RELATIONSHIP BETWEEN MARKET ORIENTATION AND ORGANIZATIONAL PERFORMANCE

Transcription

1 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/2010/2708 Department of Marketing May 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 Administration in Marketing 1

2 Acknowledgement I 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 and completion of this study. First and foremost, I heartily 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 academic and 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 practical importance 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 to complete 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 during this 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 this study success. 2

3 Table of Contents 1. INTRODUCTION Chapter Introduction Background of the Study Problem Identification Research Question Objectives of the Study Significance of the Study Chapter Outline LITERATURE REVIEW Chapter Introduction Organizational Performance Market Orientation Page Different views of Market Orientation Kholi and Jaworski s View Slater and Narver s View Customer Orientation Competitor Orientation Inter Functional Coordination Social Benefit Orientation Market Orientation and Organizational Performance Conceptual Framework Hypotheses Development Customer Orientation & Organizational Performance Competitor Orientation & Organizational Performance Inter Functional Coordination & Organizational Performance Social Benefit Orientation & Organizational Performance

4 3. RESEARCH METHODOLOGY Chapter Introduction Philosophy Research Design Exploratory Vs. Conclusive Research Quantitative Vs. Qualitative Research Research Context Determination of Population and Sample Population Sampling and Sample Sampling Sample Extent Data Collection Primary data and Data Collection Primary Data Collection Method Secondary Data Questionnaire Design Pilot Study Data Collection Measurement and Scaling Primary Measurements Organizational Performance Customer Orientation Competitor Orientation Inter functional Coordination Social Benefit Orientation DATA ANALYSIS Chapter Introduction Demographic Factor Analysis Position of the Respondents Age Composition of the Sample

5 Gender Composition of the Sample Educational Level of the respondents Background Data Analysis Line of the Business Main Production of the Business Established Year of the Business Measurement Model Confirmatory Factor Analysis Validity and Reliability Structural Model Hypothesis Testing DISSCUSSTION AND CONCLUSION Chapter Introduction Summary of the Study Findings of the Study Contribution of the Study Managerial Contribution Theoretical Contribution Limitations and Future research Limitations Future Research References 5

6 List of Tables Table 2.1: Summary of previous research findings Table 3.1: Determinants of manufacturing organizations selection Table 3.2: Results of the Pilot Test Table 3.3: Measurement items of Organizational Performance Table 3.4: Measurement items of Customer Orientation Table 3.5: Measurement items of Competitor Orientation Table 3.6: Measurement items of Inter Functional Coordination Table 3.7: Measurement items of Social benefit Orientation Table 4.1: Demographic Data Position of the Respondents Table 4.2: Demographic Data Age Composition of the Sample Table 4.3: Demographic Data Gender Composition of the Sample Table 4.4: Demographic Data Educational Level of the Respondents Table 4.5: Background Data Line of the Business Table 4.6: Background Data Main Production Table 4.7: Background Data Established Year of the Business Table 4.8: Confirmatory Factor Analysis (Original Model) Table 4.9: Confirmatory Factor Analysis (Final Model) Table 4.10: Assessment of the Reliability Table 4.11: Results of PLS path model Estimation Table 4.12: Discriminant Validity of the Constructs Table 4.13: Summery of the Hypotheses Testing

7 List of Figures Figure 2.1: Kholi and Jawoski s view on Market Orientation Figure 2.2: Narver and Slater s view on Market Orientation Figure 2.3: Developed Conceptual Framework Figure 3.1: Basic research Designs Figure 3.2: Sampling Techniques Figure 3.3: Primary Measurement Scales Figure 4.1: Demographic Data Position of the Respondents Figure 4.2: Demographic Data Age Composition of the Sample Figure 4.3: Demographic Data Gender Composition of the Sample Figure 4.4: Demographic Data Educational Level of the Respondents Figure 4.5: Background Data Line of the Business Figure 4.6: Background Data Main Production Figure 4.7: Background Data - Established Year of the Business Figure 4.8: Structural Model Figure 5.1: Slater and Naver s view of Market Orientation (MKTOR model) Figure 5.2: NEWMKTOR model

8 Appendix 1: Covering Letter List of Appendices Appendix 2: Survey Questionnaire (English) Appendix 3: Survey Questionnaire (Sinhala Translation) Appendix 4: Detailed Pilot Study Results Appendix 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) 8

9 Declaration I 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 where due acknowledgment has been made in the text. Signature of the student: Name of the student: Registration number of the student: Date: 9

10 Certification This 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 student under my supervision. This dissertation has been submitted with my approval. Supervisor Dr. Thusitha Gunawardhana Department of Marketing Faculty of Management and Finance University of Ruhuna Head, Department of Marketing Faculty of Management and Finance University of Ruhuna 10

11 Abstract Studying 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 in small 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 developed through this research study to measure the Market Orientation in different contexts. Key Words: Competitor Orientation, Customer Orientation, Inter Functional Coordination, Market Orientation, Organizational Performance and Social Benefit Orientation 11

12 1.1. Chapter Introduction CHAPTER 1 INTRODUCTION This is the first 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 Organizational Performance. 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 identifies the importance of the study in detail. Determined main objective and the sub objectives of the research study included in the section five of this chapter. Section six of this chapter shows the structure of the research study. 12

13 1.2. Background of the Study During the last two decades with the rapid growth of the business economy Marketing has become a significant 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 of market orientation. Today, each and every organization pay more consideration in order to maximize the profit through satisfying customer s needs and wants and keeping profitable 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 profits. Not only that when considering about customer s perspective, especially today consumers are more knowledgeable and rational when compare with the past. They always expect higher level of satisfaction by fulfilling their needs and wants through products and services. Therefore organizations should give priority to fulfill the consumer s 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 field 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 more effective 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, 2010 and Narver and Slater, 1990). Slater and Narver (1990) concluded that market 13

14 orientation consists of three behavioral components: Customer Orientation, Competitor Orientation, and Inter Functional Coordination. They conceptualized an organization s degree of market orientation as the sum total of its emphasis on these three 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 in the 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 America s 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 of marketing concept. Market oriented organizations typically have a long term focus related to profits 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 discovers and 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 the industry by an organization. 14

15 Result of the implementation of business practices can be identified 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 of the organization Problem Identification Although 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 influence 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 influence attitudes people have toward different aspects of their lives including attitudes toward Market Orientation (Homer and Kahle, 1988). These attitudes, in turn, influence the way in which individuals behave (Homer and Kahle, 1988). Researches have shown that market oriented organizations perform better than nonmarket oriented organizations in terms of efficiency, effectiveness, adaptability, and overall performance (Jaworski and Kohli, 1993; Slater and Narver, 1994). Moreover, firm performance largely depends on market performance and employee performance (Hansen and Wernerfelt, 1989). This is the rationale for studying the influence 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 efficient and effective progress. Not only that, therefore, before plan new marketing strategies or to evaluate current system it essential to conduct a research study. Based 15

16 on the research findings managers can make decisions in order to achieve better organizational 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 importance and 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 Benefit 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 first time this research study considered about small and 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 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 benefits by an organization on behalf of increase of performance of the organization and it will help to make a good image in customer s mind about the organization and its products. And also it comes with the Societal Marketing Concept and the concept Corporate Social Responsibility as well. 16

17 Research questions Once 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 and Organizational Performance? In addition to main research question sub questions are, What is the relationship between Customer Orientation and Organizational Performance? What is the relationship between Competitor Orientation and Organizational Performance? What is the relationship between Inter Functional Coordination and Organizational Performance? What is the relationship between Social Benefit Orientation and Organizational Performance? 1.4. Objectives of the Study The main objective of this research study is, To examine the relationship between Market Orientation and the Organizational Performance. In addition to that sub objectives are, To examine the relationship between Customer Orientation and the Organizational Performance. To examine the relationship between Competitor Orientation and the Organizational Performance. To examine the relationship between Inter Functional Coordination and Organizational Performance. To examine the relationship between Social Benefit Orientation and Organizational Performance. 17

18 1.5. Significance of the Study Mainly 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 profitable 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 market orientation 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 understand marketing theories differently from their counterparts in other economies. Building on the initial research by, Kholi and Jaworski (1990) and Narver and Slater (1990), significant 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 specific. Market orientation is often considered to be marketing s contribution to business strategy (Hunt and 18

19 Lambe, 2000), and its salient dimensions, competitor orientation and customer orientation, 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, competitor s reactions, coordination of different functions within the organization and social benefits 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 profits. Further, this provides what kind of marketing strategies should be taken on behalf of the organizational success and the increase the marketing performance of the organization. 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 relationship between Market Orientation and Organizational Performance. 19

20 1.6. Chapter Outline The first chapter describes the introduction of the research study, problem identification and research questions, the objectives which are going to achieve through the research and significance of the research study. Further it includes the structure 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 Confirmatory 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 findings & conclusion and managerial implications. Further, it includes limitations of the research study and future directions for future researchers. And also theoretical contribution for the market orientation is included in this chapter five. 20

21 2.1. Chapter Introduction CHAPTER 2 LITERATURE REVIEW This 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 Benefit 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 dependent variable, 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 definitions and the concepts, there are main two theories has been identified. Those theories are essential to get proper understanding and 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 the previous research findings. 21

22 2.2. Organizational Performance Performance is a fairly broad concept, and it is meaning changes in accordance with user s 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 financial 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 financial performance (Anderson, 1997). Similarly, studies demonstrate the influence 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 (O Sullivan, 2009). Organizational performance refers to the firm s market and financial performance, which is positively related to the firm s economic value (Slater and Narver, 1994) According to the definition 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 firm s 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 firm is more likely to achieve high levels of customer satisfaction, to keep existing customers loyal, to attract new customers, and 22

23 subsequently to attain the desired level of growth, market share, and hence of organizational 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 important concepts 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 (Griffin, 2003). Professional scholars namely Stoel horst (2001) and Van Raaij (2004) describe market orientation as marketing s explanation of performance differentials between firms. Market orientation enhances a firm s 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 of performance 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 marketing s stature (Rust et al., 2004). One study to date (O Sullivan and Abela, 2007) has demonstrated a positive relationship between the ability to measure marketing performance, and actual firm performance (O Sullivan and Abela, 2009). However, marketing performance is the subjective assessment of an organization s performance relative to its competitors over the previous three years across three attributes: market share growth, revenue growth and sales growth. Therefore, the study evaluates marketing performance using the subjective approach to measuring 23

24 performance. A number of authors defend the adequacy of subjective measures as opposed to objective ones (Pertusa Ortega et al, 2010). Conceptually, growth reflects increases in sales and is often reflected 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 reflects 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 the organization in delivering value to its customers and is often viewed as an antecedent to profitability (Vorhies and Harker, 2000) Market Orientation Market Orientation receives a significant 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 firm 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 of a defendable competitive advantage, decreased costs and increased profits (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 organization s operations and the subsequent support given to this idea by Levitt (1960) that the customer is the reason for the organization s 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 intelligence 24

25 generation, dissemination and responsiveness to market information for efficient and effective decisions (Sundqvist, Puumalainen and Saminen, 2000; Kohli and Jaworski, 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 inducement for 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 the concept 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 which help firms stay close to their consumers (Hsieh et al. 2008). Conceptually, market 25

26 oriented 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 Jaworski (1990), and a cultural perspective based on Narver and Slater (1990). But in this research study paid attention 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 efficiently 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 competitors in 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 organization s 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 the market orientation literature suggests that market-oriented firms are in a better 26

27 position 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 efficiently 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 profitability, 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 firms (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 very prolific (Farrelly and Quester, 2003) Different views of Market Orientation Although 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 Kohli and Jaworski s View of Market Orientation It 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 The first paper, by Kohli and Jaworski (1990), viewed market orientation as the implementation of the marketing concept. In the model they proposed emphasizes the 27

28 collection 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 nonmarketing positions in United State America companies. The main finding was that profitability 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 for the company. Figure 2.1:- Kohli and Jaworski s view on market orientation. Source: Kohli and Jaworski (1990). Figure 2.1 shows the interaction between intelligence generation, dissemination and responsiveness. Intelligence gathering is just what the name implies, gathering intelligence 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 system s 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 only willing to share information if it implies no cost. 28

29 Narver and Slater s View of Market Orientation The 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. Narver s and Slater s 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 one corporation. 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 firms 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 definition: Market orientation consists of three behavioural components such as customer orientation, competitor orientation, and inter functional coordination and two decision criteria long term focus and profitability. 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 and profitability to their model. Figure 2.2: Narver and Slater s view on market orientation. Source: Narver and Slater (1990). 29

30 Figure 2.2 shows the interaction between the three behavioural components; customer orientation, 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 customer s customers and their business environment and how that will develop in the future. This concept matches with Kohli s and Jaworski s (1990) suggestion that companies must collect and assess data on customer s 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 fill current and future customer needs 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 and distributing that knowledge throughout the organization. This means that the market 30

31 oriented company must provide adequate business processes and systems for data input and coordinate the communication of disseminated business info in order to create 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 the customer. The two decision criteria shown in the figure 2.2 are a long term profit focus and profitability. It is through the continuous creation of superior customer value that a business creates its long-run profit performance. A short period marketing campaign or sales action might boost sales, but the organizational image and generation of repeat 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 to better performance. Although both papers by Slater and Naver (1998) and Kohli and Jaworski (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 Naver (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 the relationship between Market Orientation and Organizational Performance. 31

32 Accordingly, entire current research study is based on the four behavioural components of the Market Orientation Customer Orientation The heart of the market orientation is its customer focus. To create superior value for buyers continuously requires that a seller understand a buyer s 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 efficient 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 defined 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 reflect 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 with community 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 Jaworski, 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 consumers thereby become accustomed to this philosophy (Ritchie, and Zerbe, 2000). A firm s 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-selling strategy. 32

33 Narver and Slater (1990) described customer orientation as the sufficient understanding of a company s 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 Jaworski, 1990) found in their interviews with company managers that a customer focus is a critical element in determining market orientation Competitor Orientation According 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 alternative from 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 defined as firms 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 firm s current and potential competitors may therefore be found among firms with similar and dissimilar production technology platforms. A competitor orientation may lead to a cost advantage because competitor oriented businesses tend to watch costs 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 running daily operations than with long term business planning (Amer and Bain, 1990; 33

34 Robinson 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 to improve appropriate business marketing and planning skills. Competitor orientation can enhance a firm s 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, Rindfleisch, 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 profitability of a firm and suggested that firms should focus on maximising their own profit and ignore their competitor s 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 such information can be used to build a competitive advantage in the industry it operates. 34

35 Inter Functional Coordination 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 organization s goal (Narver and Slater, 1990). According to Porter (1985), inter functional coordination can be defined as every department, facilities, branch office and other organizational units has a role that must be defined and understood. This is defined as the coordinated 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 integration and collaboration of different functional areas or departments. Inter functional coordination describes the ability of different functional areas to accommodate disparate views and work around conflicting perspectives and mental models by putting aside functional interests for the better of the organization as a whole. As the literature on internal marketing is rapidly growing, Inter Functional Coordination is also viewed as an important criterion of internal marketing. Rafiq 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 officially identified 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 Functional Coordination 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 organization s goal (Narver and Slater, 1990). According to the definition of Slater and Narver in 1990, to become customer oriented organization communication of information is 35

36 must. Inter functional coordination describes the ability of different functional areas to accommodate disparate views and work around conflicting 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 conflicting 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 marketing concept (Harrison and Shaw, 2004) Social Benefit Orientation Social benefits can be defined as the increase in the welfare of a society that is derived from a particular course of action. Most social benefits cannot be quantified (Paul and kwon, 2002). Through this definition it is crystal clear that Social benefit 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 benefits of production or consumption. Although in this definition 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

37 Another way of explaining about Social benefit is defined by measurement against a third-party standard, and all statutes permit incorporators to also pursue more specific Social benefits 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 flow 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 to positioning in consumer s mind about the organizations as well as the products. When it comes to Sri Lankan context because of the cultural situations, Social Benefit has become very important and essential concept today business industry Market Orientation and Organizational Performance Prior 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 Jaworski (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 defines 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 Jaworski (1990) view has been subjected to criticism (Diamantopoulos and Hart, 1993) while the Narver and Slater (1990) conceptualization has been praised (e.g., 37

38 Greenley, 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 the forms of orientation and performance. 38

39 Table 2.1:- Summary of the previous research findings Author/s 1 Slater and Narver (1990) 2 Fred Langerak, Erik Jan Hultink, and Henry S. J. Robben (2010) Research Questions/ Objectives To examine the relationship between Market orientation, Customer value and superior Performance. To determine how critical NPD activities are for a market-oriented firm to achieve superior performance Findings Major finding was there is a Strong relationship between market orientation and superior performance. A substantive Market orientation must be the foundation for a business competitive advantage strategy. The Results provide evidence that a market orientation is related positively to product advantage and to the proficiency in market testing, launch budgeting, launch strategy, and launch tactics. Product advantage and the 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 to organizational performance. 3 Laith Alrubaiee (2013) Investigate the Relationship between New Service Development, Market There is a Positive Relationship between New Service Development, Market Orientation 39

40 4 Michael K. Brady, J. Joseph Cronin, Jr.(2009) 5 Mohamme d Abdulai and Mahmoud (2011) 6 Jin K Han, Namwoon Kin and Rajendra K Srivastva. (1996) 7 Ronald E. Michaels and Ralph L. Day (2010) Orientation and Marketing Performance. The main objective is investigates the effect of being customer oriented on service performance perceptions and outcome behaviours. What is the relationship between Market Orientation and Business Performance among SMEs in Ghana? Main objective was to Examine the role that organizational innovations play in the context of the relationship between Market orientation and Organizational performance. Measuring Customer Orientation of Salespeople: A Replication With Industrial Buyers. and Marketing Performance. Finding was in service sector customer orientation is a more important and it highly influence to Perceptions and outcome behaviours. They highlighted that the development of market orientation in this sector rests more on the attitude of owners/ managers and, more importantly, the repeatedly reported performance implication of market orientation does not elude Ghanaian SMEs. More specifically, market orientation. Exhibited in conclusion there are two components of Market orientation are unimportant. And, Competitor orientation is very important to the Organizational performance. Tentatively conclude that the SOCO scale works as well with buyers as with salespeople. We hope further testing of the SOCO construct in the future will lead to its refinement and that its use will contribute to improvements in the quality of research on 40

41 salesperson-buyer interactions. 8 Aaron J. Johnson, Clay C. Dibrell, and Eric Hansen ( 2004) 9 Seigyoung Auh1, Bulent Menguc (2005) 10 Thorsten Hennig- Thurau (1999) 11 Anis Ben Brik Belaid Rettab Kamel Mellahi (2010) Incorporates market orientation theory (competitor orientation, customer orientation, and inter functional coordination) and firm innovativeness to explain differences in firm financial performance. Top management team diversity and innovativeness: The moderating role of inter functional coordination. How does Customer Orientation impact on customer satisfaction, commitment, and retention? How do Market Orientation and CSR impact on Business Performance The more successful firms are more internally focused (inter functional coordination and innovativeness) than externally focused (competitor and customer orientation). Results generally supported hypothesis in that the effect of TMT diversity on innovativeness was positive as inter functional coordination increased. Considering as a whole, they found that especially customer oriented activities highly impact to the customer satisfaction and retention. CSR significantly moderates the association between customer orientation and financial performance. All interactions are insignificant, with the exception of the relationship between customer orientation and financial performance. Customer orientation has a significant negative moderating effect on financial performance. 41

42 12 Mark Schreiner (2002) 13 Vasilis Theoharak is and Graham Hooley (2009) 14 Thorhallur Gudlaugss on and Adrianus Philip Schalk (2009) A Framework for the Discussion of the Social Benefits of Microfinance Examine the relationship between Customer orientation and innovativeness: differing roles in new And old Europe. Examine the Effects of Market Orientation on Business Performance: Empirical Evidence from Iceland But, this association becomes positive, albeit weak, at a high level of CSR. They found in microfinance social benefits are not important. Because there is no any direct impact of Social benefits to the Micro finance industry. Customer orientation practices are particularly effective in enhancing firm-level performance for firms from New European transition economies. Core finding is that returns on customer orientation and organizational innovativeness are different in Old and New European countries. The bank has a strong external focus combined with a focus on stability. The adaptability dimension (the measure of 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 a moderately strong relation with employee satisfaction. The bank is very profit-oriented, which might explain its low score on some dimensions. The 42

43 15 Ken Matsuno, John C Mentzer, and Aysegul Ozsomer (2002) 16 Deshpand e, R.and Farley, J.U. (1996), How do Entrepreneurial Proclivity and Market Orientation effect on Business Performance? Organizational culture, market orientation, innovativeness, and firm performance: an international research odyssey. results from this study are in line with the results from other Icelandic studies that have used DOCS to measure the shape of organizational culture. The results indicate that Entrepreneurial Proclivity has not only a positive and direct relationship on market orientation. But also indirect and positive effect on Market Orientation through the reduction of departmentalization. The results also suggested that Entrepreneurial Proclivity s performance influence is positive when mediated by market orientation but negative or non-significant when not mediated by Market Orientation. The results show that Organizational culture, Market orientation and innovativeness are positively effect to the success of the firm s performance. In addition to that there should be a good innovativeness within the organization. 43

44 17 Sin, L.Y.M., Tse, A.C.B., Yau, O.H.M., Chow, R.P.M. and Lee, J.S.Y. (2003) 18 O Sullivan, D. and Abela, A.V. (2007) 19 Albert Maydeu- Olivares, Nora Lado ( 2008) Examine The relationship between Market orientation and business performance: a comparative study of firms in mainland China and Hong Kong. The main objective is to Examine the Marketing performance measurement ability and firm performance. Market orientation and business economic performance, Main objective is to provide a necessarily partial model for how this impact takes place using innovation degree, innovation performance and customer loyalty as intermediate variables. The scholars point of view they found that both China and Hong Kong Marked oriented activities are highly effect to the Business performance as well as specially customer oriented marketing strategies leads to success of the business. Not only that when compare with both countries they found that those countries are used different Market oriented strategies in order to enhance the performance of the companies. According to the findings of this research paper they have found that Marketing performance can be measured by using different developed scales as well as they have exhibited the firms performance totally depends on the Market oriented activities. This study found that the effects of market orientation on economic performance are completely channeled through these variables, particularly through innovation degree and innovation performance. Based on the results the paper provides guidelines for improving the market share, premium growth and profitability of European 44

45 Union insurance firms. 20 Fred Langerak, Erik Jan Hultink, and Henry S. J. Robben (2004) 21 Baker Sinkula (1999) The Impact of Market Orientation, Product Advantage, and Launch Proficiency on New Product Performance and Organizational Performance. How do Synergistic Effect of Market Orientation and Learning Orientation on Organizational Performance? The results provide evidence that a market orientation is related positively to product advantage and to the proficiency in market testing, launch budgeting, launch strategy, and launch tactics. Product advantage and the 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 to organizational performance. Market orientation has impact on performance. Market orientation has more impact on performance with the mediation of learning orientation. Market orientation has impact in the increase of market share with the mediation of learning orientation. Market orientation and new products performance decrease with the mediation of learning orientation. 22 Deshpande To examine the Customer orientation has impact 45

46 Farley Webster (1993) 23 Matear Osborne Garrett Gray (2002) 24 Adrianus Philip Schalk (2009) relationship between Corporate Culture, Customer Orientation, and Innovativeness in Japanese Firms How Does Market Orientation Contribute to Service Firm Performance? An Examination of Alternative Mechanisms, To measure the shape of this bank s organizational culture; the level of its market orientation; and to test the relationships between the cultural dimensions defined in the measurement instrument which is the Denison Model Of Organizational Culture Survey (DOCS) and business performance? on performance. Innovativeness has impact on performance. Market orientation has positive and meaningful impact on performance. When market orientation, innovativeness and performance are approached together, it is observed that innovativeness acts as a mediator between market orientation and financial performance. The results in this study show that the independent variable, market orientation, explains only 4% of the total variation in business performance (r= 0.20), (R²=0.40). This means that the business performance of the bank is for 96% influenced by other explanatory variables than market orientation 25 Noble Market Orientation and Competitor orientation is related 46

47 Sinha Kumar (2002) 26 Pelham (1997) 27 Krista R. Muis Lisa D. Bendixen Florian C. Haerle (2006) Alternative Strategic Orientations: A Longitudinal Assessment of Performance Implications Firm effectiveness, sales growth/ market share Epistemology Research: Philosophical and Empirical Reflections in the Development of a Theoretical Framework to performance in any occasion. Customer orientation is not related to performance. Impact of a mediator between market orientation and performance must be searched for. There is a positive relation between learning orientation and performance; and learning orientation acts as a mediator between market orientation and performance. Firm effectiveness (+), Sales growth/market share (0) Theoretical framework of personal epistemology that incorporates both positions and hypothesizes how the belief systems might interact in terms of the development of personal epistemology and relations to various facets of cognition, motivation, and achievement. The article ends with a discussion of educational implications. 47

48 2.5. Conceptual Framework Conceptual framework developed based on the literature review and it has been finalized according to the arguments in previous literature. Market Orientation Customer Orientation H 1 : + Competitor Orientation H 2 : + Inter functional Coordination H 4 : + H 3 : + Organizational Performance Social benefit Orientation Figure 2.3:-Conceptual Framework Source: - Developed for the research study (2014) Figure 2.3 shows the conceptual framework and further it represents the relationship among Independent variables such as Customer Orientation, Competitor Orientation, Inter functional Coordination, Social Benefit Orientation and the dependent variable Organizational Performance. 48

49 2.6. Hypotheses Development There are four hypotheses have been developed in order to test through the research study. Three hypotheses developed based on the previous research studies conducted in different contexts related to the Market orientation and Organizational Performance. One hypothesis is developed by considering the nature of the businesses field and the importance of the variable for the manufacturing industry Customer Orientation and Organizational Performance According to Slater and Narver (1994), Organizational performance refers to the firm s market and financial performance, which is positively related to the firm s customer orientation (Slater and Narver, 1994). The view of Hunt and Morgon (1995), they have conducted a research and the results were customer focused strategies in competitive organizations positively related with their performance, because a market oriented culture has been represented as one of a firm s competitive capabilities and performance (Hunt and Morgan, 1995). 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 firm is more likely to achieve high levels of customer satisfaction; to keep existing customers loyal; to attract new customers; and subsequently to attain the desired level of growth, market share, and hence of organizational performance (Homburg and P.flesser, 2000). Another scholar called Deng and Dart in (1994) conducted a research study by putting 148 firms across industries as their sample and could be able to find that there is a high influence of customer oriented activities on firm performance. By considering previous research findings, the following hypothesis is proposed. +H 1 : - There is a positive relationship between Customer Orientation and Organizational performance 49

50 Competitor Orientation and Organizational Performance Customer focus may play a key part in the strategy to create superior customer value, but an effective strategy requires more than simply customer centered methods. A complete reliance of customer orientation can often lead to incompleteness in business strategy, which leaves an organization prone to a reactive posture in coping with competitor s strategies (Day and Wensley, 1988). Further, Day and Wensley (1998) highlighted that competitor oriented strategies increase the performance of a firm. Griesinger and Livingston (1973) concluded from a review of experimental game literature that the proportion of competitive subjects varies depending on personality, cultural factors, and situational factors, such as feedback and game instructions. They also concluded that many subjects seemed eager to know what was expected of them in order that they might adopt an appropriate orientation to the game. For example, the results from laboratory studies by Deutsch (1958, 1960) imply that explicit support for competitor oriented objectives has a strong effect on organizational performance. In addition to that in 1993, Slater and Narver has conducted a research and found there is a positive association among subjective evaluation of market performance, sales growth and new product success, relative to competitors and in 1996 also they have conducted a research again and they found that the competitor oriented activities positively association with sales growth, and firms performance and but not profit. Based on above mentioned research findings the researcher suppose the following hypothesis for current study, +H 2 : - There is a positive relationship between Competitor Orientation and Organizational Performance 50

51 Inter Functional Coordination and Organizational Performance Several studies have linked Inter Functional Coordination with Organizational Performance. Jaworski and Kohli (1993), using bank managers, investigated the relationship between Inter Functional Coordination and Organizational performance, putting market orientation in between. The results showed that Inter Functional Coordination has a positive impact on market orientation, and market orientation is positively related to Organizational performance. From the perspective of internal marketing, Caruana and Calleya (1998), collected data from marketing executives, examined the relationship between internal marketing and organizational performance. Farzad et al. (2008) studied the effect of the five criteria of Internal Marketing and market orientation on organizational performance in Iranian banks. The results showed that there is a positive relationship between inter functional coordination and organizational performance. According to another scholar Balakrishnan (1996) implemented a research in order to find the relationship between market orientation and firm s performance by putting Inter functional coordination between them and they found that inter functional coordination activities should be effectively managed on behalf of the success of the organizational performance. By considering above research findings the researcher proposed following hypothesis, +H 3 : - There is a positive relationship between Inter Functional Coordination and Organizational Performance Social Benefit Orientation and Organizational Performance The main thrust of benefit corporation statutes is to require these entities to pursue purposes beyond profit making. A benefit corporation must be formed for a general public benefit, meaning a material, positive impact on society and the environment. Other than in the New Jersey statute, general public benefit is defined by measurement against a third-party standard, and all statutes permit incorporators to also pursue more specific public benefits. They include: Providing (low income or underserved) individuals or communities with beneficial products or services; 51

52 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 flow of capital to entities with a public benefit purpose; or The accomplishment of any other particular (identifiable) benefit for society or the environment. Although the social benefit is very important to the organization, so far researchers do not consider social benefit orientation as a sub component of the market orientation. Social benefit orientation is a new concept which specially adopted for this research study. There were no any researchers has been considered this concept related to Market Orientation. Therefore there is no literature review in order to prove whether there is a positive relationship between Social benefit orientation and organizational performance or not. This is the first time Social Benefit Orientation considers as a sub component of the Market Orientation. Today each and every organization pays significant amount of consideration in order to gain competitive and sustainable advantage. With the concept of societal marketing, most businesses implement different kind of social beneficial activities such as donations, seminars, training programs, scholarships and specially environment friendly activities. And also they think social benefits as their obligation to the society. Through these kinds of strategies the organizations obtain good reputation and make profitable relationships with customers. And also it will enhance the quality of the organization and it will leads to long term survival in the industry. By considering general current situation of the business industry, social benefit orientation helps to increase the performance of the organization. Based on the above mentioned situation the researcher proposed the following hypothesis, +H 4 : - There is a positive relationship between Social Benefit Orientation and Organizational Performance 52

53 3.1. Chapter Introduction CHAPTER 3 RESEARCH METHODOLOGY This chapter has been framed in a detailed way to present different aspects of a research by detailing the underlying features of different social research methods and their respective features. This research study is conducted using descriptive research design. Exploratory and conclusive research methods are the major social research methods being employed by researchers. This chapter also discusses the appropriateness of the research methods selected and the steps that were followed for accomplishing the research objectives. Further, Second section is discussed the philosophy of the research study while the third section of this chapter describes the research design. Fourth section explained the research context of the research study and fifth section deal with determination of population, sampling and sample and extent of the research study. Section six is discussed about the data and data collection method of the research study in detail while section seven is explained questionnaire design. Section eight included the pilot study and section nine included Measurements and Scaling in detail. 53

54 3.2. Philosophy Research philosophy can be defined as the development of the research background, research knowledge and its nature (Saunders and Thornhill, 2007). Research philosophy is also defined with the help of research paradigm. In the words of Cohen, Manion and Morrison (2000), research paradigm can be defined as the broad framework, which comprises perception, beliefs and understanding of several theories and practices that are used to conduct a research. It can also be characterized as a precise procedure, which involves various steps through which a researcher creates a relationship between the research objectives and questions. According to the definition given by Gliner and Morgan (2000) paradigm is a way of thinking about and conducting a research. It is not strictly a methodology, but more of a philosophy that guides how the research is to be conducted (p.17). Research paradigm and philosophy comprises various factors such as individual s mental model, his way of seeing thing, different perceptions, variety of beliefs towards reality, etc. This concept influences the beliefs and value of the researchers, so that he can provide valid arguments and terminology to give reliable results. There are Three Components of Research Paradigm, Epistemology: Common parameters and assumptions those are associated with the excellent way to investigate the nature of the real world to give reliable results. Ontology: Common assumptions that are created to understand the real nature of the society. Methodology: Combination of different techniques that are used by the researcher to investigate different situations. It is necessary for the researcher to understand the philosophical position of research issues to understand the different combination of research methods. There are mainly three type of paradigm to understand the philosophy. Those are reality, Positivism, Interpretivism and realism. Positivism: The concept of Positivism is directly associated with the idea of objectivism. In this kind of philosophical approach, scientists give their viewpoint to evaluate social world with the help of objectivity in place of subjectivity (Cooper and Schindler 2006). According to this paradigm, researchers are interested to collect general information and data from a large social sample instead of focusing details of 54

55 research. According to this position, researcher s own beliefs have no value to influence the research study. The positivism philosophical approach is mainly related with the observations and experiments to collect numeric data (Easter-by-Smith et al 2006). Interpretivism: Interpretivism can be referred as the Social Constructionism in the field of management research. According to this philosophical approach research give importance to their beliefs and value to give adequate justification for a research problem (Easterby- Smith et al. 2006). With the help of this philosophical, researchers focus to highlight the real facts and figures according to the research problem. This kind of philosophical approach understand specific business situation. In this approach, researchers use small sample and evaluate them in detail to understand the views of large people (Kasi, 2009). Realism: This research philosophy mainly concentrates in the reality and beliefs that are already exist in the environment. In this philosophical approach, two main approaches are direct and critical realism (McMurray, Pace and Scott 2004). Direct reality means, what an individual feels, see, hear, etc. On the other hand, in critical realism, individuals argue about their experiences for a particular situation (Sekaran and Bougie 2010). This is associated with the situation of social constructivism, because individual tries to prove his beliefs and values. The current research study belongs to the epistemology and positivistic approach. Audi (1999) defines epistemology as the study of the nature of knowledge and justification: specifically, the study of (a) the defining features, (b) the substantive conditions or sources, and (c) the limits of knowledge and justification (Audi, 1999, p. 273). Educational psychologists (e.g., Hofer and Pintrich, 1997) have similarly defined personal epistemology as individuals beliefs about the nature of knowledge and the nature of knowing. Accordingly, an examination of personal epistemology includes exploration of the structure of knowledge, certainty of knowledge, sources of knowledge, justifications for knowing (e.g., Hofer, 2000; Hofer and Pintrich, 1997; Schommer and Aikins, 2004), and developmental aspects of knowledge acquisition 55

56 (e.g., King and Kitchener, 1994; Perry, 1970; Royce et al., 1978). These dimensions are considered in the context of both philosophical perspectives of dominant epistemologies of various academic domains (e.g., science s dominant epistemology is post positivism [Burbules and Lin, 1991]) as well as in the context of beliefs individuals may hold across domains. In this research study there are many assumptions can be seen Research Design Nachmias and Nachmias (1996) describe research design as a logical model of proof that allows the researcher to draw inferences concerning causal relations among the variables under investigation. According to Sekaran (2003), the various issues involved in the research design concern the purpose of the study, the type of investigation, the type of the sample, which will be used, the methods by which the required data will be collected, as well as the process that will be followed for the analysis Exploratory vs. Conclusive Research design Research Design Exploratory Conclusive Descriptive Causal Figure 3.1:- Basic Research Designs Source: - Malhotra, Marketing Research, 6 th edition (2010) Figure 3.1 shows that the theoretical aspect of basic research designs. Basic research designs namely exploratory research design and conclusive research design can be identified. Exploratory research is designed which is used to explore or find new 56

57 things, the phenomenon while conclusive research is used to test specific hypotheses examine specific relationship and or make prediction for decision making (Malhotra, 2010). Conclusive research design is further divide into two categories, namely descriptive and causal research designs. Descriptive research design is used to describe market characteristics or functions and causal research used to obtain evidence regarding the cause and effect relationships. In this research study descriptive research design has been applied to examine the relationship between Market orientation and Organizational Performance, because over this study the researcher described market characteristics of the selected variables and their links as well as provide solutions for the identified research problem. It is helped to decision makers to make correct decisions on behalf of the organizational success. That is why it has been adapted for this research study. In this study the dependent variable is Organizational Performance and Independent variables are customer orientation, competitor orientation, Inter functional coordination and social benefit orientation Quantitative Vs. Qualitative Research White (2000) defines quantitative research as an investigation in which the results consist of numeric values. These numerical results are subjected to mathematical and statistical analysis for evaluation of the findings of the study. Since the qualitative research is based on numerical values it has to employ objective ways of gathering and interpreting various issues connected with the research. The quantitative research method is also regarded as positivist approach since the research approach is based on scientific evaluations. As the name suggests quantitative research method uses techniques which are focussed on quantitative information. The basis for research analysis thus is the numerical data collected and analysed using statistical and mathematical formulas and processes. Cresswell (1994) defined qualitative research as An inquiry process of understanding a social or human problem, based on building a complex, holistic picture, formed with words, reporting detailed views of informants, and conducted in a natural setting (Cresswell, 1994). 57

58 The basis on which the qualitative research works is through a close look at the words, actions and records of real world people whereas under the quantitative technique the research is given a mathematical significance which extends beyond the actions and words of the people. The patterns of meaning that emanate from the information gathered from the participants form the core area of focus for the qualitative method. It is for the researcher to identify these patterns which exist within these expressions of words and actions and present the patterns in a readable manner to those interested in studying the result of the research. While doing this the researcher has to adhere to the world as perceived by the participants so that a realistic picture of the results can be presented to the readers. Quantitative research is based on the measurement of quantity or amount. It is applicable to phenomena that can be expressed in terms of quality. Qualitative research is concerned with qualitative phenomena and especially important in the behavioral sciences where the aim is to discover the underlying motives, interests, personality and attitudes of human beings (Shajahan, 2004). Further, the main difference between these two research methods is that quantitative research methods transform the information into numbers and amounts, whereas qualitative research methods use the researcher s interpretation of information which cannot or should not be translated into numbers or amounts. The difference between quantitative and qualitative research lies in the procedure involved in investigation. The quantitative technique is an approach which seeks to inquire into an identified problem, based on testing the theory measure with numbers and analysing the data using statistical techniques. The main objective of the quantitative technique is to find out if a theory can be generalised. This research study used quantitative approach. Numerical methods and mathematical processes have been applied to analyse the results of the study Research Context Throughout this research study the researcher tried to examine the relationship between Market orientation and Organizational Performance. Research Context indicates the place where the researcher is going to conduct the research study (Malhotra, 2010). The current study focused on Small and Medium manufacturing businesses in order to conduct the research and therefore the research context is Small 58

59 and Medium manufacturing industry. Based on the following criteria researcher has determined the Sri Lankan Small and Medium Scale manufacturing organizations. Small and Medium business are defined in a variety of ways by various countries using such parameters such as number of persons employed, amount of capital invested, amount of turnover or nature of the business, etc. Not only that different countries apply different definitions on the concept of Small and Medium business enterprises, even within countries, different regions and different institutions adopt varying definitions in this regard (Gamage, 2003). In Sri Lanka, there is no clear definition for Small and Medium business enterprises. Different government agencies use different criteria to identify Small and Medium Enterprises. Some of these criteria are the number of employees, the size of fixed investment, and the nature of the business and the sector. I.e. formal or informal, in which the industry operates. There are deferent terms used in different documents to identify this sector. Small and Medium Industries or Enterprises, Micro Enterprises, Rural Enterprises, Small and medium activities, Cottage and Small Scale Industry, etc., are some of the terms frequently used (Gamage, 2003). Using the size of the capital and the number of employees as the criteria, the Industrial Development Board (IDB) defines a small industry as an establishment whose capital investment in plant and machinery does not exceed Rs. 4 million (US $ 30000) and the total number of regular employees does not exceed 50 persons( Central Bank of Sri Lanka, 2012). The department of Small Industries (DSI) classifies enterprises with capital investment less than Rs. 5 million (US$ 40000) and fewer than 50 employees as small and Medium scale organizations (Ponnamperuma, 2000). For the purpose of a World Bank Financed Investment Assistant scheme, financial institutions defines small and medium scale enterprises as those enterprises whose investment in fixed assets at original book value, excluding land and building, do not exceed Rs.8 million (US$ 62000). In the case of projects where the main investment in land and building (for example warehouse), the total investment in fixed assets, inclusive of the cost of land and building should not exceed Rs. 16 million (US $ ). 59

60 For the purpose of the assistant programs implemented by the Sri Lanka Export Development Board (SLEDB) for export oriented enterprises, small and medium scale organizations are defined as those enterprises with a capital investment excluding lands and buildings of less than Rs. 8 million (US $ 62000) or with annual export turnover of less than Rs. 50 Million (US $ ) (Hwaliyanage, 2001). The World Bank defines enterprise size in Sri Lanka based on the number of employees: those with the fewer than 49 employees are small and those with employees are medium sized. The number of employees as the criterion for size appears reasonable because it distinguishes between organizations regardless the line of the business and the amount of capital investment must be revisited frequently due to inflation (Ponnamperuma, 2000). Considering as a whole in this research study the researcher determined the small and medium scale organizations based on the following criteria. Table 3.1: Determinants of Manufacturing Organizations Selection Criteria 1. An establishment whose capital investment in plant and Machinery does not exceed Rs. 4 million (US $ 30000) 2. The total number of regular employees does not exceed 50 persons. 3. Capital investment less than Rs. 5 million (US$ 40000) and fewer than 50 employees. 4. Capital investment excluding lands and buildings of less than Rs. 8 million (US $ 62000) 5. Fewer than 49 employees are small and those with employees are medium sized Industrial Development Board Central Bank of Sri Lanka, 2012 Department of small industries Sri Lanka Export Development board World Bank Source: Developed for the Research Study (2014) 60

61 Table 3.1 shows the Small and Medium scale manufacturing organizations determinants which are used in this research study and there are five criteria employed to select the manufacturing organizations for the research study Determination of Population and Sample Population Population refers to the entire group of people, events, or things of interest that the researcher wishes to investigate (Sekaran, 2004). According to the Brenda (1986) population is defined as the entire set of units for which the survey data are to be used to make inferences (Brenda, 1986). This research is focused about to examine the relationship between Market Orientation and Organizational Performance. Therefore the population is all managerial level employees (both male and female) who are working in small and medium scale manufacturing business organizations located in Sri Lanka Sampling and Sample Sampling According to Cooper and Schindler (2003), The basic idea of sampling is by selecting some elements in a population, we may draw conclusion about entire population. A sample is a subject of the population. It comprises some members selected from it. In other words, some, but not all, elements of the population would form the sample (Sekaran, 2004). There are two categories of sampling procedures namely probability sampling and non- probability sampling. In probability sampling each participant has an equal chance of being selected. Simple random sampling is the simplest of probability sampling. The non-probability sampling is the selection of elements for the sample is not necessary made with the aim of being statically representative of the population. 61

62 Sampling Techniques Probability Sampling Non Probability Sampling Simple Random Sampling Systematic Sampling Convineance Sampling Judgment Sampling Snawball Sampling Figure 3.2:- Sampling Techniques Source: - Malhotra, Marketing Research, 6 th edition (2010) Figure 3.2 shows that the main Sampling Techniques available to a researcher which can be used to determine the sample from the population. Mainly there are two types of sampling techniques namely, Probability Sampling techniques and Non probability sampling techniques. The white color box indicates the sampling technique which has been used in this research study. In this research study the sample is selected by using non probability sampling method which is Snowball Sampling Technique. Snowball sampling may be defined as a technique for gathering research subjects through the identification of an initial subject who is used to provide the names of other subjects. These persons may themselves open possibilities for an expanding web of contact and inquiry. The strategy has been utilized primarily as a response to overcome the problems associated with understanding and sampling concealed populations such as the deviant and the socially isolated (Faugier and Sargeant, 1997) Sample Sample is defined as a portion or subset of the population, the size of which is determined by the type and objective of the study, as well as time and financial constraints (Fink, 1995). Sampling therefore is the method of drawing the sample and it is a vital part of a research as it allows to the researcher to generalize findings, as it is impossible to examine the whole population (Nachmias and Nachmias, 1996). 62

63 The sample size would be 240 managerial level employees (both male and female) who are working in small and medium scale manufacturing business organizations located in Southern Province (Galle, Matara and Hambantota), Sri Lanka. The sample size has been limited 240 respondents due to many reasons. According to the statistical information found from the district secretariat offices Matara, Galle and Hambantota there are nearly 200 small and medium scale organizations are situated. And also it was difficult to reach and access some of the organizations due to legal conditions and formal requirements Extent The Researcher has selected southern province as geographical area due to many reasons. The researcher is a permanent resident in southern province, Budget consideration and diversity of the southern province. Southern province is a one of emerging province in Sri Lanka and it includes Galle, Matara and Hambantota. Most of the well success small and medium scale organizations are located in southern province. Mainly because of easy transportation system and easy access to raw materials Southern province has become business reputed province. The three districts in southern province there are so many geographical and climate differences can be seen. Galle and Matara have similar climate during the whole year. But when it comes to Hambantota, there is a sere climate. Manufacturers get advantages from these differences by establishing plants in appropriate areas Data Collection In any social research study normally two data collection methods are being employed for the collection of information and data. The methods used are; (i) primary data collection and (ii) secondary data collection. These two methods of collecting data are quite often being used by the researchers alternatively for the purpose of collecting data with respect to the studies undertaken by them. 63

64 Primary data and data collection Primary data are the data organized by the researcher for the specific purpose of addressing the research problem at hand (Naresh K. Malhotra, Marketing Research, 2010, Page 98). According to Walliman (2005) when the information and data is collected from the sources which are direct and detached then such data are known as primary data. These sources are the ones which are prevalent in the real world which remain undeterred by the interpreters who occupy intermediate positions. Walliman (2005) has identified popular research publications and papers presented by research scholars as the sources of primary data. It is to be noted that primary data are collected through sources that are in an inanimate form. This collection process involves the measurement of various factors involved in the research. The inanimate forms involved in the course of collecting data represent the events occurring with relevance to the topic under study. It is usual that such forms are represented in the analysis of the specific conditions that describe the events. The analyses take the form of reports and observation notes. The narratives of the people connected with the research are also sometimes included in the contents of primary data. All the required data for the research study have been gathered through a pre specified questionnaire Primary Data Collection method Survey method has become popular because it serves to collect information which is both quantitative and numerical. The information and data also represents some part of the total population in the form of samples and the information is gathered through intelligent questions being put to the samples (Neuma and Fink, 1995). Usually the survey method facilitates the results to be generalized. The reason for this phenomenon is that there is a possibility to allow a large volume of sample to take part and respond to the survey questionnaire. However, the survey method suffers from a drawback in that sometimes the response rate may be very low vitiating the results of the study. (Aaker, Kumar and Day, 1995) Primary data would be collected through questionnaire based self-administered survey method. The researcher met the respondents and distributes questionnaires. And also 64

65 the respondents who could not meet directly the researcher used mediator for distribute questionnaire to gather required data Secondary Data Secondary data are the data collected for some purpose other than the problem at hand (Naresh K.Malhotra, Marketing Research, 6 th edition, 2010, p. 98). The researcher has the liberty to choose any kind of source that is found suitable for gathering the required information and data. Normally the data that is gathered from any other source than the primary sources of data shall be construed as secondary data. Secondary sources of data include the presentations in the form of papers in professional magazines, newspaper articles and books or other printed form of materials available in any media. The resources contained in the internet being the major electronic media are also considered as the sources of secondary data. Since there are a number of sources from which the secondary data can be collected there is a greater value for secondary data (Saunders, 2003). However the secondary data suffers from a basic shortcoming of unreliability. With respect to secondary data since the information and data pass through several hands, there is the likelihood that the data may contain errors which may distract the direction of the research (Walliman, 2005). The secondary data is gathered from published journals, published books, some reliable websites and organization s annual reports. In addition to that, secondary data have been collected from the district secretariat offices in Matara, Galle and Hambantota Questionnaire Design As a descriptive research it is very important to prepare a questionnaire in order to collect the data. A questionnaire is a research instrument consisting of series of questions and other prompts for the purpose of gathering information from respondents. The choice of the questionnaire as one of the means of gathering data is borne out of the fact that it is cheap, do not require as much effort from the questioner as verbal or telephone surveys, not time consuming and often have standardized 65

66 answers that make it simple to compile data It allows the respondents to supply answers that are confidential to them. (Sekeran, 2003).These questionnaires were handed directly to the respondents by the researchers which gave the researchers the privilege to introduce the topic and encouragement in answering the questionnaire. Accordingly, the researcher prepared a questionnaire (See Appendix 2) by including both open and closed (mixed Model) 13 questions and the questionnaire consist with three parts. The part one consists with the questions that are needed to identify the background of the organization Part two consist with the questions which are need measure the variables of the study (Dependent variable and Independent variables). Part three included the questions which are needed for identify the demographic factors related to respondents. (Non-comparative scale method has been used and it is five point scale). Developed questionnaire distributed after translating to the Sinhala (See Appendix 3). The reason for translation of the developed questionnaire in to Sinhala because most of the mangers of small and medium scale manufacturing organizations did not have sound knowledge regarding English language and Sinhala is the mother tongue of Sri Lanka). First and foremost the researcher distributed the questionnaire to randomly select 6 respondents of the sample, on behalf of understanding the validity and accuracy of the questionnaire (conducted a pilot test). After making adjustments the researcher distributed questionnaire among sample and collect the data from the respondents Pilot Study The pilot test is a useful tool for researchers, as it helps them to check the data collection methods and uncover any mistakes or miscomprehension of the questionnaire. The sample examined in the pilot study must be a part of the sample used for the conduction of the research; thus, the researcher may reveal unexpected findings, based on which any necessary adjustment is made (Gerson and Horowitz, 2002). A pilot study was conducted before the administration of the questionnaire in order to detect potential problems that may arise as a result of difficulty in the interpretation of questions by respondents. The feedback given from the respondents was considered in remodelling the questions to suite the research objectives. 66

67 The pilot test conducted by getting randomly selected five respondents from the sample and they are belongs to different manufacturing organizations. The pilot test respondents consisted with one manager of the Lalanthi Grinding mills, two from Sandila Garments, and three from food manufacturing firms in Matara area. The results shows that the way of asking Q12 (Age) is should be changed. And also some of them could not be able to understand the five point likert scale as well. Other than that they have given favourable comments about quality of the questionnaire. Based on the given answer by the respondents, the researcher analysed likert scale statements in order to measure the range and the accuracy of the statements. On behalf of that researcher is analysed simple statistics technique such as Mean and Standard deviation by using SPSS. Table 3.2 shows the results generated from the SPSS regarding the Simple descriptive Statistics. (See Appendix 4 for detail pilot test results.) Table 3.2:- Results of the Pilot Study Variable Mean Std. Deviation Inter Functional Coordination Customer Orientation Social Benefit Orientation Competitor Orientation Organizational Performance Source: Developed for the Research Study (2014) Table 3.2 shows the analysis of pilot test data. (See Appendix) It includes the five main variables of the current research study. Here the researcher has calculated Mean Value and Standard Deviation by using SPSS. The results show that Inter functional coordination variable has the highest mean value (4.3143) and customer orientation variable shows the lowest mean value (3.9714). 67

68 3.9. Data Collection Data was collected by fully structured questionnaires that were delivered to the 310 managerial level employees in small and medium scale manufacturing organizations in southern province by personally and through a mediator along with a letter (See Appendix 3) that explained the nature of the study and promised confidentiality. The questionnaire was first distributed in October 2014 by the researcher through the Regional Development Bank (At that time Bank had organized an event for the small scale manufacturers in Matara District). There were only retuned 255 questionnaires within the required time period and response rate was 82% (255/310*100). Out of the 255 questionnaires there were only 242 questionnaires completed Measurements and Scaling Primary Measurements Primary Scales Nominal Ordinal Interval Ratio Figure 3.3:- Primary measurement scales Source: - Malhotra, Marketing Research, 6 th edition (2010) Figure 3.3 shows the primary measurement scales available to a researcher. There are four types of primary measurements scales namely, Nominal, Ordinal, Interval and Ratio. In this study used specially Nominal and Ordinal scales to measurement purposes. Primary measurements intend assigning numbers or other symbols to characteristics of objects accordance with clearly identified rules (Malhotra, 2004). There are four scales of measurement which are nominal, ordinal, interval and ratio. Nominal scale is a formal labeling procedure to identify or to classify the objects. Ordinal scale is a 68

69 raking scale to indicate the relative extent from objects groups characteristics. Interval scale is a rating object with numerically equal distances to compare differences among objects. Ratio scale is an identifying or classifying object, ranking order the objects and comparing intervals or differences between objects. In this study the researcher used nominal and ordinal primry scale measurements. After reviewing the relevant literature the researcher adapted most measures from previous research articles and developed some for consistency with this study. Non comparative scale techniques were used for all constructs and used five point likert Scale methods Organizational Performance Organizational performance involves the recurring activities to establish organizational goals, monitor progress, towards the goals and make adjustments to achieve these goals more effectively and efficiently (Namara, 2003). The researcher adapted the measures of organizational performance from Mooraman and Rust (1999). It asks the top level managers to indicate their perception of their organization s performance relative to their major competitors (1: Strongly disagree to 5: strongly agree) in terms of occupancy, gross operating profit and Market share. In addition, researchers have also used global measures that assess managers perceptions of overall business performance, mostly through comparisons of organizational performance with company objectives and/or competitors performance (e.g., Jaworski and Kohli, 1993). According to the Taylor and Francis, 1996, organizational performance qualitative dimensions are competitiveness, profitability, liquidity, growth, market share, employee satisfaction, customer satisfaction and service quality. Quantitative dimensions are productivity, effectiveness, and financial capabilities. 69

70 Table 3.3: Measurement Constructs of Organizational Performance Constructs 1. Sales revenue growth is high 2. Market share gain is high 3. Profitability is High References Agarwal, Sanjeev, Krishna M. Erramilli, and Chekitan D. Dev(2003) 4. Have successful innovation Kevin Zheng Zhou, James (2001) 5. High customer Satisfaction Naver J.C and Slater S.F. (1990) 6. High employee Satisfaction Moorman and Rust (1999). Source: Developed for the Research Study Table 3.3 shows that the constructs used to measure the organizational performance and there are six constructs included in the questionnaire. Those are representing the Sales revenue growth, Market share gain, Profitability, successful innovation, Customer Satisfaction and Employee Satisfaction Customer Orientation Customer orientation refers to the philosophy or strategic mind-set of the organization. Some authors(gatignon and Xuereb, 1997; Voss and Voss, 2000) argue that market orientation is not a matter of strategy, but just a methodology, however, we counter argue that market orientation changes the way a company competes in the marketplace, thus making customer orientation a strategic issue and provides that a place at the chief executive level( Gatignon and Xuereb, 1997; Voss and Voss, 2000).The measurements of the Customer orientation found by referring previous articles and adapted according to the objectives of the research study. In order to measure the constructs of this variable used five point likert scale technique (1- Strongly Disagree to 5- Strongly Agree). 70

71 Table 3.4: Measurement Constructs of Customer Orientation Item References 1. Our firm gathers information about customers needs. 2. Our firm has insight into the buying process of customers Naver J.C and 3. Our firm consults customers to improve the quality of Slater S.F. (1990) service. 4. Our firm handles customers complaints well. Day, G.S. and Wensley, R. (1988) 5. We regularly measure customer satisfaction. Fred Langerak, Erik Jan Hultink, 6. Our firm looks for ways to offer customers more value. 7. Our firm treats customers as partners. and Henry S. J. Robben (2004) Source: Developed for the Research Study (2014) Table 3.4 exhibits the constructs of the Customer Orientation. There are seven constructs were used to measure the customer orientation. Those are information about Customer needs, buying process of customers, Quality of service, customer complaint handling, measure customer satisfaction, and ways to add more values to customers and treat customers Competitor Orientation According 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 (Narver and Slater, 1990). However, different organizations seem to view competitor orientation differently and are not as concerned with long term strategies. To measure the competitor orientation constructs found from previous research articles and modified according to objectives of the current research. Five point likert scale technique used (1- Strongly Disagree to 5- Strongly Agree). 71

72 Table 3.5: Measurement Constructs of Competitor Orientation Constructs References 1. Our firm knows whether competitors are open to complaints by customers. 2. Our firm knows why customers continue buying from competitors. 3. Our firm knows whether customers buying from competitors are satisfied. 4. Our firm knows how competitors maintain relationships with customers. 5. Our firm monitors customers buying from competitors. 6. Our firm knows why customers switch to competitors. 7. Our firm knows which products competitors offer customers. 8. We respond rapidly to our competitors actions. Naver J.C and Slater S.F. (1990) Day, G.S. and Wensley, R.,(1988) Source: Developed for the Research Study (2014) Table 3.5 illustrates the measurement constructs selected to measure the Competitor Orientation and there are eight indicators were used. Those are included about nature of the competitors, way of competitors treat; maintain relationships with their customers, which products offers to customers by the competitors and response pattern of competitors to customer s actions Inter Functional Coordination Inter Functional Coordination was defined as the coordinated utilization of company resources in creating superior value for target customers (Narver and Slater, 1990). Then there was the concept of interdepartmental dynamics, which consists of two dimensions: interdepartmental conflict and interdepartmental connectedness (Kohli and Jaworski, 1990; Jaworski and Kohli, 1993). Different researchers have been developed different constructs according to their views. Inter functional customer calls, Functional Integration in Strategy; Information shared among functions, all functions contributes to customer value and Share resources with other businesses are 72

73 the main sub components of the Inter functional coordination. In questionnaire used five point likert scale method for measure Inter Functional Coordination. Table 3.6: Measurement Constructs of Inter Functional Coordination Constructs 1. Our firm s departments coordinate their contacts with customers. 2. Our firm s departments jointly satisfy customers needs. 3. Our firm s departments are collectively responsible for the relationship with customers. 4. Resources are frequently shared by different departments. 5. Our firm s departments take decisions that affect the relationship with customers collectively. 6. Our firm s departments are collectively aware of the importance of the relationship with customers. References Naver J.C and Slater S.F. (1990) Agarwal, Sanjeev, Krishna M. Erramilli, and Chekitan D. Dev, (2003). Fred Langerak, Erik Jan Hultink, and Henry S. J. Robben, (2004) 7. Our firm s departments coordinate their activities aimed at customers. Source: Developed for the Research Study (2014) Table 3.6 exhibits the measurement constructs of inter functional coordination variable of the Market orientation. There are seven constructs were included to measure the variable. Mainly those constructs were consisted with department coordination, resource allocation, collectivism of the different departments, decision making process of the departments and the way of all department thinks about customers. 73

74 Social Benefit Orientation 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 (Robert Katz and Antony, 2010). The social benefit of an economic activity to both the individual and the spillover to third parties social benefit are the total of private benefit and any external benefits (Glosid, 2001) all different kinds of improvements can be related to one of the three groups of benefits shown below and measurements developed according to the three groups of benefits. Personal Ecological Community leve -General cultural level -quality of the environment -Inter-family relations -Professional level -Sanitation -community solidarity -Self-esteem -waste management -Security and peace condition. Table 3.7: Measurement Constructs of Social Benefit Orientation Item References 1. Our firm establishes policies by focusing social responsibilities. 2. Our firm thinks social benefit as an obligation to the society. 3. Our firm considers Ecological nature. 4. Our firm considers basic infrastructure facilities. 5. Our firm focuses Socio-cultural and community. 6. Our firm organizes donation programs. Robert Katz and Antony Page, The Role of Social Enterprise (2010) 7. Our firm thinks corporate social responsibility (CSR) as an obligation. Source: Developed for the Research Study (2014) 74

75 Table 3.7 present the constructs were used to measure the Social benefit orientation which is added to the market orientation as a sub variable especially for this research study and Social benefit is a new concept the researcher adapted to market orientation, as a sub variable. These constructs adjusted according to the researcher s interest because there were no any measures of previous research studies. There are seven constructs included in questionnaire in order to measure the variable social benefit orientation. Those constructs represent the societal benefits that should a manufacturing company should think to deliver superior value to the customers. 75

76 4.1. Chapter Introduction CHAPTER 4 DATA ANALYSIS The purpose of this chapter to present the relevant data, collected from respondents to find out relationship between Market Orientation and Organizational Performance. Data presentation is based on data collected from Questionnaire based Survey method. Further this chapter emphasizes the data analysis and presentation of findings. The analysis of collected data was carried out through various statistical techniques and Structural equation modelling (SEM) is used to test the study hypotheses. A confirmatory factor analysis (CFA) is undertaken on the data to verify the undimensionality and reliability of the scale used to measure the market orientation and organizational performance. Confirmatory factor analysis is a technique used to estimate the measurement model. It seeks to confirm if the number of constructs and the loadings of indicators variables on them confirm to what is expected on the basis of the theory (Malhothra, 2010). Both Smart PLS 2.0 and SPSS (20) software packages were used in this Study. Further, section two of this chapter shows the demographic data analysis while section three showing the background data analysis. Section four is the confirmatory factor Analysis and section five describes the structural model while section six included the hypotheses testing of the research study in detail. 76

77 4.2. Demographic Data Analysis Demographic data analysis is the basic data analysis technique and it help to understand the composition of the sample. Further it shows the demographic information of the respondents. Position of the respondents within the organization (Owner, Manager, Partner or Director of the organization), educational level of the respondents (Primary Level, Ordinary Level, Advanced Level or Graduate Level), age (Less than 34 years, years, years or more than 55 years) and sex (male or female) are used to determine the nature of the respondents Position of Respondents Table Demographic Data- Position of the Respondents Frequency Percentage (%) Mean Value Owner Manager Partner Director Total Source: - Developed for the research study (2014) Table 4.1 shows the one of the demographic data that used to identify the background of the respondents called position of the respondent within the organization. Out of the 240 respondents of the sample 52 respondents are owners of the business and 126 respondents are Managers while 50 respondents are partners. And also 12 respondents are directors of a manufacturing business. The mean value of the question Position of the respondents is taken

78 5% Position 21% 52% 22% Owner Manager Partner Director Figure 4.1:- Demographic Data- Position of the Respondents Source: - Developed for the Research Study (2014) According to the figure 4.1, out of 240 respondents 52% are managers and 22% of the respondents are owners and they have control power to maintain the business. 21% of the respondents are partners and they are doing their business with another person. 5% of the respondents are directors of the small and medium scale manufacturing companies in southern province and belongs to the medium scale companies Age Composition of Sample Table 4.2:- Demographic Data Age Composition of Sample Frequency Percentage (%) Mean Value Less than 34 years More than 55 years Total

79 Source: - Developed for the Research Study (2014) Table 4.2 shows the age composition of the respondents. Majority of the respondents of the sample consisted with age between 35 and 44. It represents 101 respondents of the sample. There are 45 respondents represent the age less than 34 years while 78 respondents represent the age between 45 and 54 years. And also there were 16 respondents are more than 55 years according to the analyzed data. And also mean value of the age is2.27. Age Composition 7% 19% 32% 42% Less than 34 years More than 55 years Figure 4.2:- Demographic Data Age Composition of Sample Source: - Developed for the Research Study (2014) Figure 4.2 shows the percentage of the age composition of the sample. Majority of the Managerial level employees in the sample consist with the age between years and it represent the 42% of the total respondents. 32 % of the managerial level employees are age between years. There are 19 % of Managerial level employees representing the age less than 34 years and 7% of respondents are more than 55 years old. 79

80 Gender Composition of the Sample Table 4.3:- Demographic Data-Gender composition of the Sample Frequency Percentage (%) Mean Value Male Female Total Source: - Developed for the Research Study (2014) Table 4.3 illustrates the gender composition of the sample. Majority of the respondents are male and it is 138 respondents out of the 240 respondents of the sample. There are 102 female respondents included in the sample. And also it has 1.43 mean value. Gender 43% 57% Male Female Figure 4.3:- Demographic Data-Gender Composition of the Sample Source: - Developed for the Research Study (2014) Figure 4.3 represent the graphical presentation of the gender composition of the sample. According to the figure sample consisted with 57% of Males and 43%of female respondents. 80

81 Educational Level Table 4.4:- Demographic Data-Education level of Respondents Frequency Percentage (%) Mean Value Primary Level Ordinary Level Advanced Level Graduate Level Total Source: - Developed for the Research Study (2014) Table 4.4 shows that the educational level of the respondents. According to the data there are 39 respondents have educated up to primary level. 109 respondents are passed ordinary level and 58 respondents have educated for Advanced level. 34 respondents are graduates out of the 240 respondents sample. The mean value is 2.36 for the educational level of the respondents. Educational Level 24% 14% 0% 16% 46% Primary Level Ordinary Level Advanced Level Graduate Level Other Figure 4.4:- Demographic Data-Education level of the Respondents Source: - Developed for the Research Study (2014) 81

82 Figure 4.4 shows that the education level of the respondents. Majority of the respondents have Ordinary level education it represent 46% and 16% of the respondents have primary educational level and 24% of respondents have advanced level education. And also results show that 14% of respondents of the sample are graduates Background Data Analysis Background data represent the background information about the selected small and medium scale manufacturing organizations, the respondents are working. There are three information were considered and those are line of the business (Sole Proprietor, Family, Partnership, Private Company, Public Company or Joint Venture), main production of the business (Food, Garment, Footwear, Plastic or Machinery) and established year of the business (Before 1980, In between 1981 and 1990, In between 1991 and 2000, In between 2001 and 2010 or After 2011) Line of the Business Table 4.5:- Background Data Line of the Business Frequency Percentage (%) Mean Value Sole Proprietor Family Partnership Private Company Public Company Joint Venture Total Source: - Developed for the Research Study (2014) Table 4.5 shows that the background information of the manufacturing organization, line of the business. Out of 240 respondents 39 respondents are working in sole proprietor business. 115 respondents are worked in family business while 70 82

83 respondents work in partnership business. According to the data table majority of the respondents are working in family business and minimum respondents are working in joint venture business. Further line of the business has 2.3 mean value. 29% Line of Business 3% 2% 2% 16% 48% Sole Propreator Family Partnership Private Company Publc Company Joint Venture Figure 4.5:- Line of the Business Source: - Developed for the Research Study (2014) Figure 4.5 represent the percentage of the composition of business line. 48% of the respondents are working in family business and 29% of respondents represent the partnership while 16% of respondents are working in sole proprietor businesses. The respondents work in private company, public company and join venture has taken less than 5% of the total respondents Main Production Table 4.6:- Background Data - Main Production Frequency Percentage (%) Mean Value Food Garment Footwear Plastic Machinery Total Source: - Developed for the Research Study (2014) 83

84 Table 4.6 shows that another background information of the company called main production. 47 respondents are working in food manufacturing companies located in southern province while 77 respondents are from the Garment manufacturing organizations. 46 respondents represent the footwear manufacturing business and 69 respondents are representing plastic manufacturing business. Main Production has taken a 2.59 mean value. 0% Production 29% 19% 20% 32% Food Garment Footwear Plastic Machinary Figure 4.6:-Background Data - Main Production Source: - Developed for the Research Study (2014) Figure 4.6 exhibits the percentage values of main production of the selected manufacturing organizations. According to the data 20% of the small and medium scale organizations of the respondents belong to the organizations is produced food. Majority of the small and medium scale manufacturing firms are produced Garments and represent 32%. And also 19% of the respondents are working in footwear manufacturing business while 29% of the respondents are working in plastic manufacturing small and medium businesses Established Year of the Business Table 4.7:- Background Data: Established Year of the Business 84

85 Frequency Percentage (%) Mean Value Before In between 1981 and In between 1991 and In between 2001 and After Total Source: - Developed for the Research Study (2014) Table 4.7 shows that the established year of the selected small and medium manufacturing organizations. Out of 240 respondents 74 respondents are working in business that have established in between 1981 and There are 45 respondents work in the business which have established before 1980 while 25 respondents are working in the businesses which have established in between years 1991 and And also 44 respondents are consisting with the businesses that established in years between 2001 and There are 52 respondents worked after 2011 established small and medium scale manufacturing businesses. And also mean value of the question is taken Established Year of the Business Before % 19% In between 1981 and % 10% 31% In between 1991 and 2000 In between 2001 and 2010 After 2011 Figure 4.7: - Established Year of the Business Source: - Developed for the Research Study (2014) 85

86 Figure 4.7 shows that the established years of the small and medium manufacturing business that the respondents are working. Majority (22%) of the respondents work in small and medium manufacturing business organizations which have established after 2011 and 18% respondents from the businesses that have established in years between 2001 and There are 19 % respondents are working in before 1980 established small and medium manufacturing businesses while 10% respondents work in small and medium businesses established in between 1991 and And also 31% respondents work in the manufacturing businesses that have established in year between 1981 and Measurement Model Confirmatory Factor Analysis (CFA) A confirmatory factor Analysis is technique used to estimate the measurement model. It seeks to confirm if the number of constructs and the loadings of indicators variables on them confirm to what is expected on the basis of the theory (Malhotra, 2010). Subsequently, a confirmatory factor analysis (CFA), using Structural Equation Modelling (SEM) and applying the maximum likelihood method, was used to test the reliability and validity of the dimensions suggested by the Confirmatory Factor Analysis (CFA) (Hair et al., 1998; Anderson and Gerbing, 1988). The results consistently supported the factor structure for all three constructs determined through the CFA. 86

87 Table 4.8:- Confirmatory Factor Analysis (Original Model) Constructs/ Indicators Standardized Loadings/ t values Composite Reliability/ AVE Customer Orientation 0.66/0.22 Our firm gathers information about customers needs /(1.2)* Our firm has insight into the buying process of customers /(2.0) Our firm consults customers to improve the quality of service /(1.8) Our firm handles customers complaints well /(2.0)* We regularly measure customer satisfaction /(3.2) Our firm looks for ways to offer customers more value /(1.8)* Our firm treats customers as partners /(1.7)* Competitor Orientation 0.72/0.29 Our firm knows whether competitors are open to complaints by customers /(1.4)* Our firm knows why customers continue buying from competitors /(2.2)* Our firm knows whether customers buying from competitors are satisfied /(2.2) Our firm knows how competitors maintain relationships with customers /(1.0)* Our firm monitors customers buying from competitors /(2.8) Our firm knows why customers switch to competitors /(3.2) Our firm knows which products competitors offer customers /(1.2)* We respond rapidly to our competitor s actions /(2.1)* 87

88 Inter Functional Coordination 0.52/0.18 Our firm s departments coordinate their contacts with customers /(1.8) Our firm s departments jointly satisfy customers needs /(0.32)* Our firm s departments are collectively responsible for the relationship with customers /(0.40)* Resources are frequently shared by different departments /(2.44) Our firm s departments take decisions that affect the relationship with customers collectively /(1.1)* Our firm s departments are collectively aware of the importance of the relationship with customers /(1.42)* Our firm s departments coordinate their activities aimed at customers /(3.42) Social Benefit Orientation 0.68/0.25 Our firm establishes policies by focusing social responsibilities /(3.0) Our firm thinks social benefit as an obligation to the society /(1.72)* Our firm considers Ecological nature /(1.7)* Our firm considers basic infrastructure facilities / (2.1) Our firm focuses Socio-cultural and community /(1.0)* Our firm organizes donation programs /(1.7)* Our firm thinks corporate social responsibility (CSR) as an obligation of the company /(3.2) Organizational Performance 0.69/0.28 Sales revenue Growth is high 0.626/(3.71) Market share gain is high 0.260/(0.74)* Profitability is high 0.470/(1.7)* Have Successful Innovation 0.479/(1.7)* High Customer Satisfaction 0.573/(2.0) High Employee Satisfaction 0.584/(2.42) Source: Developed for the research study (2014) 88

89 Table 4.8 shows the Confirmatory factor analysis (CFA) and it is conducted by using the Smart PLS software and mainly computed standardized loading values, t values, Composite Reliability and Average Variance Extracted (AVE) (Appendix 4 and 5). According to the measurement model it shows satisfactory fit. However, modification indices and standardized residuals indicated that a more parsimonious model could be achieved (Anderson and Gerbing, 1988). Therefore it was decided to delete some constructs which the constructs with multiple loadings and correlated measurement errors were deleted. Customer Orientation: According to the confirmatory factor analysis (CFA) table (Table 4.8), the Composite Reliability and AVE value of the Customer Orientation has taken 0.66 and 0.22 respectively. There are seven constructs represent the variable Customer Orientation. First item is our firm gathers information about customers needs and the standardized loading value and t value are and 1.2 respectively. The standardized loading vale and t value of the item Our firm has insight into the buying process of customers is taken.512 and 2.0 while the statement Our firm consults customers to improve the quality of service values are and 1.8. The standardized loading value and t value for the item Our firm handles customers complaints well is and 2.0. And also next item is We regularly measure Customer Satisfaction and loading value and t- value has taken and 3.2. Another construct of the Customer Orientation is Our firm looks for ways to offer customers more value and this statement has loading value and 1.8 t- value. The last item is Our firm treats customers as partners and standardized loading value and t values of the item is.451 and 1.7 respectively. Based on the results of the CFA it was decided to delete four constructs and to retain three constructs. The constructs that were deleted were the following: Our firm gathers information about customers needs (β= 0.319; t= 1.2); Our firm handles customer s complains well (β= 0.427; t= 2.0); Our firm looks for ways to offer customers more value (β= 0.396; t= 1.8) and Our firm treats customers as partners (β= 0.451; t= 1.7). These four constructs were deleted because they had factor loadings below 0.5 and somewhat low t-values, thus falling below the 89

90 stipulated thresholds (Nunnally and Bernstein, 1994). The initial Composite Reliability of Customer Orientation, before deleting any constructs, was 0.66, and the average variance extracted (AVE) was These low values indicate that the measurement model should be re-specified. The following three constructs were retained: Our firm has insight into the buying process of customers (β= 0.512; t= 2.0); Our firm consults customers to improve the quality of service (β= 0.522; t= 1.8) and We regularly measure customer satisfaction (β= 0.597; t= 3.2). Competitor Orientation: According to the confirmatory factor analysis table (Table 4.8), the composite reliability and AVE value of the competitor orientation has taken 0.72 and 0.29 respectively. There are eight constructs represent the concept Competitor Orientation. First item is Our firm knows whether competitors are open to complaints by customers and the standardized loading value and t values are and 1.4. The standardized loading vale and t value of the item Our firm knows why customers continue buying from competitors is taken.458 and 2.2 while the statement Our firm knows whether customers buying from competitors are satisfied values are and 2.2. The standardized loading value and t value for the item Our firm knows how competitors maintain relationships with customers is and 1.0. And also next item is Our firm monitors customers buying from competitors and loading value and t values has taken and 2.8. Another construct of the competitor orientation is Our firm knows why customers switch to competitors and this statement has loading value and 3.2 t value. The next construct is Our firm knows which products competitors offer customers and loading and t values are and 1.2 respectively. The last item is We respond rapidly to our competitor s actions and standardized loading value and t values of the item is.440 and 2.1 respectively. Based on the results of the CFA it was decided to delete five constructs and to retain three constructs. The constructs that were deleted were the following: Our firm knows whether competitors are open to complaints by customers (β= 0.350; t= 1.4); Our firm knows why customers continue buying from competitors (β= 0.458; t= 2.2); Our firm knows how competitors maintain relationships with customers (β= 90

91 0.381; t= 1.0); Our firm knows which products competitors offer customers (β= 0.477; t= 1.2) and We respond rapidly to our competitor s actions (β= 0.440; t= 2.2). These five constructs were deleted because they had factor loadings below 0.5 and somewhat low t-values, thus falling below the stipulated thresholds (Nunnally and Bernstein 1994). The initial composite reliability of Competitor Orientation, before deleting any constructs, was 0.72, and the average variance extracted was These low values indicate that the measurement model should be re-specified. The following three constructs were retained: Our firm knows whether customers buying from competitors are satisfied (β= 0.568; t= 2.2); Our firm monitors customers buying from competitors (β= 0.578; t= 2.8) and Our firm knows why customers switch to competitors (β= 0.666; t= 3.2). Inter Functional Coordination: According to the confirmatory factor analysis original table (Table 4.8), the composite reliability and AVE value of the variable inter functional coordination has taken 0.52 and 0.18 respectively. There are seven constructs represent the concept inter functional coordination. First item is Our firm s departments coordinate their contacts with customers and the standardized loading value and t values are and 1.8. The standardized loading vale and t value of the item Our firm s departments jointly satisfy customers needs is taken.089 and 0.32 while the statement Our firm s departments are collectively responsible for the relationship with customers values are and 0.4 The standardized loading value and t value for the item Resources are frequently shared by different departments is and And also next item is Our firm s departments take decisions that affect the relationship with customers collectively and loading value and t value have taken and 1.1. Another construct of inter functional coordination is Our firm s departments are collectively aware of the importance of the relationship with customers and this statement has loading value and 1.42 t value. The last item is Our firm s departments coordinate their activities aimed at customers and its standardized loading value and t value is.746 and 3.42 respectively. 91

92 Based on the results of the CFA it was decided to delete four constructs and to retain three constructs. The constructs that were deleted were the following: Our firm s departments jointly satisfy customers needs (β= 0.089; t= 0.32); Our firm s departments are collectively responsible for the relationship with customers (β= 0.080; t= 0.40); Our firm s departments take decisions that affect the relationship with customers collectively (β= 0.305; t= 1.1) and Our firm s departments are collectively aware of the importance of the relationship with customers (β= 0.433; t= 1.42). These four constructs were deleted because they had factor loadings below 0.5 and somewhat low t-values, thus falling below the stipulated thresholds (Nunnally and Bernstein 1994). The initial composite reliability of Inter Functional Coordination, before deleting any constructs, was 0.52, and the average variance extracted was These low values indicate that the measurement model should be re-specified. The following three constructs were retained: Our firm s departments coordinate their contacts with customers (β= 0.541; t= 1.8); Resources are frequently shared by different departments (β= 0.615; t= 2.44) and Our firm s departments coordinate their activities aimed at customers (β= 0.746; t= 3.42). Social Benefit Orientation: According to the confirmatory factor analysis table (Table 4.8), the composite reliability and AVE value of the variable Social benefit orientation has taken 0.68 and 0.25 respectively. There are seven constructs represent the variable social benefit orientation. First item is Our firm establishes policies by focusing social responsibilities and the standardized loading value and t values are and 3.0. The standardized loading vale and t value of the item Our firm thinks social benefit as an obligation to the society is taken.373 and 1.72 while the statement Our firm considers Ecological nature values are and 1.7 The standardized loading value and t value for the item Our firm considers basic infrastructure facilities is and 2.1. And also next item is Our firm focuses Socio-cultural and community and loading value and t values has taken and 1.0. Another construct of inter functional coordination is Our firm organizes donation programs and this statement has loading value and 1.7 t value. The last item is Our firm think corporate social responsibility as an obligation and standardized loading value and t values of the item is.698 and 3.2 respectively. 92

93 Based on the results of the CFA it was decided to delete four constructs and to retain three constructs. The constructs that were deleted were the following: Our firm thinks social benefit as an obligation to the society (β= 0.373; t= 1.72); Our firm considers Ecological nature (β= 0.467; t= 1.7); Our firm focuses Socio-cultural and community (β= 0.264; t= 1.0) and Our firm organizes donation programs (β= 0.417; t= 1.7). These four constructs were deleted because they had factor loadings below 0.5 and somewhat low t-values, thus falling below the stipulated thresholds (Nunnally and Bernstein 1994). The initial composite reliability of Social benefit Orientation, before deleting any constructs, was 0.68, and the average variance extracted was These low values indicate that the measurement model should be re-specified. The following three constructs were retained: Our firm establishes policies by focusing social responsibilities (β= 0.611; t= 3.0); Our firm considers basic infrastructure facilities (β= 0.536; t= 2.1) and Our firm thinks corporate social responsibility (CSR) as an obligation of the company (β= 0.698; t= 3.2). Organizational performance: According to the confirmatory factor analysis table (Table 4.8), the composite reliability and AVE value of the variable organizational performance has taken 0.69 and 0.28 respectively. There are six constructs are representing the variable organizational performance and respondents are given answers by comparing their competitors. First item is Sales revenue Growth is High and the standardized loading value and t- value are and The standardized loading vale and t- value of the item Market share gain is high is taken.260 and 0.74 while the statement Profitability is High values are and 1.7. The standardized loading value and t value for the item Have Successful Innovation is and 1.7. And also next item is High Customer Satisfaction and loading value and t value has taken and 2.0. The last item is High Employee Satisfaction and standardized loading value and t value of the item are.584 and 2.42 respectively. Based on the results of the CFA it was decided to delete three constructs and to retain three constructs. The constructs that were deleted were the following: Market share gain is high (β= 0.208; t= 0.74); Profitability is high (β= 0.470; t= 1.7) and Have Successful Innovation (β= 0.479; t= 1.7). 93

94 These three constructs were deleted because they had factor loadings below 0.5 and somewhat low t-values, thus falling below the stipulated thresholds (Nunnally and Bernstein, 1994). The initial composite reliability of Organizational Performance, before deleting any constructs, was 0.69, and the average variance extracted was These low values indicate that the measurement model should be re-specified. The following three constructs were retained: Sales revenue growth is high (β= 0.626; t= 3.71); High Successful Innovation (β= 0.573; t= 2.0) and High Employee Satisfaction (β= 0.584; t= 2.42). Standardized loading values and t values indicate that extent of item match to measure the variables. Professional scholars like Baggozi and Yi (1988) accepted that the standardized loading value should be greater than 0.5 and t values should be more than 2.0 in order to match an item with the variable. Based on the theory the researcher has deleted all the constructs from the confirmatory factor analysis initial model which are less than loading value and 0.5 and less than t value 2.0. Based on the accepted criteria the researcher deleted four constructs (our firm gathers information about customers needs (0.319/1.2), our firm handles customers complaints well (0.427/2.0), our firm looks for ways to offer customers more value (0.396/1.8) and our firm treats customers as partners (0.451/1.7)} from the Customer Orientation, five constructs {Our firm knows whether competitors are open to complaints by customers (0.350/1.4), Our firm knows why customers continue buying from competitors (0.458/2.2), Our firm knows how competitors maintain relationships with customers (0.381/1.0), Our firm knows which products competitors offer customers (0.477/1.2) and we respond rapidly to our competitor s actions (0.470/2.2)} from Competitor Orientation, four constructs {Our firm s departments jointly satisfy customers needs (0.089/0.32), Our firm s departments are collectively responsible for the relationship with customers (0.08/0.4), Our firm s departments take decisions that affect the relationship with customers collectively (0.305/1.1) and Our firm s departments are collectively aware of the importance of the relationship with customers (0.433/1.42)} from Inter functional Coordination, four constructs {Our firm thinks social benefit as an obligation to the society (0.373/1.72), Our firm considers Ecological nature (0.467/1.7), Our firm focuses Socio-cultural and community (0.264/1.0) and Our firm organizes donation programs (0.417/1.7)} from 94

95 Social benefit orientation and three constructs {Market share gain is high (0.260/0.74), Profitability is High (0.570/2.0) and High Customer Satisfaction (0.573/2.0)} from Organizational Performance due to the standardized loading value less than 0.5 and t values less than 2.0. Table 4.9 shows that the confirmatory factor analysis final model (See Appendix 6 and 7 for more details) developed after deleting all the constructs standardized loading value less than 05 and t value less than 2.0. which are 95

96 Table 4.9:- Confirmatory Factor Analysis (Final Model) Constructs /Indicators Market Orientation Customer Orientation Our firm has insight into the buying process of customers. Our firm consults customers to improve the quality of service. We regularly measure customer satisfaction. Competitor Orientation Our firm knows whether customers buying from competitors are satisfied. Our firm monitors customers buying from competitors. Our firm knows why customers switch to competitors. Inter functional Coordination Our firm s departments coordinate their contacts with customers. Resources are frequently shared by different departments. Our firm s departments coordinate their activities aimed at customers. Social Benefit Orientation Our firm establishes policies by focusing social responsibilities. Our firm considers basic infrastructure facilities. Our firm think corporate social responsibility as an obligation Organizational Performance Sales revenue Growth is High Have Successful Innovation High Employee Satisfaction Standardised Loading/ ( t- values) 0.733/(4.1) 0.518/(2.2) 0.751/(4.3) 0.752/(5.9) 0.536/(2.9) 0.759/(4.6) 0.540/(2.8) 0.691/(2.9) 0.861/(5.3) 0.805/(10.6) 0.515/(3.1) 0.702/(6.6) 0.758/(7.03) 0.605/(3.6) 0.616/(3.2) Composite Reliability/ AVE 0.71/(0.56) 0.73/(0.58) 0.75/(0.61) 0.72/(0.57) 0.7/(0.54) Source: Developed for the Research Study (2014) 96

97 Table 4.9 shows that the final confirmatory factor analysis (Measurement Model).After deleting constructs less loading values the fit of the respecified model improved to X 2 = with degree of freedom = 10 (Table 4.10). Three different measures of internal consistency or reliability were computed and two are presented in table First, all composite reliabilities are.7 or higher, which indicates that internal consistency among the measures far above the recommended level of.60 (Bagozzi and Yi, 1988). Second, average variance extracted ranged from 0.54 to Bagozzi and Yi (1988) suggested a target level is more than Customer Orientation: According to the confirmatory factor analysis final model table (Table 4.9), the Composite Reliability and Average Variance Extracted (AVE) value of the customer orientation has taken 0.71 and 0.56 respectively. There are there constructs represent the variable Customer Orientation. First item is Our firm has insight into the buying process of customers and its standardized loading value and t values are and 4.1. The standardized loading vale and t value of the item Our firm consults customers to improve the quality of service is taken and 2.2.The last item is We regularly measure customer satisfaction and its standardized loading value and t values of the item are and 4.3 respectively. Competitor Orientation: According to the confirmatory factor analysis final model table (Table 4.9), the composite reliability and AVE value of the Competitor Orientation has taken 0.73 and 0.58 respectively. There are there constructs represent the variable Competitor orientation. First item is the Our firm knows whether customers buying from competitors are satisfied and its standardized loading value and t values are and 5.9. The standardized loading vale and t value of the item Our firm monitors customers buying from competitors is taken and 2.9.The last item is Our firm knows why customers switch to competitors and its standardized loading value and t - values of the item is and 4.6 respectively. 97

98 Inter Functional Coordination: According to the confirmatory factor analysis final model table (Table 4.9), the composite reliability and AVE value of the Inter Functional Coordination has taken 0.75 and 0.61 respectively. There are there constructs represent the variable Inter Functional Coordination. First item is Our firm s departments coordinate their contacts with customers and its standardized loading value and t- values are and 2.8. The standardized loading vale and t value of the item Resources are frequently shared by different departments is taken and 2.9.The last item is Our firm s departments coordinate their activities aimed at customers and its standardized loading value and t values are and 5.3 respectively. Social Benefit Orientation: According to the confirmatory factor analysis final model table (Table 4.9), the composite reliability and AVE value of the Social Benefit Orientation has taken and 0.57 respectively. There are there constructs represent the variable Social Benefit Orientation. First item is Our firm establishes policies by focusing social responsibilities and its standardized loading value and t value are and The standardized loading vale and t value of the item Our firm considers basic infrastructure facilities has taken and 3.1.The last item is Our firm think corporate social responsibility as an obligation and its standardized loading value and t values are and 6.6 respectively. Organizational Performance: According to the confirmatory factor analysis final model table (Table 4.9), the composite reliability and AVE value of the Organizational Performance has taken 0.70 and 0.54 respectively. There are there constructs represent the variable Organizational Performance. First item is Sales revenue Growth is High and its standardized loading value and t value are and The standardized loading vale and t value of the item Have Successful Innovation is taken and 3.6. The last item is High Employee Satisfaction and its standardized loading value and t value are and 3.2 respectively. 98

99 4.5. Validity and Reliability of the Measures When undertaking any form of research is important to ensure the reliability and validity of research findings. This can be achieved by both emphasizing the adequacy of the research design and quality of the measurement procedures employed. In order to validate the instrument, this research study performed validity and reliability tests, examine correction coefficients between the realized constructs. Validity is defined as how much any measuring instrument measures what it is intended to measure. Bryman and Bell (2003) also suggested that the important issue of measurement validity relates to whether measures of concepts really measure the concept. Validity refers to the issue of whether an indicator (or set of indicators) that is devised to gauge a concept really measures that concept. Several ways of establishing validity are: face validity; concurrent validity; predictive validity; construct validity; and convergent validity. (Bryman and Bell, 2003, p 77). Reliability is defined as be fundamentally concerned with issues of consistency of measures. (Bryman and Bell, 2003) There are three prominent factors related to considering whether a measure is reliability: stability, internal reliability and interobserver consistency. (Ibid). In this study, internal reliability has been considered. Bryman and Bell (2003) suggested that a multiple-item measure in which each answers to each questions are aggregated to form an overall score, we need to be sure that all our indicators are related to each other. All the reliability values of each construct are greater than the benchmark of 0.6 which recommended by Baggozzi and Yi (1988) as good indicator of reliability. Table 4.10: - Assessment of Reliability Research Variable Number of constructs Reliability Organizational Performance Customer Orientation Competitor Orientation Inter Functional Coordination Social Benefit Orientation

100 Table 4.10 shows the reliability of the constructs. According to the table 4.10, there are three constructs represent the organizational performance and reliability value is 0.7. There are three constructs used to measure the Customer orientation and its reliability value is 0.71 and three constructs were used to measure the Competitor Orientation and reliability is Inter functional Coordination consisted with three constructs and its reliability value is 0.75 while there are three constructs represent the Social Benefit Orientation and 0.72 is the reliability value of those three constructs. All the reliability values are more than benchmark of reliability 0.6 recommended by the Baggozzi and Yi (1988) and it indicate that the constructs used in measurement procedures are in high quality. Table 4.11:- Results of PLS Path Model Estimation Path Performance Estimate ( t-values) Customer Orientation (1.8*) Competitor Orientation 0.159(1.4*) Inter Functional Coordination 0.402(2.9*) Social Benefit Orientation 0.569(5.2*) Model goodness- of fit statistics X 2 (df) (10) P value 0.00 R 2 Performance 57.9% *Ρ< 0.05 Source: Developed for the Research Study (2014) Table 4.11 shows that the path model estimation. Table shows that the correlation values for developed for paths. Correlation value for path customer orientation and organizational performance has taken and its t value is 1.8. The correlation value for path competitor orientation and organizational performance is and its t value is 1.4 while path inter functional coordination and organizational performance has correlation value and its t value is 2.9. Correlation value and t value of the path social benefit orientation have taken and 5.2 respectively. All the path 100

101 model correlations values and t values are subjected to the 5% significant level. Further, according to the table, R square value represents the coefficient of determination. The total impacts of dependent variable on independent variables are determined by the R 2 value (Malhotra, 2010). According to the table the value is (57.9%) and professional scholars (e.g.; Baggozi, 1985; Gerson, 1990) accepted that R 2 value should be greater than 25% for model fitness. So therefore in this research study there is a 57.9% total impact of dependent variable on independent variables. It reveals that measurement model of the research study fit with the requirement of the research study. Table 4.12:- Discriminant Validity of the Constructs Customer Orientation 0.56 Competitor Orientation Inter Functional Coordination Social Benefit Orientation Organizational Performance Source: Developed for the Research Study (2014) Table 4.12 exhibits the discriminant validity of the Constructs. The discriminant validity of the latent variables was tested using the approach suggested by Fornell and Larcker s (1981). The diagonals in table 4.12 show the AVE extracted from each construct reported in table The other entities represent the square of correlations among the constructs. It can be seen that no non diagonal entry exceeds the diagonals of specific construct. In sum, the measures of the proposed constructs achieve satisfactory reliability, convergent and discriminant validity. 101

102 4.6. Structural Model Market Orientation Customer Orientation Competitor Orientation Inter Functional Coordination β= 0.402; t= 2.9; ρ< 0.01 Organizational Performance Social Benefit Orientation Figure 4.8:- Structural Model Source: - Developed for the Research Study (2014) Figure 4.8 Shows that the Structural model with analyzed data and hypotheses testing results. According to the model, relationship between customer orientation and organizational performance confirms negative relationship in small and medium manufacturing organizations while relationship between competitor orientation and organizational performance, relationship between inter functional coordination and organizational performance and relationship between social benefit orientation and organizational performance confirms the positive relationships. 102

103 4.7. Hypotheses Testing The Structural Equation Modeling (SEM) methodology was employed to test the hypotheses. SEM is a procedure for estimating a series of dependence relationship among a set of concepts represented by multiple measured variables and incorporated in to an integrated model (Malhotra, 2010). Most of the path coefficients are significant at the 99% confidence Level (Significance level 0.01%) providing strong support for all the hypothesized relationships Customer Orientation and Organizational Performance H1 states that there is a positive relationship between customer Orientation and Organizational Performance. The hypothesis is not supported by the data (β= ; t= 1.8; ρ< 0.01). Results show that there is a negative relationship between Customer orientation and Organizational performance Competitor Orientation and Organizational Performance H2 predicted that there is a positive relationship between Competitor orientation and organizational performance. This prediction is supported by the analyzed data (β= 0.159; t= 1.4; ρ < 0.01). Results show that there is a positive relationship between Competitor Orientation and organizational Performance Inter functional Coordination and Organizational Performance H3 postulates that there is a positive relationship between Inter functional coordination and organizational performance. This hypothesis supported by the data (β= 0.402; t= 2.9; ρ< 0.01). Results exhibits that there is a positive relationship between Inter functional Coordination and organizational performance Social Benefit Orientation and Organizational Performance H4 states that Social benefit Orientation is positively related to the organizational performance. The hypothesis is supported by the data (β= 0.569; t= 5.2; ρ< 0.01). Analysis shows that there is a positive relationship between Social benefit Orientation and organizational Performance. 103

104 Table 4.13:- Summary of the Hypotheses Testing Hypothesis Hypothesis number and Direction Customer Orientation and Organizational Performance + H1 Not Supported Competitor Orientation and Organizational Performance + H2 Supported Inter Functional Coordination and Organizational Performance + H3 Supported Social Benefit Orientation and Organizational Performance + H4 Supported Source: Developed for the Research Study (2014) Table 4.13 shows that the summary of the hypotheses testing. Right hand column shows the direction of the hypothesized relationship between independent variable and dependent variable and whether the hypothesized relationships are supported by the findings or not. First, developed hypothesis namely (+ H1) there is a positive relationship between Customer Orientation and Organizational Performance not supported by the data. Second, developed hypotheses namely there is a positive relationship Competitor Orientation and Organizational Performance (+H2), there is a positive relationship Inter Functional Coordination and Organizational Performance (+H3) and there is a positive relationship Social Benefit Orientation and Organizational Performance ( +H4 ) are supported by the data. 104

105 5.1. Chapter Introduction CHAPTER 5 DISCUSSION AND CONCLUSION This is the final chapter of the research study and it deals with the discussion and conclusion based on the analysis of the previous chapter four. Second section of this chapter describes the summary of the research study while section three explains findings of the research study in detail. Section four describes the contribution of the research study for managers, academics and policy makers. Further this section describes the new model development (NEWMAKTOR model) as well. The fifth section of this chapter describes the limitations and future research implications in detail. 105

106 5.2. Summary of the Study The main objective of the research study was to examine the relationship between Market Orientation and Organizational Performance in Sri Lankan small and medium scale manufacturing organizations. 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 and after making adjustments distributed for data collection purposes. 310 questionnaires were distributed and 255 questionnaires were returned. There were only 242 completed questionnaires. Data was analyzed by using both smart PLS and SPPS software and Demographic data analysis, Confirmatory Factor Analysis and Structural Equation Modeling are used to analyze the data collected from the respondents. Based on the analyzed results from this research study sub variables of market orientation (Competitor orientation, inter functional coordination and social benefit orientation) are strongly correlated with organizational performance while customer orientation is not correlated with the organizational performance in small and medium scale manufacturing industry in Sri Lanka. Conclusion and the managerial and theoretical implications ware 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 Orientation. Academics are used this research findings for future research studies and development of market oriented theories while policy makers can use this research findings in different ways to make policies in small and medium scale manufacturing organizations in Sri Lanka. Major limitations are sample size is not enough to draw a conclusion to the entire population and context limitation. Future researchers can apply NEWMAKTOR model to measure the market orientation in different contexts. 106

107 5.3. Findings of the study Market orientation scale was sub divided into four scales namely Customer Orientation, Competitor Orientation, Inter Functional Coordination and Social Benefit Orientation. First, the respondents were asked to provide information concerning their perception towards customer orientation practices in their firm. The results show that the respondent judged Customer Orientation as not correlated with the Organizational Performance in small and medium manufacturing industry. These results suggest that most firms in the study sample have not orientation towards customers. The main reason might be the small and medium scale organizations are targeting to produce the products based on the availability of resources within the organization. In some situation organizations could not be able to achieve the aimed performance due to lack of identification of customer needs and wants. Therefore managers of those organizations should think about the customer oriented strategies while concerning the resources available in the organizations for the production process. Specifically, these results suggest that marketing managers should endeavor to collect, to analyze, to disseminate, and to act on information about the needs and wants of consumers. This underscores the need for manufacturing organizations to have an effective and efficient market information system. Second, results show that the Competitor Orientation is positively correlated with the organizational performance. There are many small and medium scale manufacturing organizations within the industry that produce the same products and cater the same customer group and therefore competition is high among those businesses due to these reasons. Most of the small and medium scale manufacturing organization s managerial level employees have realized that the importance of the competitor orientation and they are practicing the relevant strategies to achieve the goals of the organization. Third, results are showing that inter functional coordination is positively correlated with the performance of the organization. There are many departments or section can be seen in a business organization. Each department or section should work collectively in order to achieve the goals and objectives of the organization. By accepting the value of customers, firms go out of their way to coordinate and integrate business functions in order to serve target market needs. Most of the organizations 107

108 within the sample practice inter coordination of the different departments although difficult to see separate departments in the small and medium scale manufacturing organizations in southern province. Finally, the results show that Social Benefit Orientation is positively correlated with the Organizational Performance. Although small and medium scale manufacturers do not have enough capabilities to work by focusing on social benefits they have realized the importance of the social benefit orientation. Most of the customers expect superior value from the products and social benefits. Therefore each and every organization should concern about the social benefit oriented activities when they are going to achieve goals and objectives of the organizations. By not having their objectives driven by customer orientation, most of the firms frequently gauge customer orientation with a view of paying close attention to customer service. This in essence provides competitive advantages based on proper understanding of customer needs. As a whole, the findings of the study add new understanding to the literature on market orientation and organizational performance in the Sri Lankan context. The sample of this study is confined to the manufacturing sector and therefore future studies should examine whether the relationships reported here differ across industries. The results of this study provide valuable information for managerial decision making Contribution of the Study Managerial Implications There are number of implications for practicing managers. The instruments used in the research study are available as a check list for management to measure their own market orientation and organizational performance. The findings of the research study are of particular importance to managers who are responsible for developing and implementing strategies. The positive relationship between competitor orientations, inter functional coordination, social benefit orientation and organizational performance are not only reflected in superior market performance but has also been 108

109 linked to other factors that are beneficial to the customers, the firm and its employees and society in general. It is important to suggest that the Sri Lankan small and medium scale manufacturing organizational environment represent the new empirical context that allows for an in depth inquiry of the link between market orientation and organizational performance. The results of the research study are not only relevant to academicians. From the point of view of a marketing practitioner engaging in manufacturing, the results from this research study can be helpful. Up to now no serious research study has been conducted in Sri Lankan business context about the best strategy despite the phenomenal growth of many Sri Lankan manufacturing organizations. Further According to the results Customer Orientation has negative relationship with organizational performance. Therefore in order to be a market oriented small and medium scale manufacturing organization there should be willingness to invest in relationship building, identification of customer needs and the expenses of the customer orientation. Success of a business depends on the customers This statement should sit at the heart of the marketing thinking while managers having the responsibility to handle the customer oriented strategies Theoretical Implications This research study has contributed both for theory development and for practicing managers. The main contribution to the theory development involves introducing a new variable to the market orientation called Social Benefits Orientation. Many researches have been conducted researches about the market orientation by only considering the three sub variables (Customer Orientation, Competitor Orientation and Inter Functional Coordination) which were developed by Slater and Naver (1990). They have developed this theory (MKTOR model) after conducting many researches. 109

110 Figure 5.1:- Slater and Naver s view of Market Orientation Source: - Narver and Slater (1990) Figure 5.1 shows that the Slater and Naver point of view on Market Orientation. It explains an organization should achieve long term profits by focusing on Customer Orientation, Competitor Orientation and Inter Functional Coordination with in the organization and it should be done based on the target market. In other words, an organization should make strategies within the organization in order to focus long term profits, by considering Customer Orientation, Competitor Orientation and Inter Functional Coordination. The analyzed data shows that Social benefit orientation is strongly related to the market orientation. Based on the findings the researcher developed a theoretical model by considering the Slater and Naver (1990) developed tri component model of Market Orientation. Figure 5.2 shows the developed advanced conceptualized theoretical model about Market Orientation. Further involves the confirmation of some of the hypothesized relationships among the constructs of Market orientation and Organizational Performance. 110

111 NEWMKTOR Model Target Market Figure 5.2: NEWMKTOR model Source: - Developed for the Research Study (2014) The NEWMKTOR model explains the Slater and Naver s view with a new sub variable. According to the model an organization should focus long term profits based on the market oriented activities in target market. In other words, in order to acquire long term profits an organization should consider Customer orientation, Competitor orientation inter functional Coordination and social benefit orientation. Through this research study identified the importance of the social benefit oriented activities for long term profit focus in small and medium manufacturing business organizations in Sri Lankan Context. Therefore this model contributes to the Market orientation theories for a new perspective. Further Corporate social responsibility and societal marketing concepts are useful when adding social benefit orientation to the market orientation as a component of the market orientation. 111