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Because the focus on market orientation has steadily increased over the last decade, academicians and marketing managers have begun to debate the effectiveness of market orientation as a profit enhancing strategy. Researchers and marketing managers are attempting to measure the benefits and costs associated with the implementation of market orientation. For researches and managers, the key questions that surround market orientation are whether or not it increases performance, and if so, in which circumstances should market orientation be implemented. In order for market orientation to become a cornerstone of business practices in years to come, these questions must be answered. This review will focus on three articles which address these key questions: "Market Orientation and Company Performance: Empirical Evidence from UK Companies" by Greenley, G (1995), "Market Orientation: Antecedents and Consequences", by Jaworski and Kohli (1993) and "The Effect of a Market Orientation on Business Profitability" by Narver and Slater (1990). Summary of "The Effect of a Market Orientation on Business Profitability" by Narver & Slater (1990) In "The Effect of a Market Orientation on Business Profitability" (1990), Narver and Slater address the lack of empirical evidence surrounding the effectiveness of market orientation. They begin the article by stating: "market orientation is the very heart of modern marketing management and strategy yet to date, no one has developed a valid measure of it or assessed its influence on business performance as a result, business practitioners have had no specific guidance as to what precisely a market orientation is and what its actual effect on business performance may be." Their study attempts to develop a valid measure of market orientation and its effect on the profitability of the firm. Narver and Slater's study is designed to test the hypothesis that there is a strong correlation between market orientation and profit levels for both commodity and non-commodity businesses. Narver and Slater hypothesize that market orientation is a one dimensional construct consisting of three behavioral components: customer orientation, competitor orientation and inter-functional coordination. Additionally, they hypothesize that there are two decision criteria: a long term focus and a profit objective. Based on these criteria, Narver and Slater developed a questionnaire which was given to a sample group of 140 strategic business units in the same division of a major Western corporation. They then used statistical analysis to try to determine the correlation between the adoption of market orientation and the increase in profit and overall performance. In order to obtain accurate results, the researchers attempted to limit the influence of the other forces that impact a business's profit margin; by doing this, they were able to isolate two key variables and find the relationship between them. Based on their data and analysis, Narver and Slater concluded that there is a monotonic relationship between profit and market orientation for the non-commodity business, whereas the relationship with commodity business was only apparent above the stated median in market orientation. Narver and Slater also concluded that market orientation is economical in all environments, and the question was finding the optimal level of market orientation. Critique of "The Effect of a Market Orientation on Business Profitability" by Narver & Slater (1990)
Narver and Slater's study is one of the first major empirical studies on the subject of market orientation and its impact on the firm's profit. This ground-breaking study offers empirical validation to theories that were unproven prior to the study. However, based on the results of Narver and Slater's study, there are still many...