Skip to main content
SpringerLink
Log in

The effects of customer and competitor orientations on performance in global markets: a contingency analysis

  • Article
  • Published:
Journal of International Business Studies Aims and scope Submit manuscript

Abstract

Should companies adjust their orientations toward customers or toward competitors in global markets? To answer this question, we use contingency theory and examine how the effects of customer and competitor orientations on performance are moderated by different environmental conditions. Our results from the global hotel industry indicate that a customer orientation works better in economically developed markets, as well as in markets with good local business conditions, greater resource availability, and demanding customers. In contrast, a competitor orientation is more effective in markets that are economically developing, have poor local business conditions, and face resource scarcity.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. Researchers seem to agree that the coordinated use of resources (i.e., interfunctional coordination) is critical for a firm to deliver superior customer value (e.g., Kohli and Jaworski, 1990; Narver and Slater, 1990; Deshpandé et al., 1993). Therefore we focus on the customer and competitor orientation facets of market orientation and assess their effectiveness across different environments.

  2. We assessed the validity of market orientation as a second-order construct with three first-order factors (i.e., customer orientation, competitor orientation, and interfunctional coordination). The confirmatory model fitted the data satisfactorily (χ 2(51)=79.589, P=0.006; confirmatory fit index (CFI)=0.962, Tucker–Lewis index (TLI)=0.951; root mean square error of approximation (RMSEA)=0.055), and the composite reliability of market orientation is 0.746, which suggests that market orientation as a second-order factor possesses adequate validity.

  3. In the sample, OECD markets include Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Mexico, the Netherlands, New Zealand, Poland, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. Non-OECD markets include Aruba, Azerbaijan, Bahrain, Benin, Botswana, Brazil, Cambodia, China, Egypt, India, Indonesia, Kenya, Malaysia, Mauritius, Morocco, Myanmar, Oman, Pakistan, Peru, the Philippines, Saudi Arabia, Senegal, South Africa, Sri Lanka, Thailand, Uganda, Vietnam, West Africa, the West Indies, and Zaire.

  4. We thank an anonymous reviewer for suggesting this approach.

  5. Because of space constraints, we report only the invariance test results across OECD vs non-OECD groups in Table 1b. Additional results are available on request.

References

  • Anderson, J.C. and Gerbing, D.W. (1988) ‘Structural equation modeling in practice: a review of recommended two-step approach’, Psychological Bulletin 103(3): 411–423.

    Article  Google Scholar 

  • Armstrong, J.S. and Collopy, F. (1996) ‘Competitor orientation: effects of objectives and information on managerial decisions and profitability’, Journal of Marketing Research 33(2): 188–199.

    Article  Google Scholar 

  • Armstrong, J.S. and Overton, T.S. (1977) ‘Estimating nonresponse bias in mail surveys’, Journal of Marketing Research 14(3): 396–402.

    Article  Google Scholar 

  • Batra, R. (1997) ‘Marketing issues and challenges in transitional economics’, Journal of International Marketing 5(4): 95–114.

    Google Scholar 

  • Boisot, M. and Child, J. (1996) ‘From fiefs to clans and network capitalism: explaining China's emerging economic order’, Administrative Science Quarterly 41(4): 600–628.

    Article  Google Scholar 

  • Brown, J.R. and Dev, C.S. (2000) ‘Improving productivity in a service business: evidence from the hotel industry’, Journal of Service Research 2(2): 339–354.

    Article  Google Scholar 

  • Cadogan, J.W., Diamantopoulos, A. and Mortanges, C.P. (1999) ‘A measure of export market orientation: scale development and cross-cultural validation’, Journal of International Business Studies 30(4): 689–707.

    Article  Google Scholar 

  • Cateora, P.R. and Graham, J.L. (2005) International Marketing, 12th edn, McGraw-Hill Companies: New York.

    Google Scholar 

  • Coopers & Lybrand (1997) ‘Product differentiation and innovation in a maturing lodging industry: a review of brand introductions in the 1980 to 1996 period’, Coopers & Lybrand Hospitality Direction (February).

  • Cote, J.A. and Buckley, M.R. (1987) ‘Estimating trait, method, and error variance: generalizing across 70 construct validation studies’, Journal of Marketing Research 24(3): 315–318.

    Article  Google Scholar 

  • Dawar, N. and Parker, P. (1994) ‘Marketing universals: consumers’ use of brand name, price, physical appearance, and retailer reputation as signals of product quality’, Journal of Marketing 58(2): 81–95.

    Article  Google Scholar 

  • Day, G.S. and Nedungadi, P. (1994) ‘Managerial representations of competitive advantage’, Journal of Marketing 58(2): 31–44.

    Article  Google Scholar 

  • Day, G.S. and Wensley, R. (1988) ‘Assessing advantage: a framework for diagnosing competitive superiority’, Journal of Marketing 52(2): 1–20.

    Article  Google Scholar 

  • Deshpandé, R. and Farley, J.U. (1998) ‘Measuring market orientation: generalization and synthesis’, Journal of Market-Focused Management 2(3): 213–232.

    Article  Google Scholar 

  • Deshpandé, R., Farley, J.U. and Webster Jr, F. (1993) ‘Corporate culture, customer orientation, and innovativeness in Japanese firms: a quadrad analysis’, Journal of Marketing 57(1): 23–37.

    Article  Google Scholar 

  • Donaldson, L. (2000) The Contingency Theory of Organizations, Sage: Thousand Oaks, CA.

    Google Scholar 

  • Ekeledo, I. and Sivakumar, K. (1998) ‘Foreign market entry mode choice of service firms: a contingency perspective’, Journal of the Academy of Marketing Science 26(4): 274–292.

    Article  Google Scholar 

  • Elvira, M.M. and Cohen, L.E. (2001) ‘Location matters: a cross-level analysis of the effects of organizational sex composition on turnover’, Academy of Management Journal 44(3): 591–605.

    Article  Google Scholar 

  • Fahy, J., Hooley, G., Cox, T., Beracs, R., Fonfara, K. and Snoj, B. (2000) ‘The development and impact of marketing capabilities in Central Europe’, Journal of International Business Studies 31(1): 63–81.

    Article  Google Scholar 

  • Fornell, C. and Larker, D.F. (1981) ‘Evaluating structural equation models with unobservable variables and measurement error’, Journal of Marketing Research 18(1): 39–50.

    Article  Google Scholar 

  • Gatignon, H. and Xuereb, J. (1997) ‘Strategic orientation of the firm and new product performance’, Journal of Marketing Research 34(1): 77–90.

    Article  Google Scholar 

  • Ginsberg, A. and Venkatraman, N. (1985) ‘Contingency perspectives of organizational strategy: a critical review of the empirical research’, Academy of Management Review 10(3): 421–434.

    Google Scholar 

  • Hair, J.F., Anderson, R.E., Tatham, R.L. and Black, W.C. (1998) Multivariate Data Analysis, Prentice-Hall: Upper Saddle River, New Jersey.

    Google Scholar 

  • Han, J.K., Kim, N. and Srivastava, R.K. (1998) ‘Market orientation and organizational performance: is innovation a missing link?’ Journal of Marketing 62(4): 30–45.

    Article  Google Scholar 

  • Hult, G.T.M. and Ketchen Jr, D.J. (2001) ‘Does market orientation matter? A test of the relationship between positional advantage and performance’, Strategic Management Journal 22(9): 899–906.

    Article  Google Scholar 

  • Hurley, R.F. and Hult, G.T.M. (1998) ‘Innovation, market orientation, and organizational learning: an integration and empirical examination’, Journal of Marketing 62(3): 42–54.

    Article  Google Scholar 

  • Jaccard, J., Turrisi, R. and Wan, C.K. (1990) Interaction Effects in Multiple Regression, Sage: Newbury Park, CA.

    Google Scholar 

  • Jaworski, B.J. and Kohli, A.K. (1993) ‘Market orientation: antecedents and consequences’, Journal of Marketing 57(3): 53–70.

    Article  Google Scholar 

  • Kohli, A.K. and Jaworski, B.J. (1990) ‘Market orientation: the construct, research propositions, and managerial implications’, Journal of Marketing 54(2): 1–18.

    Article  Google Scholar 

  • Lawrence, P.R. and Lorsch, J.W. (1967) Organization and Environment: Managing Differentiation and Integration, Harvard Business School Press: Boston, MA.

    Google Scholar 

  • Li, J.J. (2005) ‘The formation of managerial networks of foreign firms in China: the effects of strategic orientations’, Asia Pacific Journal of Management 22(4): 423–443.

    Article  Google Scholar 

  • Li, T. and Calantone, R.J. (1998) ‘The impact of market knowledge competence on new product advantage: conceptualization and empirical examination’, Journal of Marketing 62(4): 13–29.

    Article  Google Scholar 

  • McGrath, R.G. (2001) ‘Exploratory learning, innovative capacity, and managerial oversight’, Academy of Management Journal 44(1): 118–131.

    Article  Google Scholar 

  • MKG Consulting (2002) ‘Worldwide ranking of hotel groups’, www.mkgconseil.com.

  • Monroe, K.B. (1990) Pricing: Making Profitable Decisions, McGraw-Hill: New York.

    Google Scholar 

  • Moorman, C. and Rust, R.T. (1999) ‘The role of marketing’, Journal of Marketing 63(Special Issue): 180–197.

    Article  Google Scholar 

  • Mullen, M.R. (1995) ‘Diagnosing measurement equivalence in cross-national research’, Journal of International Business Studies 26(3): 573–596.

    Article  Google Scholar 

  • Narver, J.C. and Slater, S.F. (1990) ‘The effect of a market orientation on business profitability’, Journal of Marketing 54(4): 20–35.

    Article  Google Scholar 

  • Noble, C.H., Sinha, R.K. and Kumar, A. (2002) ‘Market orientation and alternative strategic orientations: a longitudinal assessment of performance implications’, Journal of Marketing 66(October): 25–39.

    Article  Google Scholar 

  • Norburn, D., Birley, S., Dunn, M. and Payne, A. (1990) ‘A four nation study of the relationship between marketing effectiveness, corporate culture, corporate values, and market orientation’, Journal of International Business Studies 21(3): 451–468.

    Article  Google Scholar 

  • Peng, M.W. and Heath, P.S. (1996) ‘The growth of the firm in planned economies in transition: institutions, organizations, and strategic choice’, Academy of Management Review 21(2): 492–528.

    Google Scholar 

  • Peng, M.W. and Luo, Y. (2000) ‘Managerial ties and firm performance in a transition economy: the nature of a micro-macro link’, Academy of Management Journal 43(3): 486–501.

    Article  Google Scholar 

  • Peters, T.J. and Austin, N. (1985) A Passion for Excellence, Random House: New York.

    Google Scholar 

  • Pfeffer, J. and Salancik, C.R. (1978) The External Control of Organizations: A Resource Dependence Perspective, Harper & Row: New York.

    Google Scholar 

  • Porter, M. (1980) Competitive Strategy, The Free Press: New York.

    Google Scholar 

  • Slater, S.F. and Narver, J.C. (1994) ‘Does competitive environment moderate the market orientation–performance relationship?’ Journal of Marketing 58(1): 46–55.

    Article  Google Scholar 

  • Slater, S.F. and Narver, J.C. (1998) ‘Customer-led and market-oriented: let's not confuse the two’, Strategic Management Journal 19(10): 1001–1006.

    Article  Google Scholar 

  • Steenkamp, J.E.M. and Baumgartner, H. (1998) ‘Assessing measurement invariance in cross-national consumer research’, Journal of Consumer Research 25(1): 78–90.

    Article  Google Scholar 

  • Voss, G.B. and Voss, Z.G. (2000) ‘Strategic orientation and firm performance in an artistic environment’, Journal of Marketing 64(1): 67–83.

    Article  Google Scholar 

  • Zhou, K.Z., Su, C. and Bao, Y. (2002) ‘A paradox of price-quality and market efficiency: a comparative study of the US and China markets’, International Journal of Research in Marketing 19(4): 349–365.

    Article  Google Scholar 

  • Zhou, K.Z., Tse, D.K. and Li, J.J. (2006) ‘Organizational change in emerging economies: drivers and consequences’, Journal of International Business Studies 37(2): 248–263.

    Article  Google Scholar 

  • Zhou, K.Z., Yim, C.K. and Tse, D.K. (2005) ‘The effects of strategic orientations on technology- and market-based breakthrough innovations’, Journal of Marketing 69(2): 42–60.

    Article  Google Scholar 

Download references

Acknowledgements

We thank Professor Krishna Erramilli, Jeff Weinstein of HOTELS magazine, and Vikram Mujumdar for their invaluable assistance in this research. We also thank the three anonymous JIBS reviewers and the Departmental Editor, Professor G Tomas M Hult, for their insightful and constructive comments.

Author information

Authors and Affiliations

  1. School of Business, The University of Hong Kong, Pokfulam, Hong Kong

    Kevin Zheng Zhou

  2. College of Business and Economics, West Virginia University, Morgantown, WV, USA

    James R Brown

  3. School of Hotel Administration, Cornell University, Ithaca, NY, USA

    Chekitan S Dev

  4. College of Business, Iowa State University, Ames, IA, USA

    Sanjeev Agarwal

Authors
  1. Kevin Zheng Zhou
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. James R Brown
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Chekitan S Dev
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Sanjeev Agarwal
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Kevin Zheng Zhou.

Additional information

Accepted by G Tomas M Hult, Deputy Editor-in-Chief, 25 July 2006. This paper has been with the authors for two revisions.

Appendix

Appendix

The measurement items and results of the validity analyses are given Table A1.

Table a1 Measurement items and validity assessment
Full size table

Rights and permissions

Reprints and permissions

About this article

Cite this article

Zhou, K., Brown, J., Dev, C. et al. The effects of customer and competitor orientations on performance in global markets: a contingency analysis. J Int Bus Stud 38, 303–319 (2007). https://doi.org/10.1057/palgrave.jibs.8400259

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/palgrave.jibs.8400259

Keywords

Search

Navigation