The third section of this chapter exhibits the problem identification and the research gap of this research study while the fourth section of this chapter identies the importance of the study indetail. Determined main objective and the sub objectives of the research study included in the section ve of this chapter.Section six of this chapter shows the structure of theresearch study. 12 Umesh Gunarathne W. H.D. P. -2015
  14. 14. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 20151.2. Background of the StudyDuring the last two decades with the rapid growth of the business economy Marketing has become a signicant area in the business industry and Marketing plays vital role in the today organizations.Due to this reason Market oriented strategies received a significant amount of attention from researchers (e. g. Eris and Ozmen N.T,2012; Lopez M.B,2010; Rettab and K.Mellahi,2010; A. P. Schalk,2008; Kholi and Jawoski,1996; Slater and Narver,1990).Researches in the area of marketing,has exploded in the decade of the 1990s.This growth is due in large part to the seminal work of Narver and Slater (1990) that developed scales to measure the components ofmarket orientation. Today,each and every organization pay more consideration in order to maximize the prot through satisfying customers needs and wants and keeping protable relationship with customers,because every organization has realized that without concerning needs and wants of the consumers it is very harder to survival within the industry while earning prots.Not only that when considering about customers perspective,especially today consumers are more knowledgeable and rational when compare with the past.They always expect higher level of satisfaction by fullling their needs and wants through products and services.Therefore organizations should give priority to fulll the consumers needs and wants.In other words organizations should implement business strategies and established organizational policies by identifying the things that consumers are expecting from the organizations (Albert and Nora,2009). The concept of market orientation is considered as the corner stone of the marketing management eld and emerged in the literature as the implementation of the marketing (Schalk,2008).The marketing concept is essentially a business philosophy where superior financial performance is considered to be the result of being moreeffective than competitors in determining and satisfying customer needs. Furthermore market orientation is conceptualized as a supplement to the marketing concept as it expands the focus from customer to market,including customers,competitors and other factors affecting customer needs (Goldman and Grinstein,2010and Narver and Slater,1990).Slater and Narver (1990) concluded that market13 Umesh Gunarathne W. H.D. P. -2015
  15. 15. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015orientation consists of three behavioral components:Customer Orientation,Competitor Orientation,and Inter Functional Coordination.They conceptualized an organizations degree of market orientation as the sum total of its emphasis on thesethree components. Marketing concept has represented a fundamental tenet of marketing thought.As the philosophical foundation of a market orientation by Kholi and Jawoski (1993),the marketing concept serves as the primary justification for the clear role of customers inthe planning and execution of market strategies. As the marketing concept and theory of market orientation aim at explaining why some organizations achieve greater performance than their competitors,this is the closest thing the field of marketing management has to its own competitive theory.Also,Market Orientation is acknowledged by practitioners as an important characteristic of successful enterprises,as Deutschman (1991) found that Americas fastest growing companies primarily put the customers first,and listen to,understand and serve them.These all type of strategies has been linked with the development ofmarketing concept. Market oriented organizations typically have a long term focus related to prots and to implementing a high degree of market orientation (Felton,1999).A short run focus on profits is not inconsistent with long run profit performance.According to Levitt (1980),the relationship between them is as follows:At all times a business organization attempts to create superior value to their customers.As competitors respond and diminish business's customer value superiority,the business discoversand implements additional value for its customers (e.g.it augments its product). To grow and survive in a competitive environment they must focus on long term investment strategies that are important for building the market orientation.Market orientation is not a business mode that can be switched on or off,which also implies a long term focus.Considering as a whole it is very essential to understand the importance of the market oriented practices in order to ensure the survival within theindustry by an organization. 14 Umesh Gunarathne W. H.D. P. -2015
  16. 16. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015Result of the implementation of business practices can be identied based on the performance of the organization.That is how an organization achieves their established goals and objectives.Performance is the most important criteria that determine survival of a business organization.Therefore this research study cover the marketing practices implemented by the managers for achieve goals and objectives ofthe organization. 1.3. Problem IdentificationAlthough the Market Orientation is an old concept,today it has become very important and complex.Most of the large organizations try to establish policies,by focusing on market,needs and wants of customers and the business strategies to gain competitive advantage.An organization becomes market oriented only if its employees are market oriented (Brown et al. , 2002).Therefore,the variables inuence attitude toward Market Orientation need to be studied at the individual organizational level and not only at the employee level.Core aspects to persons are individual values and personality traits (Roccas et al. , 2002).Individual values and personality traits inuence attitudes people have toward different aspects of their lives including attitudes toward Market Orientation (Homer and Kahle,1988).These attitudes,in turn,inuence the way in which individuals behave (Homer and Kahle,1988). Researches have shown that market oriented organizations perform better than non- market oriented organizations in terms of efficiency,effectiveness,adaptability,and overall performance (Jaworski and Kohli,1993; Slater and Narver,1994).Moreover,rm performance largely depends on market performance and employee performance (Hansen and Wernerfelt,1989).This is the rationale for studying the inuence of Market Orientation on market performance and individual employee performance.When developing the Marketing strategies to implement with the purpose of increasing organizational performance through the market oriented practices specially Customer Orientation,Competitor Orientation,Inter Functional Coordination and Social Benefit Orientation,it is very important to examine the current situation,because if new strategies are based on this relevant information there may be an efcient and effective progress.Not only that,therefore,before plan new marketingstrategies or to evaluate current system it essential to conduct a research study.Based15 Umesh Gunarathne W. H.D. P. -2015
  17. 17. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015on the research findings managers can make decisions in order to achieve betterorganizational performance. Most of the large scale manufacturing businesses are market oriented than small and medium scale manufacturing businesses in Sri Lanka.When considering the last few years there was an emerging situation for establishing the small and medium scale manufacturing organizations.But at the same time many of those established businesses are quickly vanished from the industry due to lack of practicing the market oriented applications.Most of the decision makers could not identified the importanceand real need of the market orientation. Although there are many researchers have conducted researches in order to examine the relationship between market orientation and organizational performance,they have given concentration only to the Market Orientation and Organizational Performance as a whole.But in this research study the researcher has developed conceptual framework with new sub independent variables such as Customer orientation,Competitor Orientation,Inter Functional Coordination and Social Benet Orientation.Therefore the conceptual framework of this research study is a new one to the world and to marketing research process.And also researchers have done researches only related with their contexts and it is rare to see researches in Sri Lankan context.But in this research study the researcher applied these concepts in Sri Lankan context.And also for the rst time this research study considered about smalland medium scale manufacturing business organizations located in Sri Lanka. Several researchers have identified and applied three components of Market Orientation such as Customer Orientation,Competitor Orientation and Inter Functional Coordination developed by the Narver and Slater in 1990. Hence,the researcher has adopted a new sub component called Social Benefit Orientation to the Market Orientation.The rationale behind that today,it is very important to consider about social benets by an organization on behalf of increase of performance of the organization and it will help to make a good image in customers mind about the organization and its products.And also it comes with the Societal MarketingConcept and the concept Corporate Social Responsibility as well. 16 Umesh Gunarathne W. H.D. P. -2015
  18. 18. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015 1.3.1. Research questionsOnce problem has identified,it is needed to developed research questions for answer through the research study.Therefore this research study gives the answer to the main question which is What is the relationship between Market Orientation andOrganizational Performance? In addition to main research question sub questions are, 0 What is the relationship between Customer Orientation and Organizational Performance? 0 What is the relationship between Competitor Orientation and Organizational Performance? 0 What is the relationship between Inter Functional Coordination and Organizational Performance? 0 What is the relationship between Social Benefit Orientation andOrganizational Performance? 1.4. Objectives of the StudyThe main objective of this research study is, 0 To examine the relationship between Market Orientation and theOrganizational Performance. In addition to that sub objectives are, 0 To examine the relationship between Customer Orientation and the Organizational Performance. 0 To examine the relationship between Competitor Orientation and the Organizational Performance. 0 To examine the relationship between Inter Functional Coordination and Organizational Performance. 0 To examine the relationship between Social Benet Orientation andOrganizational Performance. 17 Umesh Gunarathne W. H.D. P. -2015
  19. 19. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 20151.5. Significance of the StudyMainly this research study provides contribute to decision makers of the organization (Managers),Academic and Policy makers.It is very important to consider about Market Orientation by any organization and how the market oriented activities leads to performance of the organization because that is the most suitable way to achieve goals and objectives of the organizations while earning fair profits and maintaining protable relationships with customers.Ultimately,any organization tries to achieve goals and objectives.When organizations are going towards to achieve goals and objectives they should consider about their customers,their major competitors,coordination of inter functions within the organization as well as social benefits and responsibilities.In order to get clear understand about customers,competitors,inter functional coordination and social benefits it is very essential to study about marketorientation and organizational performance. Different scholars has been conducted researches and developed many theories related to Market orientation.According to the scholars like,Boshoff and Matheson (1998),further testing of the Kohli and Jaworski (1990) and Narver and Slater (1990) instruments in wider business environments and cultures will help in developing more strong and trustworthy measures of the market orientation concept.Businesses and scholars alike are interested in its effects on daily operations and in the costs of introducing market oriented behavior.At the micro level,many marketing issues have not been fully discussed in Sri Lanka.It is unknown how Sri Lankan managers implement and practice marketing theories such as market orientation.This study might shed some light on whether Sri Lankan managers and staff understandmarketing theories differently from their counterparts in other economies. Building on the initial research by,Kholi and J aworski (1990) and Narver and Slater (1990),signicant progress has been made in the conceptualization and measurement of market orientation and also in evaluating its impact upon business performance.Although,studies of the impacts of market orientation have demonstrated a significant and positive relationship between market orientation and business performance in developed economies.A number of studies,however,mainly in non-United States contexts,have suggested that the relationship is context specic.Market orientation isoften considered to be marketings contribution to business strategy (Hunt and18 Umesh Gunarathne W. H.D. P. -2015
  20. 20. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015Lambe,2000),and its salient dimensions,competitor orientation and customerorientation,are considered important strategic orientations. When consider about the last four decades in Sri Lanka,most of organizations are tended to produce more products without considering customer needs and wants.As a result of that they could not be able to make profitable relationship with customers and most organizations vanished from the market.With the time they realized that in order to be a successful organization with in the industry they should consider about not only profits but also needs and wants of the customers,competitors reactions,coordination of different functions within the organization and social benets that can be delivered to the society as a whole.Therefore this study provides a contribution to get clear understanding about the relationship between Market Orientation and Organizational Performance.It will help make decisions by the managers to achieve goals and objectives of the organization while concerning the ways to gain prots.Further,this provides what kind of marketing strategies should be taken on behalf of the organizational success and the increase the marketing performance of theorganization. Finally,this research study contributes to the academics.There are no significant amounts of research studies have been conducted related to market orientation area.Therefore the findings of the research study will help to academic for conducting researches in different contexts regarding market orientation.As well as this will helps to make proper directions for future researchers to confirm the relationshipbetween Market Orientation and Organizational Performance. 19 Umesh Gunarathne W. H.D. P. -2015
  21. 21. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka V V, Publisllczl at Rcscurcl1Gutc - June 20151.6. Chapter OutlineThe rst chapter describes the introduction of the research study,problem identication and research questions,the objectives which are going to achieve through the research and significance of the research study.Further it includes thestructure of the research study (Chapter outline of the research). Chapter two consists with two parts and the first part relate with the literature review regarding variables (Dependent and Independent variables) and theoretical background behind the concepts developed by the different researchers in different perspectives.It provides guidance to the research study.In part two of chapter two, conceptual framework and hypotheses development can be seen. Third chapter of the research study deal with the Methodology of the research study and it includes philosophy,research design,research context,population and Sample, data collection,questionnaire design,pilot test and the measurement and scaling. Chapter four is the Data Analysis.It includes the relevant data analysis procedures need to analyze the collected data.Further it is included Conrmatory Factor Analysis(CFA),Structural Equation Modeling (SEM) and the Hypotheses Testing. Chapter five is the final chapter of research study and it consists with the ndings & conclusion and managerial implications.Further,it includes limitations of the research study and future directions for future researchers.And also theoreticalcontribution for the market orientation is included in this chapter five. 20 Umesh Gunarathne W. H.D. P. -2015
  22. 22. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka I . .Published at Re. 'em'cI1Gute - June 2015CHAPTER 2 LITERATURE REVIEW2.1. Chapter IntroductionThis is the second chapter of this study and it consists with the literature review related to main variables of this study namely Market Orientation (i. e.,Customer Orientation,Competitor Orientation,Social Benet Orientation,and Inter functional Coordination) and Organizational Performance.In addition to that in this chapter include the models and theories,definitions related to the variables of this study developed by the professional Scholars.(E.g.Slater and Naver,1990; Gronroos,1992 and Kohli and Jaworski,1996). The second section of this study focuses the literature review of the dependentvariable,Organizational Performance. The third section of this chapter is described and the review of literature about the independent variables in this study such as Customer Orientation,Competitor Orientation,Social Benefit Orientation and Inter Functional Coordination.Especially in third section in addition to the denitions and the concepts,there are main two theories has been identified.Those theories are essential to get proper understandingand directions to the progress of the research study. And also in fourth section of research study exhibit integration of dependent variable (Organizational Performance) and Independent variables,(Customer Orientation,Competitor Orientation,Inter Functional Coordination and Social Benefit Orientation) while fifth section discuss about the conceptual framework developed for the research study.Sixth section describes the hypotheses development.There are four hypotheses can be seen in this research study and developed those hypotheses based on theprevious research ndings. 21 Umesh Gunarathne W. H.D. P. -2015
  23. 23. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 20152.2. Organizational PerformancePerformance is a fairly broad concept,and it is meaning changes in accordance with users perspective and needs (Lebas,1995).Traditionally,firm performance has been viewed and measured in accounting terms (Avci et al. , 2011).An additional issue should be raised here;due to confidentiality concerns,it is often challenging to obtain actual accounting data from organizations unless they are publicly quoted companies.As a result,previous research studies looking into performance related issues used self-reported nancial and non-financial performance measures.However,Sink and Tuttle (1989) noted that performance should not be treated only as a financial concept.Thus,it is suggested that particularly in the service sector,non-financial performance should receive serious consideration.In addition,Law et al.(1995) recommend the use of nonfinancial performance measures based on the fact that tourism establishments are labour intensive and customer-oriented.The marketing literature is replete with evidence of the positive relationship between market performance and nancial performance (Anderson,1997).Similarly,studies demonstrate the inuence of market performance variables such as market share on return on sales (Buzzell,2004).On the other hand,marketing performance measurement continues to be a large and growing concern for marketing scholars and managers a like (OSullivan, 2009)Organizational performance refers to the rms market and nancial performance,which is positively related to the r1ns economic value (Slater and Narver,1994) According to the denition there are three important concepts can be highlighted.Those are Market performance,Financial Performance and Economic value.In this study specially consider about the market performance of the manufacturing industry.Not only that according to Hunt and Morgan (1995) organizational performance in competitive terms (i. e.,compared to relevant competitors),because a market oriented culture has been posited as one of a rms competitive capabilities and sources of advantage.The literature argues that a market oriented culture provides a unifying focus of organizational efforts in the delivery of value to customers while also providing a comparative impetus with competitors activities (Kohli and Jaworski 1990).Therefore,a market oriented rm is more likely to achieve high levels ofcustomer satisfaction,to keep existing customers loyal,to attract new customers,and22 Umesh Gunarathne W. H.D. P. -2015
  24. 24. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015subsequently to attain the desired level of growth,market share,and hence oforganizational performance (Homburg,2000). According to another scholars like Yamin (2001),Gunasekruan (1998) and Mavondo,(1990),organizational performance refers to how well an organization achieves its market oriented goals as well as its financial goals (Yamin,2001; Gunasekruan,1998; Mavondo,1990).When consider about this definition there are two importantconcepts illustrated.In this study consider about the market oriented goals. Organizational Performance can be seen as a multidimensional construct consisting of more than simply financial performance (Baker and Sinkula,2005).Organizational performance is described as the extent to which the organization is able to meet the needs of its stakeholders and its own needs for survival (Grifn,2003).Professional scholars namely Stoel horst (2001) and Van Raaij (2004) describe market orientation as marketings explanation of performance differentials between rms.Market orientation enhances a rms performance by providing differentiation and cost advantages.First,the concept of organizational performance is based on the idea that an organization is the voluntary association of productive assets,including human,physical,and capital resources,for the purpose of achieving a shared purpose (Alchian and Demsetz,1972).Those providing the assets will only commit them to the organization so long as they are satisfied with the value they receive in exchange,relative to alternative uses of the assets.As a consequence,the essence ofperformance is the creation of value. However,marketing performance measurement is the assessment of the relationship between marketing activities and business performance (Clark and Ambler,2001).Academic interest in marketing performance measurement is largely based on the assumption that greater marketing accountability enhances firm performance and marketings stature (Rust et al. , 2004).One study to date (OSullivan and Abela,2007) has demonstrated a positive relationship between the ability to measure marketing performance,and actual rm performance (OSullivan and Abela,2009).However,marketing performance is the subjective assessment of an organizations performance relative to its competitors over the previous three years across three attributes:market share growth,revenue growth and sales growth.Therefore,thestudy evaluates marketing performance using the subjective approach to measuring23 Umesh Gunarathne W. H.D. P. -2015
  25. 25. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015performance.A number of authors defend the adequacy of subjective measures as opposed to objective ones (Pertusa Ortega et al,2010).Conceptually,growth reects increases in sales and is often reected in market share gains.Growth in sales and market share are important to a business to ensure long term viability and resource availability.Profitability primarily reects current performance (Venkatraman,1989).Similarly,profitability is viewed by some scholars (e. g. Hunt and Morgan,1995) as the ultimate organizational outcome and is commonly used in strategic management studies.In addition,customer satisfaction represents the effectiveness of theorganization in delivering value to its customers and is often viewed as an antecedentto profitability (Vorhies and Harker,2000). 2.3. Market OrientationMarket Orientation receives a signicant amount of attention from researchers (e. g.,Etgar,Slater and Naver,1990; Gronroos,Kohli and Jaworski,1990; Ruekert,1992; Gainer and Pandanyi,2005; Carr and Lopez,2007).Market orientation can be defined as a form of organizational culture where employees are committed to continuously create superior customer value,or as a sequence of marketing activities that lead to better performance.Most of researches have concluded that high market oriented companies perform better than companies that are less market oriented.They focus on adapting their products and services to the needs and expectations of their customers instead of those who are product oriented and focus on developing a product or service that is then marketed and hopefully sold (Gronroos,2006).To achieve this customer focus,a rm with a high degree of market orientation cultivates a set of shared values and beliefs about putting the customer first and reaps results in form ofa defendable competitive advantage,decreased costs and increased prots(Desphande,1999). Market orientation is not a new concept to the marketing and management literature.Scholars argued that the postulate by Drucker (1954) that the customer must be focus of organizations operations and the subsequent support given to this idea by Levitt (1960) that the customer is the reason for the organizations existence were all pointing to the fact that market orientation behavior was necessary at that time.This idea was extended to become known as the marketing concept (McNamara,1972). The market orientation concept focuses on coordinated business intelligence24 Umesh Gunarathne W. H.D. P. -2015
  26. 26. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015generation,dissemination and responsiveness to market information for efcient and effective decisions (Sundqvist,Puumalainen and Saminen,2000; Kohli and J aworski,1990).The concept is also concerned with issues including organizational culture, innovation,human resource planning and organizational learning (Narver and Slater,1990; Ruekert,1992; Baker and Sinkula,1999; Greenley,Cadogan and Fahy,2005; Keskin,2006). Market orientation scholars such as Kohli and Jaworski (1990),Narver and Slater (1990),Ruekert (1992),Gainer and Pandanyi (2005),Carr and Lopez (2007) have argued that market orientation traces its origins from the market concept and has consequences to overall business strategy.The marketing concept is concerned with customer orientation,competitor orientation,innovation and profit as an inducementfor creating satisfied customers (Narver and Slater,1994; Hunt and Morgan,1995). Although there are four concepts of marketing concepts,in this study consider about Customer Orientation and Competitor Orientation.Market orientation has been widely accepted by scholars as the implementation of the market concept,as an organizational culture,or as a mix of those two (Greenley,1995; Han,Kom and Srivastave,1998).Other scholars argued that market oriented behaviour in marketing new solutions leads to better performance,has positive effects on customer satisfaction and loyalty as well as innovation,employee satisfaction and cooperation (Twaites and Lynch,1992; Deshpande,Farely and Webster,1993; Gatignon and Xuereb,1997). In addition to that,there are so many scholars tried to view Market Orientation in different ways.Those are very important to get a sound understanding about theconcept of Market Orientation and progress of the research Study. According to Drucker (1954) and Levitt (1960) market orientation is a central element of a management philosophy . Similarly;the market orientation construct is at the very heart of modern marketing and a frequently studied research subject.It was presented in the 1990s as the actions that firms undertake to implement a customer orientation,and include a set of behaviours and the organizational culture that supports them(Grinstein,2008).Accordingly,Baker and Sinkula (2005) stated that market orientation is a value-based strategic philosophy exhibiting itself in behaviours whichhelp firms stay close to their consumers (Hsieh et al.2008).Conceptually,market25 Umesh Gunarathne W. H.D. P. -2015
  27. 27. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015oriented organizations are organizations that are well informed about the market and that have the ability to use that information advantage to create superior value for their target customers.Two main perspectives on market orientation have emerged as a result:a behavioural perspective based on Kohli and J aworski (1990),and a cultural perspective based on Narver and Slater (1990).But in this research study paidattention to the behavioural perspective than Cultural Perspective. Narver and Slater (1990) proposed that market orientation is the extent to which culture is devoted to meeting customer needs.They defined Market orientation as the competitive strategy that most efciently generates the right kinds of behaviour to create enhanced value for the consumer and therefore assures better long-term results for corporations (Maydeu-Olivares and Lado,2003). Therefore,market orientation comprises three components:customer orientation,competitor orientation,and inter functional coordination.Customer orientation and competitor orientation include all the activities involved in acquiring information about the customers and competitorsin the target market and disseminating this information throughout the organization. Inter functional coordination involves coordinated efforts,which typically involves more than the marketing department,to use this information to create superior customer value (Narver and Slater,1990; Kumar et al. , 1998).A long range investment perspective is implied in market orientation due to the need to prevent the organizations competitors from overcoming the superior customer value created by the organization (Subramanian,2009) . The three components of market orientation collectively form a unique strategic marketing resource and are vital to the performance of the firms (Hsieh et al. , 2008).Market orientation is indeed a learning process in which organizations learn from all aspects of their environment,including customers and competitors,and take both short and long term organizational goals into consideration (Kohli and Jaworski,1990).According to Narver and Slater (1990);Shapiro (1988),being market oriented implies delivering products and services valued by consumers,usually accomplished through (1) on-going monitoring of market conditions and (2) adaptation of organizational responses.However,top management plays a critical role in fostering market orientation.Given the importance of market orientation,it comes as no surprise that this construct has received scrutiny from marketing scholars (Grewal and Tansuhaj,2001).A standard argument in themarket orientation literature suggests that market-oriented firms are in a better26 Umesh Gunarathne W. H.D. P. -2015
  28. 28. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka 7 . Publisllczl at Rcscarcl1Gutc - June 2015position to satisfy the needs of their customers (Narver and Slater,1990).Therefore,researchers expect market orientation to be manifested in enhanced firm performance (Grewal and Tansuhaj,2001).In addition,some academics consider market orientation as a resource and/ or a capacity of the company to provide a sustainable competitive advantage (Aldas Manzano,2005).The definition of market orientation adopted in this study is that put forward by Narver and Slater (1990).According to whom market orientation is the organization culture that most effectively and efciently creates the necessary behaviours for the creation of superior value for customers and,thus,continuous superior performance for the business (Narver and Slater,The effect of a market orientation on business protability,Journal of Marketing,1990). They conceptualized market orientation as a one dimensional construct that incorporates three behavioural components (customer orientation,competitor orientation,and inter functional coordination) and use a single aggregated measure of market orientation (MKTOR).The three components of market orientation collectively form a unique strategic marketing resource and are vital to the performance of the rms (Hsieh et al. , 2008).However,a firm generally seeks to develop its own market orientation to ensure the continuous needs assessment of its customers,the early detection of shifts in the marketplace,and to prompt internal review and realignment of marketing strategies and activities where required.Nevertheless,research in the area of marketing orientation continues to be veryprolic (Farrelly and Quester,2003). 2.3.1. Different views of Market OrientationAlthough there are several scholars have developed the theories regarding Market orientation concept this research study consider the theories which have been developed by the Most famous research scholars called Kohli and Jaworski,(1990) and Slater and Naver,( 1998) based on their perspectives. 2.3.1.1. Kohli and Jaworski s View of Market OrientationIt is important to say that two papers have established the concept of market orientation into the academic of business research by Kohli and Jaworski in 1990. The rst paper,by Kohli and Jaworski (1990),viewed market orientation as theimplementation of the marketing concept.In the model they proposed emphasizes the27 Umesh Gunarathne W. H.D. P. -2015
  29. 29. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Publisllczl at Rcscarcl1Gutc - June 2015collection of marketing data,dissemination of this data across functions within the organization and the action that is taken based on this intelligence.The model was built on the results of interviews with 62 managers in both marketing and non- marketing positions in United State America companies.The main finding was that protability is a consequence of market orientation but not a component of it.Later Jaworski and Kohli ( 1993) published another paper where the goal was to review and measure the antecedents that lead to market orientation and the consequences of it forthe company. ;' L1::2:: :;: Market Orientation . IntelligenceResponsweness disseminationFigure 2.1:- Kohli and J aworskis view on market orientation. Source:Kohli and J aworski (1990). Figure 2.1 shows the interaction between intelligence generation,dissemination and responsiveness.Intelligence gathering is just what the name implies,gatheringintelligence about customers,competitors and the market place. Responsiveness only happens if the formalized process for sharing business intelligence in not too burdensome.If management emphasized sharing,and if the organizational systems reward system provides an incentive to do so or there is no penalty for doing so.In other words,a department,manager or employee is onlywilling to share information if it implies no cost. 28 Umesh Gunarathne W. H.D. P. -2015
  30. 30. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Publisllczl at Rcscarcl1Gutc - June 20152.3.1.2. Narver and Slater s View of Market OrientationThe professional scholars John C.Narver and Stanley F.Slater published their famous article about Market Orientation in 1990, several months after their distinguished colleagues Kohli and Jaworski.Narvers and Slaters goal was to shed light on the components that build a market orientation and propose a useable definition of the concept.They interviewed managers in 113 strategic business units in onecorporation.Narver and Slater viewed market orientation as an organization culture, just like Desphande and Webster (1987). However,they took the definition further and argued that market oriented rms are focus not only on customers but also equally much on competitors.Additionally,they placed emphasis on inter functional coordination that is meant to create unison between all functions in the organization and become part of the organizational culture.So they have developed this defmition:Market orientation consists of three behavioural components such as customer orientation,competitor orientation,and inter functional coordination and two decision criteria long term focus andprotability. Narver and Slater ( 1990) defined three equally important behavioural dimensions of market orientation,them being customer orientation,competitor orientation and inter functional coordination.They add two decision criteria that are long term focus andprotability to their model.Customer orientionxC""Pem' lnterfunctional "i""i" coordinationTargetmarket Figure 2.2: N arver and Slaters View on market orientation. Source:N arver and Slater (1990). 29 Umesh Gunarathne W. H.D. P. -2015
  31. 31. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015Figure 2.2 shows the interaction between the three behavioural components;customerorientation,competitor orientation and inter functional coordination. Research shows that the consequence of market orientation materializes in all tasks performed by a firm.The degree of market orientation shows through employee and customer satisfaction,as well as content shareholders.Customers of a company with a high degree of market orientation experience great value for money and excellent service that is gladly delivered by skilled and professional employees of that company. Gray (1998) found that the more market oriented companies have more satisfied and loyal customers and employees there.Also not only that,Day and Wensley (1988) found that market orientation means that organizations do not only understand the customer,but also its customers customers and their business environment and how that will develop in the future.This concept matches with Kohlis and Jaworskis (1990) suggestion that companies must collect and assess data on customers current and future needs.These companies employees should emphasize service delivery and manage their customer relations well.Employees should spend considerable time with their customers (Narver and Slater,1994).Competitor orientation is the second component of market orientation and states that organizations should identify,analyse and use the strengths,weaknesses,opportunities and capabilities of both current and future competitors.This is very logical although not entirely new.Already in 1960, Levitt said that parallel to customer analysis,companies must do competitor analysis and contemplate possible solutions that might full ll current and future customerneeds and expectations (Levitt,1960). Inter functional coordination or integrated marketing means that all departments within the company play a critical role in satisfying customers.This idea concurrent with Shapiro's (1988) research that found that market orientation is not marketing orientation,because a market orientation does not suggest that only the marketing department has the most important role here.On the contrary,market orientation emphasizes that all departments and all employees are aware of the fact that their job attitude towards internal and external customers is crucial.According to Narver and Slater (1998),competitor and customer orientation include all activities that involve generating market intelligence about customers and competitors,analysing it anddistributing that knowledge throughout the organization.This means that the market30 Umesh Gunarathne W. H.D. P. -2015
  32. 32. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Publisllczl at Rcscarcl1Gutc - June 2015oriented company must provide adequate business processes and systems for data input and coordinate the communication of disseminated business info in order tocreate superior value for customers. According to Narver and Slater (1998),continuous innovation is implicit in each of these components.If there is no innovation and continuous data generation,employees will not have the right prerequisites to offer that extra service to theC11SlIOI11CI'. The two decision criteria shown in the figure 2.2 are a long term prot focus and protability.It is through the continuous creation of superior customer value that a business creates its long-run prot performance.A short period marketing campaign or sales action might boost sales,but the organizational image and generation ofrepeat customers only evolves over time along with reputation and word of mouth. The two views on market orientation are quite similar and complementary and very useful to anyone seeking knowledge on market orientation.Both papers view market orientation as a concept that leads to a greater competitive advantage and both agree that business intelligence about customers and competitors is a key prerequisite to build market orientation.Both of them conclude that all managers and staff members need to participate in creating and maintaining the market and that market orientation is a construct with three equally important components.However,the two views have important differences.Kohli and Jaworski ( 1996) put more emphasize on customers than Narver and Slater (1990),which focuses on human role and explain market orientation as a corporate culture which leads to certain customer/ competitor oriented behaviour throughout the organization creating specific atmosphere that leads tobetter performance. Although both papers by Slater and N aver (1998) and Kohli and J aworski (1990) have considered about the importance of market orientation and Organizational performance the current study pay high consideration to the three behavioural components model developed by the Slater and N aver (1990).In addition to the three behavioural components model the researcher added another component called Social Benefit Orientation to three component behavioural model on behalf of investigate therelationship between Market Orientation and Organizational Performance. 31 Umesh Gunarathne W. H.D. P. -2015
  33. 33. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015Accordingly,entire current research study is based on the four behaviouralcomponents of the Market Orientation. 2.3.2. Customer OrientationThe heart of the market orientation is its customer focus.To create superior value for buyers continuously requires that a seller understand a buyers entire value chain,not only as it is today,but also as it evolves over time.Buyer value can be created at any point in the chain by making the buyer either more effective in its markets or more efcient in its operation (Slater and Narver,1996).Global competition increases market turbulence as well as the richness and diversity of knowledge possessed by customers and competitors (Achrol,1991).Customer orientation can be dened as a group of actions taken by a business to support its sales and services staff in considering client needs and satisfaction their major priorities (Slater and Narver,1996).Business strategies that tend to reect a customer orientation might be include,developing a quality product appreciate by consumers,responding promptly and respectfully to consumer complaints and queries,and dealing sensitively withcommunity issues. To be customer oriented implies that a firm is actively engaged in the organization wide generation,dissemination of,and responsiveness to,market intelligence (Kohli and J aworski,1990).Usually,this term is described as an organizational culture that stresses the customer as the focal point of strategic planning and execution (Deshpande,1993).This culture should be pervasive throughout the company such that employees consistently exhibit customer oriented behaviours,and consumersthereby become accustomed to this philosophy (Ritchie,and Zerbe,2000). A rms ability to cheaply and swiftly introduce new products that meet customer needs is the key to long term success (Datar and Srinivasan,1997).There are so many perspectives that can be included in this study.Customer orientation evolved from the marketing concept.Saxe and Weitz (1982) suggest that customer oriented selling is a behavioural concept that refers to the level to which salespeople practice the marketing concept by trying to help their customers make purchase decisions that will satisfy customer needs,sometimes either through cross selling and up-sellingstrategy. 32 Umesh Gunarathne W. H.D. P. -2015
  34. 34. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015Narver and Slater (1990) described customer orientation as the sufcient understanding of a companys target customers to be able to create superior value for them continuously.It requires that marketers understand a buyer's entire value chain (Day and Wensley,1988).This dimension has received a good deal of attention in the research literature (Deng and Dart,1994; Kohli and J aworski,1990) found in their interviews with company managers that a customer focus is a critical element indetermining market orientation. 2.3.3. Competitor OrientationAccording to Narver and Slater (1990) competitor orientation,as an element of market orientation means that a seller understands the short term strengths and weaknesses and long term capabilities and strategies of both the key current and potential competitors.According to Slater and Narver (1993),competitor orientation centers around the following questions,(1) where are the competitors are?(2) What technologies do they offer?And (3) whether they represent an attractive alternativefrom the perspective of the target customers? .The purpose of a competitor orientation is to provide a solid basis of intelligence pertaining to present and potential competitors for executive actions.Competitors are dened as rms offering products or services that are close substitutes,in the sense that they serve the same customer need (Porter,1980; Kotler,2000).For example,in serving the coffee sweetener market,a provider of beet sugar faces competition from other providers of beet sugar,as well as from providers of cane sugar and synthetic sugar.A rms current and potential competitors may therefore be found among rms with similar and dissimilar production technology platforms.A competitor orientation may lead to a cost advantage because competitor oriented businesses tend to watchcosts closely,so they may quickly match the marketing initiatives of competitors. However,small organizations seem to view competitor orientation differently and are not as concerned with long term strategies.The literature suggests that most businesses are short-term oriented (Carson,1990; Harris and Watkins,1998),and that short term results are perceived to be more important than long term strategic issues (Harris and Watkins,1998).Managers in businesses are more concerned with runningdaily operations than with long term business planning (Amer and Bain,1990;33 Umesh Gunarathne W. H.D. P. -2015
  35. 35. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015Robinson and Pearce,1984).Hence,for businesses,short term results are often apriority over projected long term benefits.However,in order to gain a sustainable competitive advantage,managers may need toimprove appropriate business marketing and planning skills. Competitor orientation can enhance a rms competitive advantage by allowing it to benchmark with,learn from,imitate,and improve on the products of successful competitors (Drew,1997; Day and Wensley,1988).Unlike the long term benefits of customer orientation,empirical research has produced widely divergent findings on the relationship between competitor orientation and organisational performance.Narver and Slater (1990) and Noble,Sinha,and Kumar (2002) identified a positive relationship between competitor orientation and organizational performance.Harrison Walker (2001) discovered that no such relationship exists between competitor orientation and organizational performance.Armstrong and Green (2007) and Armstrong and Collopy (1996) found the existence of a negative relationship between competitor orientation and organizational performance and Luo,Rindeisch,and Tse (2007) claimed that there is a curvilinear relationship between the two variables competitor orientation and organizational performance.Armstrong and Collopy (1996) argued that competitor orientation reduces the protability of a firm and suggested that rms should focus on maximising their own prot and ignore theircompetitors tactics completely. Another way of explaining competitor orientation,to be better informed of new trends and market oriented,company must consider not only how well its products suit and satisfy customer needs but how well it performs better relatively to its competitors (Hsieh et al. , 2008).Organization must gather market intelligence on the short and long term strengths,weaknesses,absorption capabilities and strategies of both the current and the potential competitors (Hsieh et al. , 2008; Narver and Slater,1990).The analysis of competitors long term absorption capabilities,strengths and weaknesses is a key factor in determining market orientation and culture of an organization (Harrison and Shaw,2004).Employees from every function in a market oriented organization share information about their competitors because suchinformation can be used to build a competitive advantage in the industry it operates. 34 Umesh Gunarathne W. H.D. P. -2015
  36. 36. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 20152.3.4. Inter Functional CoordinationInter functional coordination is dened as the integration and collaboration of various functional areas (or departments) within an organization as a way of enhancing communication and information to better meet the organizations goal (Narver and Slater,1990).According to Porter (1985),inter functional coordination can be defined as every department,facilities,branch ofce and other organizational units has a role that must be dened and understood.This is defined as the co- ordinated utilization of organizational resources in creating superior customer value for the target segment.All employees,regardless of their distance from the strategy formulation process,must recognize their role in helping a firm achieve and sustainable competitive advantage.Inter functional coordination is defined in this study as the communication and sharing of information and resources,and integrationand collaboration of different functional areas or departments. Inter functional coordination describes the ability of different functional areas to accommodate disparate views and work around conicting perspectives and mental models by putting aside functional interests for the better of the organization as awhole. As the literature on internal marketing is rapidly growing,Inter Functional Coordination is also viewed as an important criterion of internal marketing.Raq and Ahmed (1993) defined the boundary between marketing and human resources management while arguing that organizations need to look at ways of increasing cross functional coordination.Though mentioned as early as in 1993, Inter Functional Coordination was not ofcially identied as one of the criteria of internal marketing until in 1993, when Rafiq and Ahmed (1993) proposed a comprehensive definition of internal marketing.Rafiq and Ahmed (1993) reviewed conceptual and empirical literature on the definition of internal marketing and identified Inter FunctionalCoordination as one of the five main criteria of internal marketing. Another way,Inter functional coordination is defined as the integration and collaboration of various functional areas (or departments) within an organization as a way of enhancing communication and information to better meet the organizations goal (Narver and Slater,1990).According to the definition of Slater and Narver in1990, to become customer oriented organization communication of information is35 Umesh Gunarathne W. H.D. P. -2015
  37. 37. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015must.Inter functional coordination describes the ability of different functional areas to accommodate disparate views and work around conicting perspectives and mental models by putting aside functional interests for the better of the organization as a whole.Nakata and Sivakumar (2001) highlighted that inter functional coordination represent a key form of internal social capital of an organization.Organizational resources often have conicting priorities,different perspectives,and strategies (Nakata and Sivakumar,2001).Academics and practitioners have long contended that synergy among company members is needed.A culture of integrating all departments towards better and continuous creation of customer value should lead to a market orientation within the company and successful implementation of the marketingconcept (Harrison and Shaw,2004). 2.3.5. Social Benefit OrientationSocial benets can be defined as the increase in the welfare of a society that is derived from a particular course of action.Most social benets cannot be quantified (Paul and kwon,2002).Through this definition it is crystal clear that Social benet orientation is attached with the welfare of the customers or the society and each and every business organization should pay high consideration to the social benefits.It comes with the concept of Corporate Social Responsibility.Furthermore,according to Paul and kwon (2002),Social benefit is the total benefit to society from producing or consuming a good or service.Social benefits include all the private benefits plus any external benets of production or consumption.Although in this denition they highlighted that Private benefit is a part of Social Benefit this study concern about the External benefits provided by the Organizations.If a good or service has significant external benefits,then the social benefit will be greater than the private benefit (Paul and Kwon,2002).The social benefit achieved by a social project can be defined as the improvements attained in the living conditions of its beneficiaries that are directly attributable to the project.All different kinds of improvements can be related to one of the four groups of benefits shown below,which refer to as the components of the social benefit:(1) Individual tangible goods (economic nature);Individual intangible goods (intellectual or spiritual nature);(3) Collective tangible goods (ecological nature and basic infrastructure);(4) Collective intangible goods (socio-cultural nature, for the community). 36 Umesh Gunarathne W. H.D. P. -2015
  38. 38. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Publisllczl at Rc. 'carcl1 Gate - June 2015Another way of explaining about Social benefit is defined by measurement against a thirdparty standard, and all statutes permit incorporators to also pursue more specic Social benets Providing (low income or underserved) individuals or communities with beneficial products or services;Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business,Preserving (or improving) the environment,Improving human health,Promoting the arts,sciences,or advancement of knowledge;Increasing the ow of capital to entities with a public benefit purpose,or The accomplishment of any other particular,identifiable benefit for society or the environment (Matthew F.Doeringer,2010).Based on above perspectives importance of social benefit oriented activities has been increased.Most of the organizations are aimed to use strategies in order topositioning in consumers mind about the organizations as well as the products. When it comes to Sri Lankan context because of the cultural situations,Social Benethas become very important and essential concept today business industry. 2.4. Market Orientation and Organizational PerformancePrior to the late 1980s,there was little success in the development of constructs related to market orientation.However,the late 1980s witnessed an increased academic and practitioner interest in the development of practical models to define key marketing constructs such as market orientation (Bruning and Lockshin,1994).While a number of studies present market orientation as synonymous with other constructs such as customer orientation (Shapiro,1988),more recent studies suggest that market orientation is distinct and implies a less politicized nature (Kohli and Jaworski,1990) and a more proactive,longer term focus (Slater and Narver,1998).Research into market orientation is dominated by the conceptualizations of two sets of theorists.First,the information-based conceptualization of Kohli and J aworski (1990),which presents market orientation as collecting,disseminating,and responding to intelligence about the market.Second,there exists the culture oriented approach of Narver and Slater (1990),which denes market orientation as the organizational culture that most effectively and efficiently creates the necessary behaviours for the creation of superior value for buyers. " While there is merit in both views,the Kohli and J aworski (1990) view has been subjected to criticism (Diamantopoulos and Hart, 1993) while the Narver and Slater (1990) conceptualization has been praised (e. g., 37 Umesh Gunarathne W. H.D. P. -2015
  39. 39. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Publisllczl at Rc. 'carcl1 Gate - June 2015Greenley,1995).The resurgence of interest into the concept of market orientation can be attributed to its association with organizational performance.Indeed,an examination of the substantial proportion of literature examining various aspects of the marketing concept finds an over-riding and sometimes explicit assumption that implementing the marketing philosophy will increase organizational performance (see for instance,Felton,1959; Houston,1986; Brownlie and Saren,1992).Since the development of empirical models of market orientation in the early 1990s,there has been a proliferation of studies claiming an association between market orientation and organizational performance.A review of the literature finds that studies linking market orientation and organizational performance fall into three distinct categories.The first are those studies that evaluate the utility of conceptualizations of market orientation and the association with performance.The second group comprises those studies that examine the association between market orientation and performance in certain national contexts.The third category consists of those studies that examine theforms of orientation and performance. 38 Umesh Gunarathne W. H.D. P. -2015
  40. 40. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015 Table 2.1:- Summary of the previous research ndingsAuthor/ s Research Questions/Findings ObjectivesSlater and To examine the relationship '2 Major nding was there is a Narver between Market orientation,Strong relationship between (1990) Customer value and market orientation and superior superior Performance.performance.A substantive Market orientation must be the foundation for a business competitive advantagestrategy. Fred To determine how critical '2 The Results provide evidence that Langerak,NPD activities are for a a market orientation is related Erik Jan market-oriented firm to positively to product advantage Hultink,achieve superior and to the prociency in market and Henry performance testing,launch budgeting,launch S.J .strategy,and launch tactics.Robben Product advantage and the (2010) proficiency in launch tactics are related positively to new product performance,which itself is related positively to organizational performance.Market Orientation has no direct relationship to new product performance and toorganizational performance. Laith Investigate the Relationship '2 There is a Positive RelationshipAlrubaiee between New Service between New Service(2013) Development,Market Development,Market Orientation39 Umesh Gunarathne W. H.D. P. -2015
  41. 41. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015 Orientation and Marketing and Marketing Performance. Performance. Michael The main objective is '2 Finding was in service sector K.Brady,investigates the effect of customer orientation is a more J .Joseph being customer oriented on important and it highly inuence Cronin,service performance to Perceptions and outcome Jr. (2009) perceptions and outcome behaviours. behaviours. Mohamme What is the relationship They highlighted that the d Abdulai between Market Orientation development of market and and Business Performance orientation in this sector rests Mahmoud among SMEs in Ghana?more on the attitude of owners/(2011) managers and,more importantly,the repeatedly reported performance implication of market orientation does not elude Ghanaian SMEs.More specically,market orientation.Jin K Han,Main objective was to '2 Exhibited in conclusion there are Namwoon Examine the role that two components of Market Kin and organizational innovations orientation are unimportant.And, Rajendra play in the context of the '2 Competitor orientation is veryK relationship between Market important to the Organizational Srivastva.orientation and performance.(1996) Organizational performance. 7 Ronald E.Measuring Customer '2 Tentatively conclude that the Michaels Orientation of Salespeople:SOCO scale works as well with and Ralph A Replication With buyers as with salespeople.We L.Day Industrial Buyers.hope further testing of the SOCO (2010) construct in the future will lead toits renement and that its use will contribute to improvements in thequality of research on40 Umesh Gunarathne W. H.D. P. -2015
  42. 42. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015I || |salesperson-buyer interactions.| 8 Aaron J.Incorporates market '2 The more successful firms are Johnson,orientation theory more internally focused (inter Clay C.(competitor orientation,functional coordination and Dibrell,customer orientation,and innovativeness) than externally and Eric inter functional focused (competitor and customer Hansen coordination) and firm orientation). ( 2004) innovativeness to explaindifferences in firm nancialperformance. Seigyoung Top management team '2 Results generally supported Auhl,diversity and hypothesis in that the effect of Bulent innovativeness:The TMT diversity on Menguc moderating role of inter innovativeness was positive as (2005) functional coordination.inter functional coordinationincreased. Thorsten How does Customer '2 Considering as a whole,they Hennig- Orientation impact on found that especially customer Thurau customer satisfaction,oriented activities highly impact (1999) commitment,and retention?to the customer satisfaction andretention.Anis Ben How do Market Orientation '2 CSR signicantly moderates theBrik and CSR impact on association between customerBelaid Business Performance orientation and financialRettab performance. Kamel '2 All interactions are insignificant, Mellahi with the exception of the (2010) relationship between customer orientation and financialperformance.'2 Customer orientation has a significant negative moderatingeffect on financial performance. 41 Umesh Gunarathne W. H.D. P. -2015
  43. 43. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri Lanka Published at ResearchGate - June 2015Mark Schreiner(2002)Vasilis Theoharak is and Graham Hooley (2009)Thorhallur Gudlaugsson andAdrianus Philip Schalk (2009)But,this association becomes positive,albeit weak,at a high level of CSR. A Framework for the '2 They found in microfinanceDiscussion of the Social social benefits are not important. Benets of Microfinance Because there is no any directimpact of Social benets to theMicro finance industry. Examine the relationship '2 Customer orientation practicesbetween Customer are particularly effective inorientation and enhancing firrn-levelinnovativeness:differingAnd oldperformance for firms from Newroles in new European transition economies. Europe.'2 Core finding is that returns oncustomer orientation andorganizational innovativeness are different in Old and NewEuropean countries. Examine the Effects ofMarket'2 The bank has a strong external focus combined with a focus onThe (theOrientation onBusines s stability.adaptabilityPerformance:Empirical dimension measure ofEvidence from Iceland market orientation) scores a 3.57 on a 5-point scale and has a weak positive relation with five out of six performance indicators,and amoderately strong relation withemployee satisfaction. '2 The bank is very prot-oriented, which might explain its lowscore on some dimensions.The42 Umesh Gunarathne W. H.D. P. -2015
  44. 44. Department of Marketing,Faculty of Management and Finance,University of Ruhuna:Sri LankaPublished at ResearchGate - June 2015Ken How do EntrepreneurialMatsuno,Proclivity and MarketJohn C OrientationMentzer,Business Performance? and Aysegul Ozsomer(2002)Deshpand Organizational e,R. and marketFarley,innovativeness, J .U.performance: (1996),internationalodyssey. effectculture,orientation, and firmresearchresults from this study are in line with the results from other Icelandic studies that have used DOCS to measure the shape oforganizational culture. '2 The results indicate thatEntrepreneurial Proclivity has not only a positive and direct relationshi