Original Article

The effect of marketing strategy

and marketing capability on
business performance. Case
study: Irans medical equipment
sector
Received (in revised form): 25th September 2009

Shahriar Azizi
is an assistant professor of Marketing in the Department of Management and Accounting at Shahid Beheshti University, Tehran,
Iran. He has published more than 20 articles and three books on marketing topics in Iranian journals, and also serves as reviewer
of three Persian-language journals.

Sedigheh Ansari Movahed

is an MBA student at Allameh Tabatabai University, Tehran, Iran. She also works in the marketing department of a company, which
finances medical equipment in Iran.

Maryam Haghighi Khah

is an MBA student at Allameh Tabatabai University, Tehran, Iran.

ABSTRACT In this article, the relationship between marketing strategy and the
marketing capability of three categories of business performance overall, financial
and non-financial has been investigated using a questionnaire including 30
parameters. The acceptable Cronbachs  in the questionnaire is considered to be
0.80. The multiple regression tests indicate that marketing strategy has no effect
on the overall performance (b = 0.001; t = 0.005), whereas it shows a positive effect
on non-financial performance (b = 0.412; t = 3.067), and a negative effect on financial
performance (b = 0.293; t = 2.081). The results also indicate that marketing capability
has positive effects on all three investigated categories, that is, the overall
performance (b = 0.727; t = 5.680), the non-financial performance (b = 0.481; t = 3.580)
and the financial performance (b = 0.649; t = 4.612).
Journal of Medical Marketing (2009) 9, 309317. doi:10.1057/jmm.2009.33
Keywords: marketing capability; marketing strategy; performance; medical equipment

Correspondence:
Shahriar Azizi
Department of Business
Administration, IRANTehran-Evin-SBU UniversityFaculty of Management and
Accounting, Shahid Beheshti
University of Tehran,
PO Box 1983963113,
Tehran 1967933759, Iran
E-mail: s-azizi@sbu.ac.ir

INTRODUCTION
Health care is among the essential
concerns and challenges of societies
worldwide, and it has a direct effect
on the economic efficiency of the
community. One of the major

2009 Palgrave Macmillan 1745-7904

pre-requisites for running a proper health

system is to ensure the smooth supply of
necessary medical equipment for the
community. Companies involved in the
medical equipment sector are highly
affected by the ever-changing

Journal of Medical Marketing Vol. 9, 4, 309317

www.palgrave-journals.com/jmm/

Azizi et al

technologies; hence, their business

environment is quite turbulent and their
management needs to develop new tools,
new concepts, new organizations and new
ideas to meet the demand of market and
maintain competitiveness.1 Iran is
considered one of the fastest-growing
markets for medical equipment. Although
there are a number of local producers in
Iran, the majority of market share (valuewise) is in the hands of large and
internationally reputable brands of medical
equipment. In 2007, approximately 70 per
cent of Irans demand (quantity-wise) for
medical equipment was met by domestic
production, and 30 per cent by
importation; however value-wise the
importation was exceeding the local
production. The importation value of
medical equipment grew considerably
from 2006 to 2007 at an average rate of
25 per cent increase on US dollar basis,
while over the same period (20012007)
the average growth rate has been around
6.5 per cent. Total value of importation is
estimated at around US$3 billion between
2001 and 2007. This figure does not
include smuggling and illegal importation,
which is assumed to contribute a large
part of the market (see Table 1).
The major challenges for Iranian
medical equipment which foreign
companies need to consider are as
follows:
1. International sanction: The first obstacle is
international sanction and/or limitations
Table 1: Official importation of medical equipment
(20012007)

310

Year

Value
(US$ million)

Annual growth
(%)

2001
2002
2003
2004
2005
2006
2007

397.79
423.56
465.39
363.14
336.21
425.98
534.31

0.065
0.0985
0.22
0.074
0.267
0.25

2009 Palgrave Macmillan 1745-7904

to financial transactions and sales of

technology products to Iran. These
sanctions have resulted in difficulties
in Letter of credit (LC) establishment;
the limitation of gaining credit facilities
from producers and sometimes using
a third-party middle-man to effect the
transaction, hence increasing the time
required; price/expenses; and risk in
importation of medical equipment to
Iran.
2. Smuggling: Owing to time-consuming and
complicated bureaucracy for importation
procedures, and high custom duties,
a large amount of medical equipment is
imported via illegal channels. No accurate
data for the value of smuggled imports are
available, but it is roughly estimated to be
approximately $500 million. There are no
guarantees as to the quality of smuggled
equipment, and it may jeopardize the
health of consumers.
3. Lack of reliable databases: Statistical data
are vital for proper planning of demand
and managing the requirement of the
market for medical equipment. No
reliable data on the usage of medical
equipment and the sectors where it is
used are available.
4. Insufficient supervision of the market by
health authorities: There are numerous
companies active in the medical
equipment sector of Iran. The activities
of these companies need to be
monitored by health authorities on a
continuous basis, but at present this
supervision is far from satisfactory. In
2008, the Ministry of Health started
a program called plan for issuing ID
card for Iranian medical equipment
companies.
The large number of medical equipment
companies present in this market indicates
that this is a fragmented industry. The
overall operation medical equipment
market and smooth availability of the
products for the patients is not satisfactory,

Journal of Medical Marketing Vol. 9, 4, 309317

Effect of MKS and MC on business performance

and the performance of this sector needs

to be improved. A number of factors
affect the performance of companies,
including medical equipment companies,
the parameters of which we can call
marketing capability and marketing
strategy of the involved company. By
marketing capability we mean a
companys various marketing-related
abilities and capacities: the higher the
capability, the higher performance of the
subject company is assumed to be.
Marketing strategy which reflects a
companys relationship and interaction
with its business environment can also
affect corporate performance. In this
study, we have attempted to examine
and analyze the effects of these two
aforementioned factors on the (1) overall,
(2) financial and (3) non-financial
performance of Irans medical equipment
companies.

BACKGROUND
Marketing strategy and
performance relationship
A number of factors, including the
increased competition among local and
international companies, the emergence
of more demanding customers and great
technological advances in medical
equipment, have led to a complex market
in this sector. In this complex market
environment, the marketing strategy of
the company could be a competitive
advantage versus other companies
provided that they deliver services and
values that not only meet the customer
demands, but surpass them. Therefore, it
goes without saying that companies need
to investigate and apply a differentiated
strategy versus others to stand out in the
crowd. Six main corporate operations are
usually categorized as follows: Marketing,
R&D, Technology, Operations, HR and
Finance. The objective of marketing
activities is to increase organizational

2009 Palgrave Macmillan 1745-7904

performance through sales, physical

distribution, after-sale services and
development of new market opportunities.
With respect to the role of marketing
strategy in the organization, four items
can be highlighted:
1. Marketing strategy plays an essential role
in higher performance.
2. Rapid technological advances have
made the business environment of this
sector more complicated and difficult to
predict.
3. The main activities of the organization
are determined based on business
strategy, product life cycle and other
situational factors of the company/
product.
4. Business strategy and marketing strategy
should be aligned, so that they present a
common objective for the company.
To ensure an effective marketing strategy
and performance of the organization, the
concept of market orientation needs to
be highlighted. The four main aspects of
market orientation include (1) continuous
market research and data collection from
the environment, appropriate response to
customer requests, improved customer
satisfaction and appropriate counteractivities against completion operation.
Studies in hospitals in five US states
showed that higher market orientation
leads to higher organizational performance,
as it clearly illustrates a companys strategy
and increases the organizational
commitment and customer satisfaction.2
The studies on the effect of market
orientation on the performance of
pharmaceutical companies have also
shown that there is a positive relationship
among market orientation, innovation and
performance.3 Different industries enjoy
different opportunities, successful strategies
differ across industries, and strategic
choices depend on situations.4 Another
study revealed that in food and packaging

Journal of Medical Marketing Vol. 9, 4, 309317

311

Azizi et al

industries, marketing strategy had a more

significant effect on performance than
production strategy, while this did not
apply to plastics and polymer industries.5
Snow and Herbiniak found that there is
a strong positive relationship between
business-level strategies and performance.6
Sharma indicates that marketing strategy
plays an essential role in strengthening
corporate performance, and it has third
ranking after production and R&D.7

ANSOFFS MATRIX
To illustrate the growth strategies, Ansoff
has developed a matrix focusing on a
companys product(s) and its existing and
potential markets.8

Existing
market(s)
New market(s)

Existing
product(s)

New
product(s)

Market
penetration
Market
development

Product
development
Diversification

Considering the existing and new

product(s) as well as the existing and new
market(s), four general strategies can be
investigated:
Market Penetration: Companies can achieve
their development goals through increasing
the market share of their existing products.
This is the least risky strategy. In growing
markets, maintaining the market share, in
itself, is considered growth. In this case,
companies tend to reduce prices while they
increase sales, advertisement, distribution
channels and so on.
Market Development: Companies seek new
markets for their existing products. If the
company possesses a unique product(s), it
will try to approach a niche market
matching the product. This is more risky
than market penetration because it involves
entry into new unexplored markets.
Product Development: Companies develop
new products for their existing markets or

312

2009 Palgrave Macmillan 1745-7904

extend their existing product portfolio

with some modifications. Similar to
market development, this strategy is more
risky than market penetration.
Diversifica\tion: Companies initiate new
activities and operations that are irrelevant
to their existing markets and products.
This is the most risky strategy because it
involves both new markets and new
products. It is useful when high profit is
guaranteed by taking higher risk.
Nevertheless, some believe that
diversification reduces the risk through
creating a diversified and more extensive
portfolio of products.

Relationship between marketing

capability and performance
Marketing capability is an integrated
process designed to make use of corporate
knowledge, skills and resources. It enables
businesses to better meet their customers
needs through added value services to
their products. A companys marketing
capability refers to its ability to
differentiate its product(s) and service(s)
from those of its rivals, as well as creating
and maintaining a strong profitable brand.9
Many marketing scholars believe that
marketing capability should be considered
a part of successful marketing.10 The
capability-based theories indicate that
companies are a combination of resources
and capabilities,11,12 and that they should
continuously invest in a unique manner to
maintain and expand their marketing
capabilities.13 A company with high
marketing capability a pioneer in
identifying customers needs and
recognizing the factors affecting their
purchasing behaviors is able to put its
product(s) in the best position compared
to those of its rivals. A differentiation at
this level will provide the companies with
higher profit.14 In a survey on the effects
of the marketing process on corporate
performance, Morgan found that the

Journal of Medical Marketing Vol. 9, 4, 309317

Effect of MKS and MC on business performance

companies that pay proper attention to

their inputs in strategic marketing process
will achieve much higher performance.15
Market-based organizational learning is
a proper managerial tool for obtaining
competitive advantage in marketing
capability. Marketing capability
benchmarking has been recognized as the
root of competitive advantage.16
Marketing capability-based competitive
advantage theory asserts that companies
that target differentiated capabilities will
achieve considerable competitive
advantage.1719 Marketing capability will
be valuable only when it relates to high
performance. There are a number of
scales for measuring marketing capability.
Weerawardena identifies eight processes
for describing marketing capability:
customer service system; promotional
activities for higher market share; sales
force quality; superiority in distribution
and sales networks; allocation of required
resources to advertisement; marketing
research; ability in product differentiation;
and rapid introduction of new product(s).
He believes that marketing capability
plays a pivotal role in achieving
competitive advantage. In a survey on
1272 manufacturing companies in the
machinery and metal sector,
Weerawardena found that marketing
capability is a stimulus for obtaining
competitive advantage by which
companies can enhance their performance
considerably.20 Other studies identified
some other factors as measures for
evaluating the marketing capability. These
include pricing, product development,
distribution channel management,
marketing communications, sales, market
information management, marketing plan
and marketing implementation. In this
way, customer satisfaction, market
efficiency and current profitability are
measures for performance. The conceptual
model of this study which is based on
previous ones is presented in Figure 1,

2009 Palgrave Macmillan 1745-7904

Marketing capability
Performance
(Overall, financial,
non-financial)
Marketing strategy

Figure 1: The conceptual model.

in which marketing capability and strategy

affect the different aspects of performance.
In other words, aggressive marketing
strategy will lead to higher performance,
and higher marketing capability will result
in higher corporate performance.

METHODOLOGY
In order to collect the required data for
our study, a questionnaire was designed
containing 30 items in which 27 items
were assigned to four latent variables and
three items to demographics variables
(see Appendix). For investigation and
analysis of marketing strategy, a
questionnaire containing six statements
(one statement for defensive strategy, four
statements for four types of aggressive
strategy, and one for focus strategy) was
designed. The questionnaires were
submitted to 50 large, well-reputed
companies involved in Irans medical
equipment industry, and the investigation
team was constantly and closely in contact
with involved companies. Thirty-six
questionnaires out of 50 sent were
received , which is equal to a response
rate of 72 per cent. Three replies were
excluded because of non-reply to most
of the questions. The final analysis was
performed based on 33 questionnaires.
The Cronbachs  in the questionnaire
was equal to 0.80, which is an acceptable
range (see Table 2).

ANALYSIS AND DISCUSSIONS

The conceptual analysis of the data
collected (see Table 3) from the 33
companies showed that 42.4 per cent of
respondents were under 30 years of age,

Journal of Medical Marketing Vol. 9, 4, 309317

313

Azizi et al

Table 2: Questionnaire items

Variables

Number of
questions

Marketing
capability
Marketing strategy
Financial
performance
Non-financial
performance

10

Source

6
7

Weerawardena
(2003)20
Ansoff (1965)8
Vorhies (1998)10

Vorhies (1998)10

Table 3: Samples demographics

Variables

Frequency

Percentage

Valid
percentage

Age (years)
< 30
3140
4150
>50

14
10
6
3

42.4
30.3
18.2
9.1

42.4
30.3
18.2
9.1

Gender
Men
Women

28
5

84.8
15.2

84.8
15.2

12.1
54.5
33.3

12.1
54.5
33.3

Work experience (years)

48
4
912
18
>12
11

30 per cent were between 31 and 40, 18

per cent were between 41 and 50, and
the remainder were above 50. This
indicates that most of the respondents
tended to be young and middle-aged. By
gender, approximately 85 per cent of
respondents were men, which indicates
that much fewer women are employed in
the managerial/supervision positions of the
concerned companies. Considering the
date of establishment of the studied
companies, approximately 55 per cent of
the sample companies had experience
of 912 years of operation, and 33 per
cent experience of above 12 years.
The following reputable Iranian medical
companies participated in this research:
Tajhizat Pezeshki Pishrafteh co. (GE),
Electro Pezeshk Afzar co. (Philips),
Fanavari Azmayeshgahi co. (Siemens),
Tajhizat Pezeshki pars co. (Toshiba),
B.N.M co. (Hitachi), and Shima Parto co.
(Shimatzo).

314

2009 Palgrave Macmillan 1745-7904

The results of the correlation analysis

(see Table 4) indicate that marketing
strategy has a positive relationship with
non-financial performance (r = 0.509,
P < 0.001). In other words, more
aggressive/effective marketing strategy will
lead to higher non-financial performance.
Marketing capability has positive
relationships with overall performance
(r = 0.727, P < 0.001), non-financial
performance (r = 0.564, P < 0.001) and
financial performance (r = 0.590,
P < 0.001). Higher marketing capability
leads to better marketing techniques in the
company, and hence results in better
performance. The overall performance has
positive relationships with financial
performance (r = 0.862, P < 0.001) and
non-financial performance (r = 0.702,
P < 0.001). No relationship was found
between financial and non-financial
performance. The positive relationship
witnessed in our study indicates that the
more aggressive the marketing strategy
deployed by the company, the greater the
result of non-financial performance.
Corporate performance has been
broken down into overall, financial and
non-financial, to identify the effects of
marketing strategy and capability on
corporate performance, and multiple
regression analysis has been applied, as
presented in Table 5.
Using the overall performance model,
marketing strategy has no effect on overall
performance, but marketing capability
shows a high positive effect ( = 0.727,
P < 0.0001). In the non-financial
performance model, both marketing
strategy and marketing capability have
positive effects on non-financial
performance ( = 0.412, P < 0.01 and
 = 0.481, P < 0.01, respectively). In the
financial performance model, marketing
strategy has a negative effect on financial
performance ( = 0.293, P < 0.01),
whereas marketing capability has a positive
effect ( = 0.649, P < 0.001). In this

Journal of Medical Marketing Vol. 9, 4, 309317

Effect of MKS and MC on business performance

Table 4: Means, standard deviations, and correlation of variables

MKS
MC
PE
NFP
FP

Means

SD

MKS

MC

PE

NFP

FP

2.69
3.74
3.60
4.2
3.27

0.683
0.482
0.377
0.484
0.390

0.202
1

0.147
0.727*
1

0.509*
0.564*
0.702*
1

0.162
0.590*
0.862*
0.245
1

*P < 0.01.
Abbreviations: FP Financial performance; MC Marketing capability; MKS Marketing strategy; NFP Non-financial performance;
PE Overall performance.

Table 5: Regressions tests results



Significance

R2

FANOVA

MKS
MC

0.001
0.727

0.005
5.680

0.996
0.000

0.529

16.824**

NFP

MKS
MC

0.412*
0.481*

3.067
3.580

0.005
0.001

0.481

13.894**

FP

MKS
MC

0.293*
0.649**

2.081
4.612

0.046
0.000

0.430

11.324**

Dependent
variables

Independent
variables

PE

*P < 0.01; **P < 0.001.

Abbreviations: FP Financial performance; MC Marketing capability; MKS Marketing strategy; NFP Non-financial performance;
PE Overall performance.

model, we witness a negative effect of

marketing strategy on financial
performance, and this can be explained by
the fact that an aggressive marketing
strategy requires high investment on
marketing expenses (field force, promotion
and so on). In all three models, R2 was at
acceptable range.

CONCLUSION
There are limited studies on the marketing
aspects of the medical equipment industry
worldwide. The majority of companies in
this industry cannot disclose their data
owing to business confidentiality reasons.
The results show that both marketing
strategy and marketing capability have
relatively high positive effects on the nonfinancial performance of the sample
companies. In the overall performance
model, only the marketing capability
shows an effective impact. In the financial
performance model, marketing strategy
and marketing capability have negative

2009 Palgrave Macmillan 1745-7904

and positive effects, respectively. Iranian

medical companies usually make use of
physicians and engineers as field force for
their marketing and sales activities, and
they need to be trained for marketing and
sales skills. Many companies try to gain
more market share by aggressive
marketing strategies, but for this purpose
highly trained and professional marketing
staff are required, which means a
considerable financial investment for the
company.
The results show that the higher
management of the medical companies
should pay more attention to analyzing
their marketing capability and its
improvement. High marketing capability
will encompass better use of marketing
tools and the application of creative and
novel marketing plans and ideas.
Recruitment of marketing staff from
graduates of related disciplines such as
marketing, business, human resources,
law and so on will increase the companys

Journal of Medical Marketing Vol. 9, 4, 309317

315

Azizi et al

marketing capability; otherwise the

company will need to equip its field force
of physicians and engineers with
continuous and effective training sessions
for their careers. Foreign partners should
equip their agents in Iran with effective
marketing and selling skills and tactics,
and provide their contact marketing
advice for Iranian distributors. They also
should adopt and fine-tune proper
marketing strategies by analyzing their
customers and Iran markets. Marketing
strategy is the essential function of a
company via marketing capability,
financial resource, top management
support, visionary leaders and so on,
competitors strategies and tactics, and
customer needs and wants. As a result,
this study shows that the more aggressive
the marketing strategy, the lower the
financial performance. This result indicates
that aggressive strategy does not result in
more financial performance as a rule. It
depends on other factors such as
competitor factors, customer factors and
company factors. The geographical
diversity of companies and lack of
financial databases for extracting the
financial performance were among the
limitations of this study. Another
limitation of this study is the small sample
investigated, which has led to
generalization of results. We advise more
research on company performance from
the marketing strategy and capability point
of view on a larger scale. Studying the
moderator effect of environment, the
financial strength of the company, the
relationship between the company and
health authorities, and the image of the
company is also suggested.

REFERENCES

2009 Palgrave Macmillan 1745-7904

5
6

8
9
10

11

12

13

14

15

16

17

18
19

1 Bettis, R.A. and Hitt, M.A. (1995) The new

competitive landscape. Strategic Management Journal 16:
719.
2 Lonial, S.C. and Raju, P.S. (2001) The impact of
environmental uncertainty on the market orientation,

316

20

performance relationship: A study of the hospital

industry? Journal of Economic and Social Research
3: 527.
Reinares Lara, P. and Gutierrez de Mesa, E. (2006)
Market orientation: Is it accepted as a 21 century
marketing strategy in the pharmaceutical industry?
An example: Spain. Journal of Medical Marketing 6:
260267.
Kohli, A.K. and Jaworski, B.J. (1990) Market
orientation: The construct, research proposition and
managerial implications. Journal of Management
54: 118.
Lawrence, P. and Lorsch, J. (1967) Organization and
Environment. Boston, MA: Harvard Business School.
Snow, C.C. and Herbiniak, D.C. (1980) Strategy
distinctive competence and organizational
performance. Administrative Science Quarterly 25:
317336.
Sharma, B. (2004) Marketing strategy, contextual
factors and performance, an investigation of their
relationship. Marketing Intelligence and Planning 22:
128143.
Ansoff, I.H. (1965) Corporate Strategy. London:
Penguin.
Kotler, P. (2002) Marketing Management, 11th edn.
New York: Pearson.
Vorhies, D.W. (1998) An investigation of the factors
leading to the development of marketing capabilities
and organizational effectiveness. Journal of Strategic
Marketing 6: 323.
Barney, J. (1991) Firm resources and sustained
competitive advantage. Journal of Management 17:
99120.
Peteraf, M.A. (1993) The cornerstone of competitive
advantage: A resource-base view. Strategic Management
Journal 1: 179191.
Mahoney, J.T. (1995) The management of resources
and resources of management. Journal of Business
Research 33: 91101.
Jaworski, J.B. and Kohli, A.K. (1993) Market
orientation, antecedent & consequence. Journal of
Marketing 57: 5371.
Morgan, R. (2004) Market-based organizational
learning-theoretical reflections and conceptual insights.
Journal of Marketing Management 20(1/2): 67103.
Vorhies, D.W. and Morgan, N.A. (2005)
Benchmarking marketing capabilities for sustainable
competitive advantage. Journal of Marketing 69:
8094.
Grant, R.M. (1991) Analyzing Resources and
Capabilities. Cambridge, MA: Basil Blackwell,
pp. 93122.
Hamel, G. and Prahalad, C.K. (1989) Strategic Intent
Harvard Business Review 67: 6376.
Hayes, R.H., Pisano, P. and Upton, D.M. (1996)
Strategic Operation: Competing through Capabilities.
New York: Free Press.
Weerawardena, J. (2003) The role of marketing
capability in innovation-based competitive strategy.
Journal of Strategic Marketing 11: 1535.

Journal of Medical Marketing Vol. 9, 4, 309317

Effect of MKS and MC on business performance

APPENDIX
Questionnaire items
Marketing Capability:
Quality of customer service
Effectiveness of promotional activities
(for example advertising) in gaining
market share/sales growth
Quality of salespersons
Strength of distribution networks
Advertising expenditure as percentage of
sales
Firms market research efforts
Ability to differentiate products
Speed of new product introduction
The extent of marketing activities
The extent of firms marketing
capabilities enabling it to compete
successfully
Marketing Strategy (please mark only one
option):
Our company tries to retain its current
market share (defensive marketing
strategy)
Our company tries to increase its sales
volume via increasing sales to current
customers (aggressive marketing strategy)
Our company tries to increase its sales
volume via selling new products to

2009 Palgrave Macmillan 1745-7904

current customers (aggressive marketing

strategy)
Our company tries to increase its sales
volume via selling current products to
new customers (aggressive marketing
strategy)
Our company tries to increase its sales
volume via selling new products to new
customers (aggressive marketing strategy)
Our company tries to concentrate on
profitable segments and give up other
segments (focus marketing strategy)
Financial Performance:
High market share compared to our
competitor
Increasing profit
Increasing sales volume to current
customers
Profitability of our standard business units
High return on investment
High profit:sale ratio
Achieving financial objectives
Non-financial Performance:

Our customers are satisfied

Our customers receive value
Our customers receive what they want
My company has the ability to absorb
new customers

Journal of Medical Marketing Vol. 9, 4, 309317

317

Copyright of Journal of Medical Marketing is the property of Palgrave Macmillan Ltd. and its content may not
be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written
permission. However, users may print, download, or email articles for individual use.