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The impact of product market strategy-organizational culture fit on business performance

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Abstract

Drawing on the organization theory literature concerning configuration theory, competing values theory, and fit assessment methodologies, we examine the existence and performance impact of product market strategy–organization culture fit. Specifically, we assess the relationship among three important elements of a firm’s product market strategy and the four cultural orientations that comprise the competing values theory of organizational culture using primary and secondary data from the US trucking industry. Using two different conceptualizations and operationalizations of fit, our results provide the first empirical support for the existence of interrelationships among product market strategy decisions and organizational culture orientations consistent with configuration theory conceptualizations of product market strategy–organizational culture fit. We also find support for theorized but previously untested relationships between product market strategy–organizational culture fit and firms’ customer satisfaction and cash-flow return on assets (CFROA) performance. Since product market strategy is heavily reliant on the input of marketers, and organizational culture has long been recognized as having an important impact on marketing-related decision making, these findings have important implications for marketing strategy research and practice.

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Notes

  1. The mean customer satisfaction score of 6.12 on a ten-point scale is also slightly below the most recent American Customer Satisfaction Index (ACSI) average of 72.6 (on a hundred-point scale) for the relevant ACSI industrial sector (transportation).

  2. Relevant to subsequent hypothesis testing, we also ran two measurement models containing all the independent and control variables with each dependent variable. Both the customer satisfaction (χ2 = 502.05, 452 d.f, CFI = .97, NNFI = .96, RMSEA = .03) and CFROA (χ2 = 430.0, 392 d.f, CFI = .95, NNFI = .94, RMSEA = .03) measurement models were supported in our data.

  3. Comparing a single-factor confirmatory model (χ2 = 802.42, 324 d.f, CFI = .47, RMSEA = .10) with a seven-factor model (χ2 = 356.52, 303 d.f, CFI = .94, RMSEA = .03) yields aχ2 difference equal to 445.90, 21 d.f., p < 0.001.

  4. We also examined a SEM that included a “same source” factor along with the theoretical constructs and relationships of interest, which indicated that common method variance does not significantly attenuate the paths in these analyses (e.g., Netemeyer et al. 1997).

  5. Using of a number of alternative algorithms (e.g., nearest neighbor, average linkage) produced similar results.

  6. We used items concerning the extent to which it was the firm’s strategy “to offer innovative products and services” as an indicator of superior product/service, “to be the lowest cost provider in the industry” as an indicator of lowest delivered cost, and both “to offer products and/or services for specialized needs” and TTS data concerning each firm’s average haulage distance to indicate product/market scope.

  7. The mean values for the firms in our sample are 18% CFROA with cash-flows of $12,462,240 and $70,560,670 in assets. A 5% increase in variance in CFROA explained equates to a CFROA improvement to 18.9%, which in turn indicates an increase in cash-flow of $873,710 [(18.9*70,560,670 = $13,335.95)—$12,462,240]—an increase of 7%.

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Authors and Affiliations

  1. Supply Chain Management Research Center, University of Arkansas, Fayetteville, AR, 72701, USA

    Larry Yarbrough

  2. Kelley School of Business, Indiana University, 1309 E. Tenth Street, Bloomington, IN, 47405, USA

    Neil A. Morgan

  3. School of Business Administration, University of Mississippi, Holman 327, University, MS, 38677, USA

    Douglas W. Vorhies

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  1. Larry Yarbrough
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  2. Neil A. Morgan
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Correspondence to Neil A. Morgan.

Appendix

Appendix

Scales Used in the Research

Clan Cultural Orientation (Seven-point scale: 1 = Not at all like us; 7 = Very much like us)

This is a very personal place. It’s like an extended family. People seem to share a lot of themselves.

The head of my division is generally considered to be a mentor, sage, or a father or a mother figure.

The glue that holds my division together is loyalty and tradition. Commitment to this firm runs high.

Our company emphasizes human resources. High cohesion and morale in the firm are important.

Adhocracy Cultural Orientation (Seven-point scale: 1 = Not at all like us; 7 = Very much like us)

This is a very dynamic and entrepreneurial place. People are willing to stick their necks out and take risks.

The head of this company is generally considered to be an entrepreneur, an innovator, or a risk taker.

The glue that holds us together is a commitment to innovation and development. There is an emphasis on being first.

Our company emphasizes growth and acquiring new resources. Readiness to meet new challenges is important.

Hierarchy Cultural Orientation (Seven-point scale: 1 = Not at all like us; 7 = Very much like us)

We are an organized and structured place. Detailed procedures help people know what to do.

The head of this company is generally considered to be a coordinator, an organizer, or an administrator.

The glue that holds us together is formal rules and policies. Maintaining a smooth-running institution is important here.

Our company emphasizes permanence and stability. Efficient, smooth operations are important.

Market Cultural Orientation (Seven-point scale: 1 = Not at all like us; 7 = Very much like us)

Our firm is very production oriented. The major concern is with getting the job done. People aren’t very personally involved.

The head of this company is generally considered to be a producer, a technician, or a hard-driver.

The glue that holds us together is an emphasis on tasks and goal accomplishment. A production orientation is shared.

Our company emphasizes competitive actions and achievement. Measurable goals are important.

Superior Product/Service (Seven-point scale: 1 = Not at all; 7 = To a great extent)

To what extent is the strategy of your business…

… to provide unique services?

… to offer highly differentiated services?

… to offer a high degree of value in your services?

… to offer services with distinctly different features from those of competing services?

Lowering Delivered Cost (Seven-point scale: 1 = Not at all; 7 = To a great extent)

To what extent is the strategy of your business…

… to invest in cost saving technology?

… to emphasize efficiency?

… to redesign services to reduce costs?

… to strive for high volume to spread costs?

Product Market Scope (Seven-point scale: 1 = Not at all; 7 = To a great extent)

To what extent is the strategy of your business…

… to stick to your own geographic area or shipper types?

… to offer only a few services specifically designed for your customers?

… to appeal to a specific “niche” in the marketplace?

… to focus your efforts on a particular type of customer or type of freight?

Customer Satisfaction (Mean Score of Customer Ratings)

To what extent does this carrier live up to your general expectations for them (1 = Much worse than expected; 10 = Much better).

Imagine the perfect motor carrier. How far/close does this carrier come to your ideal (1 = Very far from ideal; 10 = Very close).

Given your experience with this carrier, how satisfied or dissatisfied are you with their performance (1 = Very dissatisfied; 10 = Very satisfied).

CFROA (Net operating Income + Depreciation and Amortization – Disposal of Assets)/Total Assets

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Yarbrough, L., Morgan, N.A. & Vorhies, D.W. The impact of product market strategy-organizational culture fit on business performance. J. of the Acad. Mark. Sci. 39, 555–573 (2011). https://doi.org/10.1007/s11747-010-0238-x

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