There are many aspects of the market that must be taken into consideration in order to look into the possible effects of these market aspects in an organization. An illustration of this is the external environment. The contemplation on the behavior of the external environment is considered a maxim by firms. The business press is replete with stories of firms that are successful because they are flexible in responding to the changes that buffet them. Marketing researchers coined the term "market orientation" to throw more light on the nexus between a firm and its environment, and their findings added empirical evidence to the truism mentioned above. However, much of the work on market orientation has examined this phenomenon in manufacturing contexts, and most studies seem to be to relate the magnitude of a firm's market orientation to performance. It is possible that firms, facing the repeatedly incompatible demands from stakeholders, may emphasize one aspect of market orientation more than others.
Influences such as economic restructuring, intensified competition, government regulations, and technological advances have resulted in heightened environmental turbulence and uncertainty for business firms. As noted by Covin and Slevin (1989), businesses are particularly susceptible to environmental influences due to limited resources and the devastating consequences of poor managerial decisions. According to the authors, an environmental dimension that serves as a threat to firm viability and performance is hostility. Hostile environments are characterized by precarious industry settings, intense competition, harsh, overwhelming business climates and the relative lack of exploitable opportunities. Non-hostile or benign environments provide a safe setting for business operations due to their overall level of munificence and richness in investment and marketing opportunities (p. 75).
Porter (1980) contends that the business environment differs by industry. Ireland et al. (1987) predict that firms in different industry segments will apply different strengths to gain competitive advantage. In a study investigating effective strategies in hostile environments for manufacturing firms, Covin and Slevin (1989) found that business practices and organizational responses to the environment differed. Other research has shown that environments can affect a firm's strategies (McArthur and Nystrom 1991; White and Hammermesh 1981) and a characteristic of the industry in which the firm competes is a factor in firm profitability (Hansen and Wernerfelt 1989).
Each organization hinge on connection with its environment to obtain the human, financial, technical and material resources it needs. In order to be able to strategically plan future measures, one has to be familiar with the factors in the external environment that are likely to affect your organization. To do this, it is important that you distinguish between two levels of environment: the macroenvironment and the microenvironment.
The latter pertains to the external stakeholders that are in direct contact with your organization: partners, funders or donors, regulators and all those who are after the same dollar. These players influence the actions of an organization. Some have a positive effect, either by creating demand or supplying resources, while others may have a negative impact by imposing constraints upon you or by being detrimental to your development. Unlike the macro-environment, the micro-environment can be influenced by your organization.
Moreover, this study will focus on the former. All the major sectors of activity in a society: politics, economics, sociopolitical aspects, technology and sociocultural life are referred to as the macroenvironment. For this study, we shall use the term external environment to pertain the principles involved in the macroenvironment. The study assumes that the macro-environment does not have a direct impact on the organization, nevertheless specific measures may manipulate the manner in which the organization changes in due course. The organization has little or no possibility of influencing these factors. Events or trends favorable or harmful to the organization may develop in the macro-environment. It is therefore necessary to know how to identify them, either to take advantage of them or to try to counter them. Similarly, the discussions on the external environment shall be applied in the discussion of the relationship of the world trade organization and China
The organization's external environmental context is thus made up of all the conditions and factors external to the organization that can positively or negatively affect the life, orientations, structures, development and, in a word, the future of your organization. The research on an organization's market orientation would also be helpful in the study. Research on market orientation has centered on understanding the construct and examining its relationship to performance. Two important studies sought to define and operationalize market orientation. Based on an extensive review of the literature on sustainable competitive advantage and marketing strategy, Narver and Slater (1990) operationalized market orientation as consisting of three dimensions: customer orientation, competitor orientation, and inter-functional coordination. Using both a literature review and field interviews of managers, Kohli and Jaworski (1990) operationalized the market orientation construct as consisting of three basic components: intelligence generation, intelligence dissemination, and responsiveness. Intelligence generation extends beyond collecting information about customer needs and preferences to include information about the entire task environment confronting an organization. To be market-oriented, an organization has to communicate, disseminate, and often "sell" market intelligence to relevant departments and individuals in the organization. (Kumar, Subramanian, & Yauger, 1998). And finally, the market-oriented organization responds to or acts on the market intelligence gathered and disseminated.
The two approaches to defining the market orientation construct are similar in their emphasis on behavioral issues (Greenley, 1995). Both groups of researchers identify the construct as consisting of collecting information about the task environment, disseminating the information to all organizational units, and readying the organization to act on the information to provide value to the customer. Both approaches are similar also in operationalizing the market orientation construct as a multi-dimensional concept, where each dimension measures a different feature of market orientation. Finally, both studies view an organization's magnitude of market orientation as the sum total of its relative emphasis on the different components of market orientation.
It is conceivable that a given magnitude of market orientation may be highly skewed to either customer emphasis or competitor emphasis. The literature on sustainable competitive advantage supports this notion. While some authors (Peters & Austin, 1985) suggest that customer emphasis is the most important component, others (Jaworski & Kohli, 1993) contend that a high magnitude of market orientation will yield superior performance only when swift managerial responses follow, regardless of the focus. However, little empirical evidence exists on the performance of organizations that may have market orientations of similar magnitude but different emphasis.
One could argue that given the pressures and the demands of various stakeholders, firms may be forced to choose one emphasis over the other as they attempt to become market oriented. Although there is often a compelling need for managers to focus on both efficiency and effectiveness to satisfy the demands of myriad stakeholders (Fottler, 1987), the pressure could vary considerably depending on the form of ownership.
The succeeding chapters of this study shall be discussing macroenvironment in general and how it is conducted while chapter three shall be converse about the world trade organization and the automobile industry of China Pest analysis and the Porter's Five Forces Model. The ensuing portions of the chapter shall provide an in-depth discussion of the two tools for analysis.
Chapter three on the other hand shall be divided into two parts. The first part shall discuss the profile of China China China China
Reference:
Covin, J. G., and D. P. Slevin (1989). "Strategic Management of Small Firms in Hostile and Benign Environments," Strategic Management Journal 10, 7587.
Fottler, M.D. (1987). Health care organizational performance: Present and future research. Journal of Management, 13(2): 367-391.
Greenley, G.E. (1995). Forms of market orientation in UK
Hansen, G. S., and B. Wernerfelt (1989). "Determinants of Firm Performance: The Relative Importance of Economic and Organizational Factors," Strategic Management Journal 10, 399-411.
Kohli, A.K., & Jaworski, B.J. (1990). Market orientation: The construct, research propositions, and managerial implications. Journal of Marketing, 54: 1-18.
Kumar, K., Subramaniam, R., & Yauger, C. (1998). Examining the market Orientation Performance Relationship: A Context Specific Study, Journal of Management, 24(2):201-233.
McArthur, A. W., and P. C. Nystrom (1991). "Environmental Dynamism, Complexity, and Munificence as Moderators of Strategy-Performance Relationships," Journal of Business Research 23, 349-361.
Narver, J.C., & Slater, S.F. (1990). The effect of a market orientation on business profitability. Journal of Marketing, 54: 20-35.
Peters, T.J., & Austin, N. (1986). A passion for excellence. London
Porter, M. E. (1980). Competitive? Strategy: Techniques for Analyzing Industries and Competitors. New York
White, R. E., and R. G. Hammermesh (1981). "Toward a Model of Business Unit Performance: An Integrative Approach," Academy of Management
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