Journal of Small Business Management 2005 43(2), pp.

105–118

The Effect of a Market Orientation on Business

Performance: A Study of Small-Sized Service
Retailers Using MARKOR Scale
by Ali Kara, John E. Spillan, and Oscar W. DeShields, Jr.

Conventional marketing wisdom holds that a market orientation provides a

company with a better understanding of its customers, competitors, and environ-
ment, which subsequently leads to superior firm performance. While researchers have
explored the relationship between market orientation and business performance in
different organizations, such studies in small-sized service retailers are scarce. This
study investigates potential influences of market orientation on small-sized service
retailer performance. Data for this study were collected through personal interviews,
and Kohli, Jaworski, and Kumar’s market orientation scale was used to specify the
dimensions of a market-oriented organization. Results indicated that Kohli, Jaworski,
and Kumar’s market orientation scale provided a good measure of market orienta-
tion in this setting. Also, the results of analyses indicated a significant link between
market orientation and small-sized service retailer performance. The managerial
implications are discussed.

Introduction academic and practitioner interest in the

For over four decades, market-
oriented corporate strategy has been
recognized as a pillar of superior com-
pany performance by both academics
and practitioners. Market orientation in
both manufacturing and service indus-
tries has attracted a significant amount of
current marketing literature (Han, Kim,
and Srivastava 1998; Day 1994a; Kohli
and Jaworski 1990). Implementation of
the marketing concept characterizes a
firm’s intentions to deliver superior value
to its customers (by satisfying their wants
and needs) on a continuous basis (Slater

Dr. Kara is associate professor of marketing at the Pennsylvania State University–York

campus. His research interests include market segmentation and marketing strategy.
Dr. Spillan is assistant professor of business administration at the Pennsylvania State
University–DuBois campus. His research interests include international business and
marketing.
Dr. DeShields is professor of marketing at California State University, Northridge. His
research interests include spokesperson creditability, accent, and consumer identity.

KARA, SPILLAN, AND DESHIELDS 105

and Narver 1994). Market orientation
refers to the organization-wide genera-
tion of market intelligence through
decision support systems, marketing
information systems, marketing research
efforts, dissemination of the intelligence
across company departments, and organ-
ization-wide responsiveness to the
changes taking place in the environment
(Kohli and Jaworski 1990).
There is a large body of literature
dedicated to studying whether marketing
orientation results in superior organiza-
tional performance. Some studies have
verified a strong link between marketing
orientation and performance (Matsuno,
Mentzer, and Özsomer 2002; Greenley
1995; Ghosh et al. 1994; Speed and Smith
1993), while other studies did not
support a direct positive relationship
between performance and market orien-
tation (Han, Kim, and Srivastava 1998;
Jaworski and Kohli 1993).
Although there have been several
studies investigating the market orienta-
tion–performance relationship in small
businesses (Pelham 2000, 1997), most of
these studies have used small manu-
facturing firms as opposed to small
retailers. Pelham (1999, 1997)’s study
identified several mediating variables,
such as firm effectiveness, that influ-
enced the relationship between market
orientation and performance in small
industrial firms. However, these results
are not generalizable to small-sized
service retailers as the latter differ from
industrial firms in terms of having
greater firm-wide contact with the cus-
tomers, competition, and profit margins,
among others. Therefore, because of the
nature of service retailers, a more cus-
tomer-oriented approach might be
required of them for a better perform-
ance. The objective of this study there-
fore is to investigate the role of market
orientation on small-sized service retailer
performance. The current study’s empha-
sis is designed to provide small-sized
service retailer managers more under-
106 JOURNAL OF SMALL BUSINESS MANAGEMENT
standable guides to specific market-ori-
ented activities.
Measuring Market
Orientation
Marketing is a management function
typically responsible for understanding
the consumer and keeping the rest of the
organization informed about the cus-
tomer so that superior value is delivered
to the customer. Companies must make
long-term commitments to maintain the
relationship through quality, service, and
innovation. Consequently, market orien-
tation has been assumed as a prerequi-
site to success and profitability for most
firms. Although there are some discrep-
ancy in the use of the terms “market”
versus “marketing” orientation, it gener-
ally consists of (1) customer orientation
and targeting; (2) profit orientation; and
(3) integrated marketing organization,
that is, integration of effort by all areas
of the organization to satisfy corporate
goals by satisfying customer needs and
wants (Perreault and McCarthy 2002).
Market orientation has been one of
the most important concepts studied in
the discipline. A substantial number of
studies have been published on this topic
(see Wrenn 1997 for a detailed listing).
Among several available scales for meas-
uring market orientation (Wrenn 1997;
Wrenn, LaTour, and Calder 1994; Desh-
pande 1993; Churchill 1979), perhaps
two closely related frameworks have
been the foundation for much of market
orientation research. The first framework
is offered by Narver and Slater (1990).
After an extensive review of literature on
sustainable competitive advantage and
marketing strategy, Narver and Slater
(1990) operationalized market orienta-
tion as consisting of three behavioral
dimensions (customer orientation, com-
petitor orientation, and interfunctional
coordination) and two decision-making
criteria (long-term focus and profit
focus). The second framework is sug-
gested by Kohli and Jaworski (1990).
Having reviewed the literature and con-
ducted interviews with the managers,
Kohli and Jaworski (1990) offered a
process-driven model that considers the
stages of generating, disseminating, and
responding to market intelligence as the
essence of market orientation (Noble,
Sinha, and Kumar 2002). Briefly stated,
Kohli and Jaworski (1990) defined
market orientation, as “organization-wide
generation of market intelligence per-
taining to current and future customer
needs, dissemination of the intelligence
across departments, and organization-
wide responsiveness to this intelligence.”
Market intelligence not only pertains to
monitoring customers’ needs and prefer-
ences, but it also includes an analysis of
how consumers might be affected by
factors such as government regulation,
technology, competitors, and other envi-
ronmental forces. Environmental scan-
ning activities are subsumed under
market intelligence generation. Hence,
intelligence dissemination pertains to the
communication and transfer of intelli-
gence information to all departments and
individuals within the organization
through both formal and informal chan-
nels. Finally, responsiveness is the action
that is taken in response to the intelli-
gence that is generated and dissemi-
nated. Unless an organization responds
to information, nothing is accomplished.
These frameworks (Kohli and
Jaworski 1990; Narver and Slater 1990)
have several commonalities with respect
to customers, functional integration, and
market opportunities. We chose to oper-
ationalize Kohli and Jaworski (1990)’s
framework in this study because it has
been less frequently studied in small-
business studies, and we believe that it
is better suited to our data collection.
Market Orientation
and Performance
Many empirical findings of the market
orientation research have produced
complex and mixed results with respect
KARA, SPILLAN, AND DESHIELDS
to the relationship between market ori-
entation and business performance (Voss
and Voss 2000). The previous research
that predicted a positive relationship
between market orientation and per-
formance was using the assumption that
a market orientation provides a firm with
a better understanding of its environ-
ment and customers. The significance
of including market orientation in an
integrated model of determinants of
performance is highlighted by several
research findings, which indicate that
there is an influence of market orienta-
tion on customer orientation, organiza-
tional commitment, sales growth, and
financial performance and profitability
(Pelham and Wilson 1996; Slater and
Narver 1994; Siguaw, Brown, and Widing
1994; Jaworski and Kohli 1993; Narver
and Slater 1990). Some empirical studies
found a positive relationship between
market orientation and managers’ per-
ceptions of overall firm performance
( Jaworski and Kohli 1993), managers’
perceptions and financial performance
(Pelham and Wilson 1996; Slater and
Narver 1994), and managers’ percep-
tions and new product performance
(Atuahene-Gima 1996, 1995; Pelham and
Wilson 1996; Slater and Narver 1994). At
the same time, several studies did not
support a direct positive relationship
between performance and market orien-
tation (Han, Kim, and Srivastava 1998;
Jaworski and Kohli 1993). A possible
explanation for the lack of clear rela-
tionship with market orientation is that
it is a more complex relationship than
those tested for in previous studies
(Pelham 1997).
To summarize, while there is no
reason to believe that the strength of the
relationship between performance and
market orientation may vary depending
on industry characteristics, customer
characteristics, or the type of the per-
formance measure used, the literature
generally supports the proposition that
market-driven and innovative firms will
107
outperform their competitors (Gatignon
and Xuereb 1997; Day 1994a; Slater and
Narver 1994; Jaworski and Kohli 1993;
Narver and Slater 1990).
Research Hypotheses
In this study, we attempt to test the
links among three dimensions of market
orientation (For a summary of empirical
studies that utilized the market orienta-
tion (MARKOR) scale, see Perin and
Sampaio 2002), as well as the link
between market orientation and per-
formance. Figure 1 shows the model
used in the study.
The diagram depicts that market ori-
entation is linked to intelligence genera-
tion, intelligence dissemination, and
responsiveness. Also, the model shows
the link between market orientation and
performance. The first three hypotheses
test the relationship between market
orientation and intelligence generation,
intelligence dissemination, and respon-
siveness. The fourth hypothesis tests the
relationship between market orientation
and performance.
Figure 1
Market Orientation (MARKOR) Model
Intelligence
Generation
H1
Intelligence H2
Market Orientation
Dissemination
H3
Responsiveness
108 JOURNAL OF SMALL BUSINESS MANAGEMENT
Intelligence Generation
Market orientation is a corporate
culture that differentiates one business
from another in its tendency to always
give superior value to its customers
(Slater and Narver 1994). A business
with superb market information collec-
tion and processing capabilities can
predict more precisely and make rapid
changes in the market place and know
what superior value means to cus-
tomers (Pelham 1997). According to
Dyer, Shur, and Oh (1987), under-
standing the customer needs is critical.
Failure to ascertain current and future
customer needs will result in creating
products and services that do not satisfy
customers. Therefore, it can be expected
that:
H1: For small-sized service retailers,
intelligence generation (that is, the
collection and assessment customer
needs/preferences and forces that
influence the development of those
needs) will be a positive indicator of
market orientation.
Profit Goal Achievement
Sales Goal Achievement
H4
Performance
ROI Achievement
Intelligence Dissemination
In order for market orientation to
operate correctly, information developed
in the intelligence generation stage must
be shared with other functional units of
the business. Superior performance from
market orientation can only occur when
there is appropriate interfunctional coor-
dination. Information exchange is crucial
to achieving this goal (Han, Kim, and Sri-
vastava 1998). Successful dissemination
or sharing of information provides mar-
keters the opportunity to ask questions
and amplify or modify interpretations to
provide new insights (Quinn 1992;
Glazer 1991). Accomplishing this task
requires businesses to provide forums
for information exchange and discussion.
This may include information technol-
ogy, task forces, face-to-face meetings,
integrator roles, or liaison positions
(Slater and Narver 1995). Zaltman,
Duncan, and Holbek (1973) assert that
openness in communication across busi-
ness functions assists in responding to
customers needs. Information dissemina-
tion is critical to the success of the
market orientation process. Thus, we
expect the information dissemination
process to play a major role in the busi-
ness’s market orientation development
process. As such, we posit that:
H2: For small-sized service retailers,
intelligence dissemination (that is,
process and extent of market infor-
mation exchange within a given
organization) will be a positive indi-
cator of market orientation.
Responsiveness
Superior performance can only be
achieved by responding continuously to
the customer’s ever changing needs.
Thus, once the marketers have gathered
the market intelligence, processed it by
sharing it with the appropriate inter-
functional groups, then it is time to
develop action plans. Day (1994b) argues
KARA, SPILLAN, AND DESHIELDS
that a market orientation culture sup-
ports the need to gather the market intel-
ligence and functionally coordinate
actions to gain a competitive advantage.
Kohli and Jaworski (1990) and Narver
and Slater (1990) emphasize that the
scale of a business’s implementation of a
market orientation strategy depends on
its desired level of organization-wide
concern and responsiveness to customer
needs and competitive action. As such,
we expect the market orientation organ-
ization to influence a business’s respon-
siveness to customer needs. Thus, we
propose the following hypothesis:
H3: For small-sized service retailers,
responsiveness (that is, the action
taken in response to intelligence that
is generated and disseminated) will
be a positive indicator of market
orientation.
Marketing scholars, over the last three
decades, have stated that those busi-
nesses that develop better market orien-
tation practices will improve its business
performance (Narver and Slater 1990;
Kotler and Andreason 1987; Levitt 1960).
Pelham and Wilson (1996) assert that
small businesses can use market orienta-
tion as an especially effective strategy,
primarily because of their limited
resources. As a small business may have
difficulties pursuing other sources of
potential business profitability, such as
research and development or low-cost
leadership, market orientation becomes
an important strategic alternative for
them. Hence, we hypothesize that:
H4: Market orientation in small-sized
service retailers is positively associ-
ated with performance.
Methodology
Questionnaire
Marketing orientation scale items used
in this study were adopted from Kohli,
Jaworski, and Kumar (1993). The survey
109
instrument consisted of three sections.
Section 1 asked the respondents to
answer 32 marketing-oriented questions
to measure their organization’s market-
ing orientation (see Table 1 for scale
items). These questions were structured
in a Likert scale model (1 to 5) with
“strongly disagree,” “disagree,” “neither
agree nor disagree,” “agree,” and
“strongly agree” as the choices.
As suggested in the Kohli, Jaworski,
and Kumar (1993) study, this section of

Table 1
Market Orientation (MARKOR) Questions
Intelligence Generation
1. In our business unit, we meet with customers at least once a year to find out
what products or services they will need in the future.
2. Individuals from our service department interact directly with customers to
learn how to serve their needs better.
3. In our business unit, we do a lot of in-house market research.
4. We are slow to detect changes in our customers’ product/service preferences
(R).a
5. We survey end-users at least once a year to assess the quality of our product
and service offerings.
6. We often share our survey results with those who can influence our end-users’
purchase such as retailers and distributors.
7. We collect industry information by informal means (for example, lunch with
industry friends, talk with trade partners).
8. In our business unit, market intelligence on our competitors is generated
independently by several departments of our firm.
9. We are slow to detect fundamental shifts and trends in our industry such as
competition, technology, and regulation (R).
10. We periodically review the likely effect of changes in our business
environment, such as regulations and technology, on customers.
Intelligence Dissemination
11. A lot of informal talks in this business unit concerns our competitors’ tactics
or strategies.
12. We have interdepartmental meetings at least once a quarter to discuss market
trends and developments.
13. Marketing personnel in our business unit spend time discussing customers’
future needs with other functional departments.
14. Our business unit periodically circulates documents (for example, reports and
newsletters) that provide information on our customers.
15. When something important happens to our major customer market, the whole
business unit knows about it within a short period.
16. Data on customer satisfaction are disseminated at all levels in this business
unit on a regular basis.
17. There is minimal communication between marketing and manufacturing
departments concerning market developments (R).
18. When one department finds out something important about competitors, it is
slow to alert other departments (R).

110 JOURNAL OF SMALL BUSINESS MANAGEMENT

 Table 1
Continued

Responsiveness
19. It takes us forever to decide how to respond to our competitors’ price
changes (R).
20. In our business unit, principles of market segmentation drive new product
development efforts.
21. For one reason or another we tend to ignore changes in our customers’
product/service needs (R).
22. We periodically review our product development efforts to ensure that they
are in line with what customers want.
23. Our business plans are driven more by technological advances than by market
research (R).
24. Several departments get together periodically to plan a response to changes
taking place in our business environment.
25. The product/service lines we market depend more on internal politics than
real market needs (R).
26. If a major competitor were to lunch an intensive campaign targeted at our
customers, we would implement a response immediately.
27. The activities of the different departments in this business unit are well
coordinated.
28. Customer complaints fall on deaf ears in this business unit (R).
29. Even if we came up with a great marketing plan, we probably would not be
able to implement it in a timely fashion (R).
30. We are quick to respond to significant changes in our competitors’ pricing
structures.
31. When we find out that customers are unhappy with quality of our service, we
take corrective action immediately.
32. When we find that customers would like us to modify a product or service,
the departments involved make concerted efforts to do so.

a
(R) denotes reverse-coded item.

the questionnaire also included a valida-
tion scale where respondents were asked
to distribute 100 points between two
business units that resembled their organ-
ization. Thus, if a small-sized service
retailer was primarily like Organization A
(market oriented) and only remotely like
Organization B (non-market oriented),
the respondent might allocate more
points to Organization A and fewer points
to Organization B. Similar to Kohli and
Jaworski (1990), section 2 of the ques-
tionnaire included questions about per-
formance such as current and past three
year sales in dollars, revenue growth, and
market share, and return on investment
(ROI) in the last three years that managers
evaluated the performance of their organ-
izations. Section 3 included demographic
information.
Data Collection
The study participants were small-
and medium size-business owners and
managers from 153 enterprises located in
three major states located in the U.S.A.

KARA, SPILLAN, AND DESHIELDS 111

(Maryland, New York, and Pennsylvania).
All of the participants were recruited
randomly on the basis of convenience
and participated voluntarily. Data were
collected through personal interviews
by contacting each organization and
seeking permission to collect data. The
survey process consisted of two or more
visits to the business. In almost all cases,
the first visit consisted of leaving the
survey with the owner/manager for them
to complete. In the second or follow-up
visit, questions were answered and the
completed survey was collected
(Imperia, O’Guinn, and MacAdams 1985;
Stover and Stone 1974). Generally, data
were collected during business opera-
tions; however, sometimes it was neces-
sary to collect the completed surveys
while the business was closed or at a
convenient time that met the business
owner/manager’s schedule.
Analysis and Results
Respondent and Organizational
Profiles
Table 2 provides more information
about the respondents’ demographic
characteristics as well as their organiza-
tional characteristics.
The average age of the respondents
was 45.3 years. The average number of
years of managerial experience was 22.4
years, and the average number of years
employed in the current job was 14 years.
Cronbach Alphas
Although not as strong as one might
prefer, the Cronbach alpha reliabilities
for the Kohli, Jaworski, and Kumar
(1993) scale for small-sized service retail-
ers were adequate for this sample: ten-
item intelligence generation scale, a =
0.69; eight-item intelligence dissemina-
tion scale, a = 0.74; and 13-item respon-
siveness, a = 0.83.
Structural Equation Analysis
Because of the size of the sample and
number of variables in the model, a path
112 JOURNAL OF SMALL BUSINESS MANAGEMENT
diagram based on observable means of
the three market orientation dimensions
was used in the analyses of data. The
results of the structural equation analy-
sis indicate that the overall fit of the
model was good (c2 = 11.19, d.f. = 8.0;
p > 0.19, RMSEA = 0.05).
Tests of Hypotheses
for Market
Orientation Model
Hypothesis 1 predicts that intelligence
generation will be a positive indicator of
market orientation. As Figure 2 illus-
trates, the lambda coefficient for the rela-
tionship between intelligence generation
and market orientation is positive and
significant (lx11 = 0.34, t = 6.57, p <
0.001), supporting Hypothesis 1.
Hypothesis 2 predicts that intelligence
dissemination will be a positive indicator
of market orientation and as illustrated
in Figure 2, the lambda coefficient for
the relationship between intelligence
dissemination and market orientation is
positive and significant (lx12 = 0.61, t =
10.69, p < 0.001), supporting Hypothesis
2.
Hypothesis 3 predicts that respon-
siveness will be a positive indicator of
market orientation. As Figure 2 illus-
trates, the lambda coefficient for the rela-
tionship between responsiveness and
market orientation is positive and signif-
icant (lx13 = 0.33, t = 8.08, p < 0.001), sup-
porting Hypothesis 3.
Hypothesis 4 predicts that perform-
ance in small-sized service retailers will
be positively associated with market ori-
entation (g11 = 0.36, t = 8.08, p < 0.01),
supporting Hypothesis 4.
Discussion and
Conclusions
The results of this study demonstrate
that the overall market orientation scale
is a valid and reliable measure of market
orientation in small-sized service retail-
ers. When presented with the scale,
 Table 2
Characteristics of Small-Sized Service Retailers in
the Sample
Characteristics Frequency Percentage

Retail Area
Trade 54 35.3
Financial Services 30 19.6
Arts and Crafts 16 10.5
Repair and Maintenance 2 1.3
Publishing 31 20.3
Small Parts 4 2.6
Raw Materials 8 5.2
Not Reported 8 5.2
Total Number of Employees
Under 10 38 24.8
10–49 55 35.9
50–99 17 11.1
100–499 23 15.0
500–999 2 1.3
1000+ 13 8.5
Missing 5 3.3
Gender of the Manager
Male 117 765
Female 32 20.9
Missing 4 2.6
Education Level of the Manager
High School Degree or Less 21 13.7
Some College 37 24.2
College Graduate (Bachelor’s Degree) 6 3.9
Graduate Degree (Master’s Degree or Higher) 69 45.1
Missing 20 13.1
Income of the Manager
Less than $20,000 6 3.9
$20,001–$40,000 26 17.0
$40,001–$50,000 12 7.8
$50,001–$60,000 13 8.5
$60,001–$70,000 8 5.2
$70,001–$80,000 5 3.3
$80,001–$90,000 8 5.2
$90,001–$100,000 8 5.2
More than $100,000 20 13.1
Missing 47 30.7

KARA, SPILLAN, AND DESHIELDS 113

 Figure 2
Structural Equation Model Analysis
Intelligence
Generation
0.34*
0.61
Intelligence
Dissemination
0.33*
Responsiveness
* p < 0.01
+ fixed to satisfy the identification condition
executives had little difficulty relating to
its items. Also, the discussions during the
in-depth interview phase of the research
suggest that the constructs maintained its
face validity. The reliability coefficients
for the market orientation constructs
indicate that the scale was sufficient
based on criteria used in the literature
(Nunnally 1967).
The empirical evidence demonstrates
the universal applicability of MARKOR
scale in different settings. The analyses
conducted in this study indicate that
intelligence generation, intelligence dis-
semination, and responsiveness were the
three dimensions that influenced the
market orientation of small-sized service
retailers, which in turn, impacts the orga-
nization’s performance measured by mul-
tiple financial variables. Therefore, these
factors are generally considered critical
to the success of small-sized service
retailers. Their presence in these organi-
zations may suggest that small-sized
114 JOURNAL OF SMALL BUSINESS MANAGEMENT
Profit Goal Achievement
Sales Goal Achievement
0.94+
0.80*
0.36*
Market Orientation Performance
0.83*
ROI Achievement
service retailer managers recognize the
need to evaluate their service delivery
systems to determine if the services pro-
vided are actually meeting the needs of
the customers. If managers identify prob-
lems that are obstructing the proper
delivery of services, corrective action can
be initiated to solve the problem. Like-
wise, the analysis suggests that small-
sized service retailer managers do
disseminate information among their
staff. They keep informed about the
current environmental trends and devel-
opments so that they can meet the cus-
tomers’ future needs by collaborating
with other functional units within their
organizations. Both of these results are
significant in that they demonstrate that
formal marketing orientation potential
exists in most of the small-sized service
retailers.
Similarly, responsiveness and informa-
tion dissemination are critically linked to
any successful marketing program. If a
small-sized service retailer could formal-
ize these activities into a marketing ori-
entation program, the opportunities for
better services delivery to customers/
clients may be enhanced. Based on the
demographics of the sample, we believe
that a large proportion of the executives
that participated in the study had higher
levels of market orientation. This finding
is encouraging as there is a large body
of literature that supports the argument
that higher levels of market orientation
would lead to a better organizational
performance (Matsuno, Mentzer, and
Özsomer 2002; Greenley 1995; Ghosh
et al. 1994; Speed and Smith 1993).
Although the relationship between the
market orientation of small-sized service
retailers and different performance meas-
ures may be complex, this study provides
some empirical evidence to suggest that
better performance will be achieved by
the market-oriented organization. In
other words, small-sized service retailers,
which have higher market orientation,
will place more importance on deter-
mining and satisfying customer/client
needs. Small-sized service retailer man-
agers should emphasize customer/client
understanding and satisfaction as well as
competitor orientation because this will
enhance the level of market orientation,
which in turn may to lead to improved
performance.
Limitations and
Direction for
Future Research
A number of areas for future research
are suggested based on the above find-
ings. First, market orientation scales
could be usefully applied to a more
focused set of small-sized service retail-
ers to see if there are any discrepancies
regarding the level of market orientation
among the different service industries
that might have been disguised in this
study as it included a number of differ-
ent industries. Also, despite the fact that
KARA, SPILLAN, AND DESHIELDS
the dimensions used to measure the con-
struct of market orientation were derived
from existing studies, the measurement
of market orientation of small-sized
service retailers may not totally capture
the true picture. Moreover, it is possible
that using short-term financial measures
of performance may not completely
assess the effect of adopting market ori-
entation. The findings suggest that there
may be a need to improve the method
of measuring the long-term effects of
market orientation. Second, different
performance measures might be used
to investigate the relationship between
market orientation and organizational
performance. Client/customer satisfac-
tion could be used as a potential measure
to investigate this relationship. There-
fore, additional studies that focus on
identifying a more appropriate method
of measuring the long-term effects of
market orientation on customer/client
and employee satisfaction on small-sized
service retailers may be warranted.
For example, Narver and Slater (1990)
argued that market orientation consists
of three behavioral components: cus-
tomer orientation, competitor orienta-
tion, and interfunctional coordination.
Ruekert (1992) defines market orienta-
tion similarly but adds an explicit focus
on strategic planning by business units.
Shapiro (1988) argued that three charac-
teristics make a company market-driven:
(1) information on all-important buying
influences permeates every corporate
function; (2) strategic and tactical deci-
sions are made interfunctionally and
interdivisionally; and (3) divisions and
functions make well-coordinated deci-
sions and execute them with a sense of
commitment.
Although most scholars agree on the
importance of market orientation on
company performance, a number of
authors have voiced their concerns on
the appropriateness of market orienta-
tion in ensuring the success of a
company. For instance, Kaldor (1971)
115
suggested that the marketing concept is
an inadequate prescription of marketing
strategy because it ignores the creative
abilities of the firm. Kaldor further
argued that customers do not always
know what is needed. An extreme
example is the medical doctor–patient
relationship where the patient cannot
specify the treatment. It is the doctor
who assesses the specific needs of the
patient. Yet, it does not necessarily mean
that the doctor is not addressing the
needs and wants of his/her patient. In
fact, customers are not necessarily good
sources of information about their needs.
Also, the ability of the customers to ver-
balize what they need or want is limited
by their knowledge levels, and their sug-
gestions for modifications, should take
into account the limits of their knowl-
edge of technology. A marketing-ori-
ented firm may be preoccupied with line
extension and product proliferation. As
Tauber (1974) commented, “the meas-
urement of consumer need as well as of
purchase interest may be valid for
screening continuous innovations, but
consumers may not recognize or admit
they need products that are unusual.”
Hence, marketers sometimes need to
anticipate the future needs and wants of
consumers to be successful. Hirschman
(1983) hypothesized that the marketing
concept, as a normative framework, is
not applicable to two broad classes of
producers—artists and ideologists—
because of personal values and social
norms that characterize the production
process. When the roles of marketer and
producer are vested in the same person,
conflict may arise. In fact, their peers
may view commercial success in an aes-
thetic or ideological industry owing to
the adoption of market orientation neg-
atively because they have violated indus-
try norms. Also, consumer protection
groups often raise questions about
adhering to the market orientation phi-
losophy without considering the impact
on society as a whole and the environ-
116 JOURNAL OF SMALL BUSINESS MANAGEMENT
ment. The question is whether what is
good for specific customers are also
good for society as a whole (Tse 1998).
The small size of the sample made it
impossible to individualize indicators for
the study. When there are many items per
scale that are used as indicators, as in
this study, a large sample size is needed
to meet the sample size to variable ratio.
An insufficient sample size will cause the
solution to be instable, especially when
the items are distributed non-normally
and they are categorical or Likert scales
with small ranges. This means that the
estimates of factor loadings will have
large standard errors, and the model may
have difficulty reaching a solution. In
addition, it will also affect the recovery
of the true underlying structure. With a
small sample size and large indicators, it
will tend to prefer a smaller factor solu-
tion than what the “true” structure is.
Also, accuracy of the factor loadings will
be diminished, especially when the com-
munalities are small (that is, when they
do not have a high enough relationship
among items). As a result, composite
score for each of the indicator variable
had to be computed. However, we were
not able to collaborate and cross-validate
for the model. Thus, the model may
only hold for this sample, and the find-
ings should be generalized with this in
mind.
Notwithstanding these limitations, we
believe that these findings make a posi-
tive contribution to the small business lit-
erature and that small business managers
can benefit from the insights gained from
this investigation.
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