Market orientation and market strategy

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Market orientation and market strategy profiling: an empirical test of environment-behaviour-action coalignment and its performance implications C. Brooke Dobni Department of Management and Marketing, University of Saskatchewan, Saskatoon, Saskatchewan, Canada George Luffman University of Bradford, Bradford, West Yorkshire, UK Introduction Organizations have long sought how to achieve a competitive advantage in dynamic environments. Some believe that gaining such an advantage will be achieved by placing a renewed emphasis on delivering superior quality products and services to customers (Bitner, 1992; Day and Wensley, 1988; Zeithaml et al.

, 1985). Others feel that organizations should take a more pragmatic approach by considering trade-offs between the external environment and strategic initiatives in search of ``best practices'' (Miles and Snow, 1978; Bourgeois, 1980; Snow and Hrebiniak, 1980; McKee et al. , 1989; Venkatraman and Prescott, 1990; Narver et al.

, 1992). Finally, some have suggested a more cerebral and cultural approach which requires organizations to engender a market orientation in efforts to support strategy implementation (Kohli and Jaworski, 1990; Narver and Slater, 1990; Jaworski and Kohli, 1993; Day, 1994, 1998). Our research and consultancy work tells us that the current key challenge for management in achieving a sustainable competitive advantage lies in the implementation of strategy, ... more. less.

as opposed to the formulation of it. We believe that the key to successful implementation lies in the ability to guide and manage employee behaviours on a collective basis through a market orientation. The ability to co-align key behaviors with the competitive context ultimately determines business performance. This is most recently supported by Day (1998), who reports on what it means to be market oriented, but also comments on its elusiveness. The first stage in defining these profiles lies in the linking of what appear to be significant behaviors to the competitive realities of the environment in which the organization resides. We report an exploratory study that defines market orientation, then proceed to discuss the relationship between market orientation, marketing strategy, and organizational performance using the US telecommunications industry as the sample. This focus is particularly interesting since competition in high technology industries is fierce and technological advances are rapid, making the development and sustainment of a market orientation even more acute. Theoretical background To undertake a study such as this, three events have to occur. These are: 1 the ability to identify, validate and measure market orientation, strategy orientation, business performance, and competitive dynamics; 2 the ability to consider behaviour-action- performance outcomes in a coalignment perspective; and 3 researcher confidence that the above two can realistically happen. Our review of the literature to date provided us with the level of comfort necessary to support these events. Market orientation ± issues of definition For the purposes of this article, it is important briefly to define market orientation and consider how it has evolved to where it is today. Market orientation is the term used to describe the culture necessary to support behavioural factors required for the implementation of the marketing concept (McCarthy and Perrault, 1984; Kohli and Jaworski, 1990). Since 1990, there has been a modest but strong resurgence of academic and practitioner interest in market orientation. According to this literature, market The current issue and full text archive of this journal is available at http://www.emerald-library.com [503] Management Decision 38/8 [ 2000 ] 503±519 # MCB University Press [ ISSN 0025-1747 ] Keywords Strategy, High technology, Market orientation, Performance, Corporate culture, Competitive advantage Abstract Organizational performance is greatly influenced by employee behaviours and the resulting market orientation that they possess. Market orientation is a behavioural culture that affects strategy formulation and strategy implementation, and how an organization interacts with its environment and adjusts to changes within that context. The relationship between market orientation and performance is robust across several environmental contexts that are characterized by varying degrees of market turbulence, competitive intensity, and products/services introduction rates. This study identifies co-aligned market orientation and strategy profiles corresponding to unique competitive contexts that represent best practices for an organization seeking to maximize performance in a high technology environment. This relationship becomes dynamic when one considers the assertion that organization culture is synonymous with strategy and the evidence that the external environment affects organizational culture. As a result, the ability to profile ideal orientations will have significant strategic and performance implications for organizations that will contribute to the development of a sustainable competitive advantage. orientation represents behaviors aimed at understanding and satisfying customers (Day, 1990). The principal features of a market orientation are actionable and include: . the coordinated application of interfunctional resources to support the creation of superior customer value (Narver and Slater, 1990; Shapiro, 1988); . the ability of the organization to generate, disseminate, and use superior information about customers and competitors (Kohli and Jaworski, 1990); and . the generation of appropriate market intelligence pertaining to current and future customer needs, the communication of intelligence across departments, and the design and execution of strategies in response to this intelligence (Deng and Dart, 1994). Day (1994) suggested that the degree of market orientation possessed by an organization is positively correlated with its capabilities to support and sustain behaviour conducive to the development of this orientation. Capabilities in the marketing domain included market sensing, customer linking, competitor sensing, and customer service. Other capabilities could include technology monitoring, technology development, new product/service development, financial management, human resource management, organizational communication, and general strategy development. It is now broadly accepted that a market orientation is essentially a behavioural culture that dictates how an organization's members think and act. Market orientation Ð issues of scope Although the definition of a market orientation is well established, the scope is less clear. On the surface, the scope of a market orientation appears to be quite expansive. However, to date most of the research has focused on internal factor antecedents such as formalization, centralization, and reward systems (Lorange and Vancil, 1977; Galbraith and Nathanson, 1978; Gupta and Govindarajan, 1984; Walker and Ruekert, 1987; Rigby, 1993). For this study, we considered a broader conceptualization of market orientation, seven dimensions in all, that we feel complements the scope of a market orientation. These dimensions were derived from the literature utilizing factor analysis of 61 underlying measurement constructs of market oriented behaviour. Table I describes the factors used. To facilitate responses that were relatively free of value judgements, factors chosen were those that represented day-to-day activities and behaviours that characterize the operation of a normal business unit. It is these behaviours that are often overlooked by managers, resulting in implementation failure. Market orientation ± issues of measurement Up until 1990, very little attention was given to measurement issues, and there were virtually no empirically-based theories. Specifically, it was unclear as to the activities that engendered a market orientation. For the longest time, there was no way of measuring the degree of adoption, or the strengths of relationships between market orientation and business specific or market-level factors. From a practitioner's viewpoint it was not so important to determine whether or not an organization had adopted the marketing concept. Rather, it was felt that most functional organizations engendered the marketing concept to varying degrees. Alternatively, it became fashionable to focus on the events internal to an organization that fostered a market orientation, and the consequences of being market oriented. To this end, the first attempts to measure the degree of market orientation of organizations were made (Kohli and Jaworski, 1990; Narver and Slater, 1990; Jaworski and Kohli, 1993; Kohli et al. , 1993; Deng and Dart, 1994). This pioneering research led to subsequent and complementary models on explicating the market orientation construct, and developing a measure of marketing orientation. In considering how to measure market orientation, we reviewed the latest and most influential conceptual articles concerning sustainable competitive advantage and market orientation (see Appendix). Currently, there are valid constructs and models to measure market orientation that provide the foundation to support the model that we propose in this study. Knowing this, and given the knowledge that behaviours can be defensibly measured, an organization's market orientation may be thought of as a range that could extend from zero to some maximum amount, depending on how it is measured. Market orientation ± issues of role in strategy To further understand a market orientation's role in driving strategy (and subsequently performance), one must understand the relationship between strategy and culture. [504] C. Brooke Dobni and George Luffman Market orientation and market strategy profiling: an empirical test of environment- behaviour-action coalignment and its performance implications Management Decision 38/8 [2000] 503±519 The importance of considering culture in the study of strategy and performance has been argued by a number of different researchers. Peters and Waterman (1982), Deal and Kennedy (1982), Wilkins and Ouchi (1983), and Schein (1984) have all proposed the existence of a relationship between corporate culture, strategy, and performance. They postulate that, ultimately, organizational performance cannot be accurately understood without an understanding of the culture and strategy of the organization. Weick (1985) went as far as to suggest that organization culture is synonymous with strategy. Although current perspectives are far from unanimous regarding the way in which organization culture should be defined, recognition has been given to the relevance of culture and its influence on strategy. The literature to date also supports the proposition that there is a fit between culture, strategy, and the context in which an organization must operate. This context can includetheexternalenvironment(Hofer,1975; Bourgeois, 1980; Jauch et al. , 1980; Hitt et al. , 1982; Anderson and Zeithaml, 1984; Prescott, 1986), organizational characteristics such as structure (Chandler, 1962; Rumelt, 1974), organizational systems (Lorange and Vancil, 1977; Galbraith and Nathanson, 1978), and managerial characteristics (Gupta and Govindarajan, 1984). Chatman and Jehn (1994) also provided evidence that the external environment affects organizational culture. Thus, the coalignment between the environment, culture and strategy has significant implications for performance that management should consider. Until recently, this conceptualization of coalignment and its empirical tests represented a serious weakness in strategy research (Venkatraman, 1987). Preliminary efforts have also been made to reveal the relationship of the elements that bridge the continuum between market orientation and business performance, those being strategy elements. These elements comprise the strategy orientation that ultimately form policies and programmes that facilitate implementation. In the end, it is the success of responses chosen and implemented by organizations in consideration of the competitive context that determines business performance. It is important to note that choosing strategies to pursue is only one part of the equation, the other part involves identifying and facilitating the behaviours to ``actionize'' them. Jaworski and Kohli (1993) have discussed the necessity to consider ``joint moderating effects,'' or variables that may act in tandem when considering this. They suggest that it would be ``useful to perform Table I Market orientation and environmental context factors Behavioural factors Description 1. Response design and implementation (19 items) a Response design describes the extent to which organizations design targeted responses or strategies with respect to the information (formally and informally) generated and disseminated, the willingness to empower employees, and alter structure and processes. Response implementation considers also the ability to respond and the timeliness of implementation 2. Formal intelligence generation (14 items) Is the extent to which the organization's employees and systems formally generate intelligence on customers, competitors, and industry for use in generating business plans, and identifying products/services modifications and new offerings 3. Intelligence dissemination (15 items) Is the extent to which an organization is inter-functionally co-ordinated and its respective level of dynamism with respect to the sharing of market intelligence. Essentially, it is a measure of the effectiveness of internal communication 4. Informal intelligence generation (five items) Is the extent to which the organization's employees informally generate intelligence on customer, competitors and the industry. Intelligence might be gathered through relationships, at conferences, and via the grapevine. 5. Planning and profit orientation (three items) Is the extent to which organizations engage in formal business planning and policy generation in the pursuit of profits over the longer term (five years). 6. Customer orientation (three items) Is the extent to which employees interact with customers in efforts to determine needs and enhance service levels. 7. PSI factor (2 items) Is the extent to which technological advances (outside the control of the strategic business unit) affect business plans of the business unit Note : a Represents the number of behaviours that loaded on to and subsequently derived the factor. Factor analysis statistics are provided below. In this investigation there were 61 underlying measurement constructs of behaviour. These constructs were derived from extant literature studying thousands of American corporations over the past 20 years and are believed to be the ones most representative of the factors they are trying to measure [505] C. Brooke Dobni and George Luffman Market orientation and market strategy profiling: an empirical test of environment- behaviour-action coalignment and its performance implications Management Decision 38/8 [2000] 503±519 such analyses in future studies to better understand the conditions under which market orientation is particularly important for business performance''. Given what we have learned about organizational culture, we have concluded that market orientation is a culture that comprise a number of behavioural variables, and it is such a culture that manifests the strategic orientation and facilitates strategic implementation in an organization. The theoretical model The model presented in Figure 1 considers the relationship between behaviour (market orientation), action (marketing strategy) and outcome (return on investment) in a coalignment perspective. The expectation in this model is that a market orientation will be related to specific sets of strategies or strategy orientations, subject to distinct environmental contexts such as competitive intensity, technological turbulence, and new products/services introduction rates. These contextual variables are generally uncontrollable by any one firm in a competitive environment and are therefore considered to be external in respect to control. We are suggesting here that the scope of a market orientation needs to be considered within a holistic manifestation for it to have managerial implications. Given the holistic manifestation of this model, two broad research propositions are presented for consideration. These include: P1 : Competitive contexts will temper market orientation and strategy profiles to the point where there are ideal profile patterns. Specifically, we suggest that a market orientation has a positive affect on business performance, all things being equal. However, at the extremes when considered within the realities of the competitive context (i.e. all things are not equal or controllable), there are optimal strategies and market orientations to consider in respect of the context in which an organization must compete: P2 : There is an association between behaviours, actions and outcomes in respect to the competitive context. Specifically, the degree of adherence to the specific requirements of the environment in market orientation and strategy deployments will be significantly related to performance. Figure 1 The theoretical model [506] C. Brooke Dobni and George Luffman Market orientation and market strategy profiling: an empirical test of environment- behaviour-action coalignment and its performance implications Management Decision 38/8 [2000] 503±519 Through statistical testing of the non- significant factors with ROI, it will be become evident if there are any consequences of misalignment. Lack of such consideration may mitigate the effects of a high market orientation or result in inefficient use of resources in organizations that possess anaemic marketing skills. The implications of these scenarios would be less than optimal performance. The model presented above is a holistic environment-strategy coalignment model (Venkatraman and Prescott, 1990) as it considers the interrelationship among primary elements of market orientation, marketing strategy elements, contextual variables, and organizational performance. It is based on the premiss that, for any given business unit, if one can specify the strategic resource deployments, specifically, the behaviours and actions needed for effectiveness (based on the specific competitive context), then a deviation from this pattern would represent a misalignment between behaviour and strategy, and the environment. This focus will provide empirical evidence as to which behaviours and actions may be more ideal across environmental contexts and will provide insight as to whether organizations that align their strategic resource deployments to the specific requirements of their environmental context perform significantly better than a business unit that does not achieve this requisite match. It is proposed that these interrelationships will influence actions chosen as a basis for competition. For example, it is proposed that, in the situation of low competitive intensity, organizations will place a greater emphasis on developing cost leadership capabilities as opposed to concentrating on more aggressive strategies such as being a differentiator or innovator. As a result, the collective market orientation will be lower, particularly in the areas of intelligence generation, dissemination and customer orientation. This is not to say that being a differentiator or innovator would not be effective in such a context, rather it may result in the inappropriate use of organizational resources. Conversely, in environments characterized by high competitive intensity, one might observe a strong linkage between market orientation factors and customer value-creation strategies that are associated with focus or niche marketing elements. Previous models of market orientation possess similarities, the most common one being that market orientation is a behavioural culture that affects business performance and business profitability (Kohli and Jaworski, 1990; Narver and Slater, 1990; Narver et al. , 1992; Jaworski and Kohli, 1993; Kohli et al. , 1993; Deng and Dart, 1994). With the exception of the Narver et al. (1992) study, these models fall short when testing the relationship between behaviour and action (rather, they consider behaviour and performance), and none of the models considers them in a holistic perspective. Methodology Briefly, the key to the development of a successful model is the ability to arrive at measures for the variables defined in this model, and then embark on statistical processes that will consider the complex, interrelated nature of this manifestation and avoid the potential for logical typing errors that are common due to disaggregation of the variables. Testing this specific conceptualization involves: . the identification of distinct homogeneous environments; . the specification of ideal strategy elements/orientations and market oriented behaviour; and . testing the performance effects of strategy- environment coalignment. In efforts to arrive at ``ideal profiles'', a calibration sample was required. The process of defining a calibration sample involved bifurcating the sample in each competitive context by considering ROI and then systematically separating high performers from average performers. Only after this was accomplished did we set out to determine the patterns of behaviours and actions that contributed to higher levels of performance. Sample The target population for this research included Regional Bell Operating Companies (RBOCs), general telephone companies outside the RBOC designation, and independent phone companies operating in the USA. This industry was selected for two reasons. First, it was considered to be a high technology industry, dynamic in nature, and characterized by rapid products and services introduction rates, intense competition and high technological obsolescence. Second, it provided a single industry context which allowed us to frame questions logically that had a common meaning among respondents. This was consistent with the approach suggested by Snow and Hambrick (1980) and Harrigan (1983)[1]. The primary unit of analysis was the strategic business unit (SBU) within the organization. For the [507] C. Brooke Dobni and George Luffman Market orientation and market strategy profiling: an empirical test of environment- behaviour-action coalignment and its performance implications Management Decision 38/8 [2000] 503±519 purposes of this investigation, an SBU was defined as an organizational unit with a defined business strategy and a manager with sales and profit responsibility (Aaker, 1988). A sample list for the survey was obtained from a listing services organization with access to the ``America's Network'' database. Names of 28,000 executives were available for extraction. However, when controlled by industry and managerial rank, just over 5,000 names were revealed. From this total, 1,000 names were randomly selected to represent the sample for this study. Managerial rank included vice-presidents, system managers, directors, and general managers. The criterion of management level required each of the respondents to know the business unit's market strategy, policies and culture. Input was sought on a single informant basis from the SBUs represented by the sample. It is important to note that the sample was not restricted to marketing managers, rather it included both marketing and non-marketing managers. This incorporates the insight of Kohli and Jaworski (1990) that a market orientation involves the efforts of virtually all departments in an organization, and a concern of Narver and Slater (1990) where they suggest that marketing is not the sole responsibility of the marketing department. These insights are reaffirmed if one considers the components of market orientation from an organizational perspective. The questionnaire related to 61 market-oriented behaviours (representing seven market oriented factors), 22 marketing strategy practices of the SBU (representing four strategy orientations), and 15 situational context statements (relating to three competitive context factors). Each question used a seven-point Likert-type scale that measured the extent to which market orientation and marketing strategy was practised. Actual and relative levels of ROI were also probed. The final sample comprised 210 usable responses from 236 returned questionnaires. The sample characteristics display good representation demographically, geographically, and in the primary business function of the SBU. Comprehensive representation was gained from both marketing and non-marketing personnel. Data analysis Figures 2 and 3 provide an overview of the five-step data analysis procedure and the three-stage coalignment protocols used in this study. An overview of the procedures is also presented. The following list provides an overview of data analysis procedures: . Step 1. Reduction of data (step 1 of the analytical process, Figure 2): ± Objective: to address whether the 61 market orientation and the 15 environmental context statements could be represented in terms of a smaller number of underlying factors. This was done through factor analysis, a procedure for data simplification that reduces a set of variables to a smaller set of factors or composite variables by identifying dimensions underlying the data. ± Procedure: this involved selecting an extraction method and rotation procedure that would provide the optimal solution. The optimal solution in both cases was achieved utilizing a procedure called unweighted least squares factoring and subjecting it to varimax (orthogonal) rotation procedure. ± Further, it was necessary to reduce the number of strategy action variables (22 in all) down to levels that would allow for more logical analysis. Four new variables representing strategy orientations were computed. They were categorized and assigned on the basis of precedence and past research protocol. ± Outcome: in the preliminary solution, 61 market-oriented behaviours loaded on to 15 factors. Fifteen environmental context statements loaded on to five factors. Subsequent factor analysis under an a priori criterion of seven factors (market orientation) and three factors (environmental context) was invoked to produce a maximum number of factors that would allow for interpretation and be logically consonant for further analysis. The final factor solutions reported acceptable coefficient alphas (reliability). Sampling adequacy, tests of sphericity and levels of significance were extremely high. Also, four new variables were created that represented strategy orientations. These orientations were labelled differentiation, innovation, focus, and cost leadership. . Step 2. Cluster analysis on environmental contexts (step 2 of the analytical process, Figure 2): ± Objective: clustering was undertaken to classify respondents into environmental contexts that were mutually exclusive [508] C. Brooke Dobni and George Luffman Market orientation and market strategy profiling: an empirical test of environment- behaviour-action coalignment and its performance implications Management Decision 38/8 [2000] 503±519 and exhaustive groups. This was necessary to carry out environment specific analysis. It was believed that each SBU would gravitate towards one homogeneous context, even though they may experience heterogeneous pressures. This step was necessary to facilitate separate analysis within each environment. ± Procedure: the final factor analysis solution regarding environmental context was subjected to a number of clustering techniques. In the end, Quickcluster, using K-means non- hierarchical cluster analysis method was chosen. Three clusters, or seeds, were specified to correspond with the final factor solution. The goal was to assign all 210 SBUs to one of the cluster seeds that most closely described the environment in which they were operating. ± Outcome: a cluster solution (convergence) using the above procedure was achieved in 13 iterations. Each case within a cluster was inspected for common characteristics of association to that cluster. ANOVA testing identified maximal differences/levels of distinction between cluster groups. The groups were exclusive. Figure 2 Data analysis overview [509] C. Brooke Dobni and George Luffman Market orientation and market strategy profiling: an empirical test of environment- behaviour-action coalignment and its performance implications Management Decision 38/8 [2000] 503±519 . Step 3. Choice of environmental context (step 3 of the analytical process, Figure 2): ± Objective: to choose a context for further analysis to determine ideal profiles. ± Procedure: by simply picking one of the statistically derived contexts which has already been configured as a separate database. ± Outcome: identification of an environmental context that will be subjected to profile analysis. . Step 4. Ordinary least squares regression analysis/correlation analysis/ t- tests. (step 4 of the analytical process, Figure 2; stages 1 and 3 of the coalignment procedure, Figure 3): ± Objective: to identify a set of market orientation factors and marketing strategy orientations that are significant for each environment ± Procedure: by using ROI as the criterion variable, separate OLS regressions were conducted to identify those factors and actions that were significantly related to performance for each environment. Only those factors and actions found to be significantly related ( p < 0.05) to ROI in each environment were used for the measure of coalignment. ± Following this, a calibration sample for each environment was computed, followed by the derivation of ideal profiles. The ideal profile consisted of the standardized mean scores of market orientation and market strategy orientations that were significantly related to ROI. Note that only preliminary ideal profiles were established. Testing for coalignment has not yet been achieved. ± Correlation analysis was also performed between the degree of market-oriented activity, and strategy actions (the 22 actions that represented the orientations). ± Outcome: preliminary ideal profiles were established for each of the environmental contexts identified in the cluster analysis, and for the sample overall. Correlational patterns were also established between the level of market orientation activity and marketing strategy action. Significance of group mean differences were tested by standardizing the mean scores of the groups, and then subjecting them to t -testing. Significant differences were identified. . Step 5. Profile analysis (step 5 of the analytical process, Figure 2; stages 2 and 3 of the coalignment procedure, Figure 3): ± Objective: within each environmental context, determine the performance impact of coalignment or, alternatively, the impact of misalignment between the ideal profile and study sample profile along the market orientation factors and market strategy orientations that are significantly related to performance. ± Procedure: involved testing the significance of the zero-order correlations between misalignment and ROI for each of the environments. The coalignment proposition was supported if the correlation coefficient was negative and statistically significant from zero. In the measure of coalignment and performance, market oriented factors that were previously discarded due to the fact that they were not part of the ideal profile were re- introduced to add credence to the power of the model. Differences in the Figure 3 Profile analysis ± coalignment analytical procedure [510] C. Brooke Dobni and George Luffman Market orientation and market strategy profiling: an empirical test of environment- behaviour-action coalignment and its performance implications Management Decision 38/8 [2000] 503±519 correlations between ROI and performance between the high performing and average performing groups were subjected to t -testing. ± Outcome: within each environmental context, there were performance implications of coalignment. Results Results support the proposition that there are ideal market orientation and strategy profiles that correspond to distinct competitive contexts. In reaching this conclusion, Tables II and III report the results of the market orientation and the environmental context factor analysis. It was an absolute precondition that steps 1 and 2 of the analytical procedure produced high measures of sampling adequacy and tests of sphericity in efforts to facilitate the multivariate analysis that followed, and that the clusters display maximal differences. An a priori decision was also made to introduce four strategy orientations consistent with the typologies identified by Miller and Friesen (1984). These typologies included cost leadership, differentiation, innovation, and focus orientations. The factor descriptions for market orientation have already been provided in Table I. Tables II and III describes the environmental clusters while Table IV provides the final factor solutions for both market orientation and competitive context factors. Table III reports the results of the significance tests used to determine if differences existed among the clusters' environmental contexts. As indicated by the F -ratios, the clusters are distinct at probability levels for alpha that are less than 0.01. As evidenced in Tables I-IV, the precondition to support coalignment proposition testing across different competitive contexts was met. High reliabilities (with the exception of the PSI Factor ± alpha of 0.55), as indicated by the coefficient alpha, were also reported across all factors. Coalignment results Coalignment results have been provided for each of the clusters identified. To test for specific performance impacts of coalignment, profile analysis considered both the regression output and zero order correlations of all market orientation and strategy orientation variables even if they were not specified in the initial profile solution. Specifically, subscription to these behaviours contributed to misalignment; therefore the coalignment proposition was further supported if the correlation coefficient of these variables was negative and statistically significant from zero. Table II Environmental context factors Environmental cluster Description 1. Competitive pressure (six items) Is the extent to which an environment is competitive in nature. Competitiveness in this vein includes price competition, marketing activities of competitors, concentration of sales, and entry of new competitors (in terms of numbers of new entrants, and ease of entry) in the principal served market segment of the SBU. 2. Products/services dynamism (four items) This context is tempered by the degree of regulation, the level of research and development activity, the introduction rate of products and services, and the rate of product/service obsolescence 3. Environmental unpredictability (five items) This context describes the uncertainty in an environment attributable to the state of technology, economy, regulation, and culture Note : 15 competitive context statements were profiled using semantic differential scales Table III Final cluster assignments and ANOVA ± significance testing of differences between clusters Cluster name Number of cases Cluster MS df Error MS df F ratio a Significance Competitive pressure (CompPress) 116 30.91 2.0 0.438 207.0 70.68 0.0 Products/services dynamism (P/SDyn) 34 30.54 2.0 0.409 207.0 74.61 0.0 Environmental unpredictability (EnvironUn) 60 43.24 2.0 0.376 207.0 115.14 0.0 Note : a The F ratio is used only for descriptive purposes because the clusters have been chosen to maximize the differences among cases betw een clusters, suggesting that the groups are mutually exclusive [511] C. Brooke Dobni and George Luffman Market orientation and market strategy profiling: an empirical test of environment- behaviour-action coalignment and its performance implications Management Decision 38/8 [2000] 503±519 Cluster 1: Competitive pressure context These findings indicate that, when subjected to analysis of variance, there are significant differences between the standardized mean scores of the high performing group and the average performing group. The ideal profile for this context is indicated through the examination of significant differences between means of the two groups (see Table V and Figure 4). Significant differences exist between the market-oriented means associated with response design and implementation ( t = 6.45, sig. = 0.000), formal intelligence generation ( t = 3.82, sig. = 0.000), and customer orientation ( t = 3.76, sig. = 0.000). Further, there are significant differences in the innovation ( t = 2.67, sig. = 0.009) and differentiation ( t = 2.67, sig. = 0.009) strategy orientation means. In the cases where the t -test did not uncover significant differences it suggests that the respective behaviours and actions between the two groups were not distinct enough to contribute to differences in performance as measured by ROI. Cluster 2: Environmental uncertainty context The t -tests for this cluster provided further evidence that the behaviours associated with response design and implementation ( t = 3.32, sig. = 0.002), formal intelligence generation ( t = 2.15, sig. = 0.037), and the PSI factor ( t = 2.18, sig. = 0.033), and the actions inherent in an innovation strategy orientation ( t = 2.61, sig. = 0.044) comprised the standard profile for this context (Table VI). The zero-order correlation analysis also indicated that the three behavioural factors (response design and implementation, formal Table IV Final factor solutions ± market orientation and competitive context Factor descriptive title Eigenvalue Percentage variance factor Percentage variance cumulative Reliability coefficient alpha Mean inter-item correlation 1. Response design and implementation 8.97 14.71 14.71 0.9394 0.4812 2. Formal intelligence generation 6.42 10.53 25.24 0.8917 0.373 3. Intelligence dissemination 6.33 10.38 35.63 0.9062 0.4013 4. Intelligence generation ± informal 2.88 4.73 40.37 0.6573 0.2926 5. Profit orientation 2.12 3.48 43.85 0.8369 0.7203 6. Customer orientation 2.05 3.36 47.21 0.7134 0.3714 7. PSI factor 1.54 2.53 49.75 0.5529 0.2854 Notes : Kaiser-Meyer-Olkin measure of sampling adequacy: 0.909; Bartlett's test of sphericity: chi-square 8,185.654; df: 1,830; signi ficance: 0.000 1. Competitive pressure 4.52 28.28 28.28 0.7393 0.3154 2. Products/services dynamism 2.11 13.18 41.46 0.6924 0.3659 3. Environmental turbulence 1.35 8.49 49.95 0.7224 0.2728 Notes : Kaiser-Meyer-Olkin measure of sampling adequacy: 0.794; Bartlett's test of sphericity: chi-square 1,052.430; df: 120; signifi cance: 0.000 Table V Competitive pressure High performers standard mean score Average performers standard mean score t Standard mean difference Significance Market orientation Response design and implementation 0.587038 ±0.329999 6.45 0.9170381 0.000 * Formal intelligence generation 0.617017 0.00751 3.82 0.5418823 0.000 * Profit orientation 0.001600 0.159334 ±0.858 ±0.1432997 0.393 Customer orientation 0.387394 ±0.152831 3.76 0.5399257 .000 * PSI factor 0.00461 ±0.001500 0.341 0.0061500 0.734 Strategy orientation Differentiation 0.3148162 ±0.18543 2.67 0.5002559 0.009 * Innovation 0.3123072 ±0.18396 2.64 0.4962690 0.009 * Cost leadership 0.00748 ±0.0044 0.617 0.1188505 0.539 Focus 0.1564967 ±0.0092 1.29 0.2486797 0.197 n 43.0 73.0 Notes : ** significant at p = 0.05; * significant at p = 0.01 [512] C. Brooke Dobni and George Luffman Market orientation and market strategy profiling: an empirical test of environment- behaviour-action coalignment and its performance implications Management Decision 38/8 [2000] 503±519 intelligence generation, and the PSI factor) were significantly correlated with ROI in the high performers group. In addition, the innovation strategy orientation was also significantly correlated with ROI in this group. Factors that were not in the ideal profile (Figure 5) pattern for both groups again displayed either weak positive correlations or negative correlations with ROI. Further, none of the behaviours and actions in the average performers group were significantly correlated with ROI. Again, this provides evidence that factors not present in the ideal profile pattern do not contribute to performance and, in fact, a deviation from ideal patterns may have a negative impact on performance. Such deviations could involve the reinforcement of practices that, heedfully, contribute to less than optimal performance. Cluster 3: Products/services dynamism context Table VII reveals significant differences in the mean scores between the two groups in response design and implementation, and formal intelligence generation. It is interesting to note that formal intelligence generation is not significantly related to performance (regression analysis outcome), yet there is a significance difference in the means of this factor between the two performing groups. In rationalizing this, one must consider the sample size for this context (34 SBUs) and the limitations this places on the regression equation. As a result, outcomes from this context should be carefully interpreted. Response design and implementation and formal intelligence generation are significantly correlated with performance, while the remaining five market oriented factors are not; however, the correlation is positive. Further, the strategy orientations of differentiation and innovation are significantly correlated to performance at the level of p = 0.05. This is a departure from the regression analysis which revealed no significant relation between an innovation orientation and performance. It is also interesting to note that a focus strategy orientation, when correlated with the average performer's ROI, was significant at the level of p = 0.05; however, there were no significant differences between the means of the two performance groups when subjected to t -testing. As a result, it does not impact on the ideal profile (Figure 6). These anomalies could be explained as being due sample size and the differences in statistical procedures. Again, results from this cluster should be interpreted with caution. Discussion The analysis of environmental-behaviour- strategy coalignment heeds support for the research propositions presented. P1 postulated that the situational context will moderate market orientation and strategy profiles to the point where there are ideal profile patterns. The results indicated that there are ideal profiles, and that these profiles vary from context to context. Although the contexts studied are distinct, response design and implementation, and formal intelligence generation were significant behaviours across all contexts, although they exhibited differential beta weights. Response design and implementation is essential to support activity (strategy orientation), while formal intelligence generation is closely related to strategy design and implementation. As a result, one might expect high performing organizations to rely heavily on these behaviours across all contexts. In the context of EnvironUn, the PSI factor (technological advances) was significant, while in the context of CompPress, a customer Figure 5 Ideal profile ± environmental uncertainty context Figure 4 Ideal profile ± competitive pressure context [513] C. Brooke Dobni and George Luffman Market orientation and market strategy profiling: an empirical test of environment- behaviour-action coalignment and its performance implications Management Decision 38/8 [2000] 503±519 orientation weighed measurably on performance. When considering the ideal profile, it is difficult to suggest that one factor is more important than another in the determination of performance. For example, is formal intelligence generation more important than response design and implementation in the context of competitive pressure? The high performer's standardized mean score or regression beta weight might suggest this. Although it can be concluded that ideal profiles are distinct, one must consider that these are relative weights as to the extent that these behaviours are practised, but this does not consider if they are in fact optimal levels of practice for the situation encountered. Also each ideal factor comprises a number of underlying dimensions; and organizations, when pondering their own profiles, need to consider the impact of each dimension by determining its relative importance within the bigger picture and/or the current level of activity before proceeding to make adjustments. Specifically, the ideal profile should be viewed as a holistic manifestation which might be best thought of as a combination of interrelated behaviour and action allocation decisions. Thus, the underlying dimensions of market orientation and strategy deployments are parts of an overall holistic package of behaviours and actions, as opposed to one or a few bivariate relationships. The significance of response design and implementation across all contexts in this study addresses a major limitation inherent in past coalignment studies, that being implementation of strategy. Specifically, past Table VII Products/services dynamism High performers standard mean score Average performers standard mean score t Mean difference Significance Market-oriented factor Response design and implementation 0.6534524 ±0.1832732 2.71 0.8367257 0.011 ** Formal intelligence generation 0.1667516 ±0.5826817 2.14 0.7494333 0.040 ** Profit orientation ±0.2960325 0.00974 ±1.0 ±0.393473 0.304 Customer orientation ±0.2462705 0.1319934 ±1.1 ±0.3782639 0.266 PSI factor 0.2038052 0.9373619 0.85 0.2700378 0.4 Strategy orientation Differentiation 0.121536 ±0.1539455 2.31 ±0.2754815 0.044 ** Innovation 0.000264 ±0.00033 0.0 ±0.0006 0.987 Cost leadership ±0.2048643 0.1617394 ±1.1 ±0.3665992 0.296 Focus 0.00083 0.000656 0.0 ±0.00149 0.966 n 14.0 19.0 Note : ** significant at p = 0.05 Table VI Environmental uncertainty High performers standard mean score Average performers standard mean score t Mean difference Significance Market-oriented factor Response design and implementation 0.5045302 ±0.4287876 3.32 0.9333178 0.002 * Formal intelligence generation ±0.0053 ±0.5682681 2.15 0.5153913 0.037 ** Profit orientation ±0.3320601 ±0.1203347 ±0.897 ±0.2117254 0.374 Customer orientation 0.00868 ±0.1182570 0.788 0.2050403 0.434 PSI factor 0.2039744 ±0.1772281 2.18 0.3812025 0.033 ** Strategy orientation Differentiation 0.2668066 ±0.1236421 1.49 0.3904487 0.161 Innovation 0.1451284 ±0.0067 2.61 0.2123830 0.044 ** Cost leadership ±0.0060 0.00279 ±0.315 ±0.00881 0.754 Focus 0.00803 ±0.0037 0.421 0.1175305 0.676 n 19.0 41.0 Notes : ** significant at p = 0.05; * significant at p = 0.01 [514] C. Brooke Dobni and George Luffman Market orientation and market strategy profiling: an empirical test of environment- behaviour-action coalignment and its performance implications Management Decision 38/8 [2000] 503±519 studies only considered strategy formulation issues or administrative and adaptation issues, and did not fully consider the context in which implementation must occur, namely behavioural requirements to facilitate implementation. The inclusion of a broader set of variables that included market oriented behaviour addressed, in part, this shortcoming. Distinct patterns were also revealed with strategy orientations as well. In a context of P/SDyn, a differentiation orientation proved to be significant. In EnvironUn, an innovation orientation was key to high performance. Two orientations, differentiation and innovation, emerged as being related to performance in the CompPress context. There is evidence to support, at least partially, P2 , which suggests a performance implication between behaviours, actions and outcomes relative to the competitive context. It appears that profiles are contingent on the context encountered as the results indicate that there are some contextual influences over the behaviours of an SBU in two instances when considering the high performing group (high market orientation scores); however, given the similarities in behaviour across all three contexts, the defensibility of this proposition is somewhat weakened. In fact one could, with equal argumentative strength, interpret this as being a relatively strong relationship between market-orientation score and market orientation profile. Future studies might focus on a broader based study further to clarify contingent relationships. Finally, this model provides sufficient evidence to support the general notion concerning the performance implications of coalignment. Specifically, there is empirical evidence to suggest that there is a relationship between behaviours, actions and performance, and that deviations from ideal profiles do have negative performance implications. At the very least, at a theoretical level it reinforces the importance for organizations to consider developing behaviours and actions that are necessarily better suited for the context or domain in which they must compete, provided that they are aware of the competitive dynamics of that context. This was further supported through zero order correlation analysis, where the impact of misalignment provided became evident. Managerial implications For managers, this research has provided some preliminary evidence linking the fit between market oriented behaviour and the competitive context to organizational performance. Also managers must give due consideration to important contextual variables when dealing with matters related to the design, development and ongoing management of market-oriented behaviour. One conclusion that can be drawn from this analysis is that a change in the level of market-oriented activity will most likely facilitate a change in strategy deployments. As well, sustained implementation efforts might well be most adequately supported through changes in market orientations. Finally, it may not be as difficult as initially imagined for organizations to alter strategy deployments, particularly if it is done systematically, through a market orientation. With respect to coalignment theory specifically, the central question for management is: does an organization that aligns its behaviours and actions to specific requirements of its context perform better than a business unit that does not achieve its requisite match? The answer is yes. This research demonstrates the potential that exists in assessing the environmental context, and subsequently profiling market- oriented behaviours in high performing organizations. By identifying desired behaviours that promote superior business performance, managers can attempt to create and maintain appropriate patterns of behaviour in efforts to reduce the gap between desired and existing cultural patterns. To be successful at this, however, requires decision makers to be aware of their competitive context, existing behaviours, desired behaviours, performance targets, and the possibilities or limitations of the organization, and then take action to facilitate such shifts. Also these same managers must display leadership, or the Figure 6 Ideal profile ± products/services dynamism [515] C. Brooke Dobni and George Luffman Market orientation and market strategy profiling: an empirical test of environment- behaviour-action coalignment and its performance implications Management Decision 38/8 [2000] 503±519 willingness to change behaviours ± if that is what is required. Most certainly, incongruent behavioural patterns or ``missing the mark'' will hinder performance objectives. In any case, it is imperative that management understand environment- performance coalignment before attempting to make any requisite shifts. This research also reinforced the notion that there are specific relationships between degrees or levels of market orientation and marketing strategies, while at the same time strongly suggesting that there is no one ``winning'' behavioural or activity pattern that all should subscribe to. For example, high levels of market-oriented behaviour (intelligence generation, intelligence dissemination, customer orientation, and the like) may be desirable in all organizations, but not necessary in some. The distinction between what is desired and what is required must be made. This distinction will be tempered by moderating factors and ``pursuit'' resources available to organizations. As a result, managers need not necessarily worry if their organization's behaviour and strategies differ from others, so long as they are the ones that facilitate the effective achievement of their organization's goals. In pursuit of market-oriented profiles, managers will have to consider a number of factors. First, they will have to consider what, if any, resources will be committed to the pursuit of specific market-oriented behaviour. For example, in environments where a market orientation is proposed to have a limited impact, is a market orientation even necessary or desirable? Or is the fact that it contributes to culture management that facilitates employee commitment and spirit enough to warrant expenditures on resources? Nonetheless, careful consideration in respect to costs versus the benefits have to be given as change efforts are likely to be protracted and successes difficult to measure in the short term. If the decision is made to pursue such an orientation, then the process of implementation becomes the focus. The choice of which capabilities/behaviours to nurture and which investment commitments to make must be guided by a shared understanding of the environmental context, the needs of the customers, the competitive positioning sought, any trends that may be occurring or upcoming, and the organization's ability to support and sustain change. Transitions to a market orientation (or different degrees of market-oriented behaviour) can only be facilitated by cultural shifts. Now, managers can attempt to change their culture to suit the context if indeed there is a perceived gap between actual and desired orientations. Just the idea of toying with organizational culture requires one to consider the risks and consequences associated with the dynamics that behaviour modification could potentially present. Certainly, senior management's feel for the current organizational culture, and the ability and desire of operational level employees to change will direct the focus of efforts necessary to ready the organization or business unit. It is the expectation that senior management commitment, communication, trust and employee involvement will dominate the key success factors in transitional efforts. Following this, the issue then becomes the pace of change. This pace will be affected by the elements noted above, as well as the size of the business unit, the current culture, the current organizational structure and reward systems, the perceived urgency for change, and the characteristics (market and competitive) of the context in which the organization operates currently, or will potentially encounter. Again, these all have to be carefully considered by the proponents of the change effort. Proponents have to be prepared to make tough decisions, display leadership, and alter systems that are within their control, for example, organizational structure and reward systems, to facilitate shifts. Being able to profile market orientation in a coalignment perspective allows one to consider enactment opportunities. The possibility exists to enact contexts that suit the organization's current orientation. For example, if your organization possesses a market-oriented culture that supports innovation, then you might consider entering markets where innovation is a key success factor. This consideration could be a major tool in directing positioning and diversification alternatives. The presumption here is that they are aware of the fit between culture and context, and they have a finger on the pulse of their current organizational culture. Accordingly, the ability to profile market orientation will reduce some of the risk associated with such endeavours. Moreover, being aware of ideal profiles may prevent managers from making unfocused or unnecessary changes to current organizational cultures. At the very least, it would be prudent for managers to consider development efforts aimed at culture alignment with ideal profiles. [516] C. Brooke Dobni and George Luffman Market orientation and market strategy profiling: an empirical test of environment- behaviour-action coalignment and its performance implications Management Decision 38/8 [2000] 503±519 Conclusions, limitations and future studies This research has some potential implications for future research which pertain both to the methodology employed in collecting and analyzing the data, and to the substantive findings of the research effort. The results of this research are encouraging, as this study lays the foundation for further research examining this topic in greater detail. The exploratory nature of this study means that further empirical and qualitative studies are required to substantiate the reliability of the findings. Until future research explores the robustness of the proposed model, the application of the model and subsequent findings may only be valid for the particular sample used. Although we are confident of the model's portability to other industries, most certainly this model could benefit from exposure to a larger sample base, and/or applicationtoothersectorsandindustries.Itis anticipated that this model is transferable, and therefore its tenability could first be proved in other situations. Similarly, this study was limited to merely establishing the propositional presence of associations between market-oriented behaviourandvariouscontextualandoutcome dimensions rather than the rigorous testing of predefined hypotheses. The detailed effect of constructs are not analysed, and conclusions are best likely to be regarded as tentative until they are validated by further research. The primary challenge of this research was to determine ideal profile patterns in a holistic manifestation. An agenda for further research might focus on improving the understanding of the behaviour-action- outcome model and the implications of the process of developing and sustaining a market orientation. For example, future research might focus on: . The issue of optimal dimension levels within ideal profile patterns. Although it can be concluded that ideal profiles are distinct, one must consider that the representation in this research involves relative weights as to the extent that these behaviours are practised, but does not consider if they are in fact optimal levels of practice for the situation encountered. . Determining the distinctiveness and sustainability of market-oriented behaviours. For example, are some behaviours more distinct than others in determining a competitive advantage? Similarly, are they sustainable, and will they stand the test of competition over the long run? . Further diagnosis and study of market- oriented factors, and environmental context measures. The factors under study in this research have been statistically determined. In time, additional factors may better explain or measure these behaviours. Also a larger sample may provide a more comprehensive set of factors for exploration. . Efforts to support change programmes. It is important to know and understand what triggers organizations seriously to pursue an improvement in their market orientation and, subsequently, what processes are used to facilitate such efforts. Topics might include process, time frames, what worked, what did not work, time lags for implementation, and costs versus benefits. Qualitative research would be beneficial on a longitudinal basis that include companies which have been successful, as well as those which have failed. . An enlargement of the range of correlates examined. The theoretical model could be tested by enlarging the moderating factors, and/or by undertaking more broadly based studies of the relationships among behaviour-action-outcome in a market- oriented conceptualization. This would probably entail a more sophisticated and holistic conceptualization of coalignment. Finally, this research has provided some preliminary insight into the menu of employee behaviours that are assumed to be instrumental in the achievement of contextual specific superior performance. Behaviour is generally considered to be an under-researched area in the marketing field, particularly in the discipline of services marketing. Therefore, it should be an important focus of research attention. Potential research areas range from uncovering the behavioural expectations that customers have about firms with which they do business to identifying more precisely the nature and form of a market orientation that is needed to elicit and sustain the ``customer desired'' behaviours. Note 1 Single industry studies are characteristic of a large body of research in the strategy literature because they also provide for some degree of control over environmental peculiarities that confront individual organizations (Snow and Hambrick, 1980; Harrigan, 1983). These constraints enhance the internalvalidity of this research; however, they may reduce the extent to which the findings can be generalized to other industries and environments. This is countered by the [517] C. 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