Analyzing market knowledge competence

In this section the first proposition (presented in Chapter 2.6) of the study is ana-lyzed. The proposition stated: the interaction of organizational processes and the available market knowledge is positively related to the market knowledge compe-tence of an exporting firm. For this purpose, first of all from the available data of both case studies, the interaction between organizational processes and market knowledge is analyzed and then the implications for market knowledge compe-tence are identified.

Market and organizational knowledge: From the case study two types of know-ledge were identified as strategically contributing to market knowknow-ledge compe-tence of the firms: experiential knowledge and the knowledge of customers’

needs. On the premises that experiential and the organizational knowledge reside in the firm and as knowledge of customers’ needs, is acquired from the market, firms consider knowledge of customer’s needs as the market knowledge. How-ever, the knowledge development process was interesting though. Market knowl-edge could only be considered as the organizational knowlknowl-edge after it is internal-ized; and was considered as an experiential knowledge when firms were able to utilize it. Therefore, the organizational knowledge base development of an export-ing firm was a dynamic cyclic process where firms constantly were involved to convert market knowledge, acquired through direct or indirect experience, into organizational knowledge base of the firm.

Experiential knowledge, on the other hand, could be classified under the organ-izational knowledge base. According to the organorgan-izational learning and the knowledge-based view, experiential knowledge was the accumulated learning of the firm. Whenever firms started selling and marketing operations in a new coun-try, the previous experiential knowledge contributed as the initial input for

under-stating customers’ needs of new customers. Therefore knowledge of customers’

needs after being internalized and utilized in the firm acted as the experiential knowledge for next export expansion operation.

The market knowledge of both firms was based on previous experience. Previous experience of the company founders was found to be related to opportunity identi-fication at the beginning of export expansion. While firm A emphasized the pre-vious domestic experience of selling and marketing the product, firm B empha-sized the previous experience of doing business and experience in product devel-opemnt in the domestic energy market. This means that the firm developed knowledge of how the energy business had grown through certain growth phases and what product features were accordingly needed by the customers. The learn-ing from this experience was then stored in the firm with the personnel who actu-ally performed the activities. With time, as more and more learning from both firms’ experiences was acquired, an increase in their experience bases was achieved.

Firm B concluded that their previous experience of dealing with energy market customers and product development for an industry which was going through phases of establishment was a key asset. This was typical for a firm operating in a dynamic industry in which customers want to satisfy a variety of their own needs from one product. However, for both firms, irrespective of the fact that they pos-sessed experiential knowledge of product development, selling, marketing or do-ing business, it was the knowledge of the needs of customers which was lackdo-ing in export markets and which greatly influenced export expansion.

By comparing both of the firms’ nature of customer needs, it can be said that knowledge of customer needs was primarily influenced by the heterogeneity of the needs, meaning that customers from the same industry required a variety in functionality of the product which suited their own needs. The more functional aspects the customers required, the higher the production costs could be. How-ever, a greater knowledge and understanding of the needs of the customer created a vast potential for developing customer-friendly software with less costs. As the number of customers gained by the companies increased, their experiential know-ledge related to the market (needs of the customers), product development and ways of doing business increased. This increased knowledge in relation to a wider customer database could be positively related to export expansion. This is shown graphically in Figure 9.

Figure 9. The relationship between market knowledge and export expansion.

However, an increase in market knowledge also occurred when the interaction between organizational processes and market knowledge was followed by a stra-tegic approach; when the firm specifically focused on acquiring market-specific learning. For example, when company A relied on its existing experiential knowl-edge from previous markets and adopted a shot gun approach in a product launch in several states of North America simultaneously with the expectation of making profit, it failed to generate a sales cycle.

Interaction between organizational processes and market knowledge: Al-though resource and the knowledge- based views share the idea that interaction between organizational processes and knowledge is necessary for internalization of knowldge, the interaction between organizational processes and market knowl-edge was not fully understood by the managers of companies A and B, because of its process-based nature. They were further unable to explain clearly how the in-teraction process occurred. Moreover, this process was fast, and the export man-agers of the firms were more inclined to emphasize the outcome of the process rather than to describing its several phases. However, investigating the process-based nature of the interaction was not the focus of data collection. The export managers were clear enough to mention how structural changes in the organiza-tional processes were adapted by the firms though, when the aim of the compa-nies was to acquire certain market knowledge which was lacking.

Market knowledge

Export expansion New customers Previous customers

In order to accommodate market knowledge within the firms, some interactions were relatively easier to adapt by using existing structures/processes and already established rules, while for others new organizational processes were developed.

This was clearly evident when company A changed product development proce-dures and company B mentioned that structured ways of knowledge sharing must be developed due to an increased complexity in the export market.

Both firms greatly benefited from the flexibility of the process management in the early stages of export expansion, which helped them to learn and change proc-esses and routines. The behaviour of the top management team and key personnel working on product development and marketing contributed to the development of the learning capability of the companies.

In order to respond to the heterogeneity of customer needs, both firms attempted to secure market knowledge via partnerships. Partnerships and channel relation-ships were generally regarded by both firms as key means to access the knowl-edge of customer needs. Initial and personalised visits to potential customers were made to secure market knowledge on a first-hand basis. Further, personnel within sales partnerships and with foreign market experience were seen as potential re-sources for export expansion, as they possessed knowledge of the foreign market due to previous experiences. Thus, both companies committed to sales and distri-bution-related partnership development in foreign countries so as to secure a lar-ger database of customers. The larlar-ger database of customers brought a deeper understanding of the market and the knowledge of the customers’ needs. The ex-periential knowledge of the companies also increased accordingly.

Problems: Due to the dynamic market environment in the energy sector, com-pany B faced difficulties in standardizing the market and achieving operating ec-onomies. The company also experienced production slack, which was solely due to market characteristics and industry growth patterns and not to lacking a capa-bility for product development. This production slack and the dynamic nature of the market characteristics including the heterogeneity of the customer needs in-fluenced the extent to which company B committed itself to exporting. On the other hand, concerning company A, the financial automation industry was rela-tively stable in terms of customer needs as compared to the energy sector and the industry did not go through several phases of rapid changes.

Implications of the interaction between organizational processes and market knowledge for market knowledge competence: The interaction between market knowledge and organizational processes can be directly traced to those factors which are likely to promote knowledge development and its transfer from the market to the firm. From this adaptation process it can be said that market

knowl-edge competence is not only realizing what knowlknowl-edge a firm lacks about a mar-ket, but also the learning of the capabilities and limits of a firm regarding market knowledge acquisition in that specific market. It is somewhat irrelevant if a firm has had previous experiential knowledge; dynamism and adaptation to the market is more significant to cater to new opportunities. Thus, in order to analyze the market knowledge competence of a firm, an investigation of market knowledge development behaviour is crucial.

It can be noted that the export expansion process of both companies had been dynamic. Both of the firms passed through a series of sequential and evolutionary stages of export expansion in which the transition from one type of sales mode to another was clearly evident. During the evolutionary stages the firms adapted their organizational structures to acquire market knowledge in order to respond to a market opportunity. Thus, over all, export expansion was an organizational ad-aptation process of the structures and processes within the firms, in the context of knowledge that was acquired from the market.

Further, firms would be unable to develop market knowledge competence unless possessing a learning orientation as the interaction involved an adaptation in the organizational structure/processes in order to accommodate new knowledge. The analysis suggested foreign market knowledge acquisition as a situational-specific process². Knowledge from market to market varied due to the diversity of cus-tomer needs and market characteristics. The key to market knowledge acquisition was found to be a firm’s ability to adapt organizational processes so as to maxi-mize market knowledge acquisition. However, foreign market knowledge was also influenced by the heterogeneity of customer needs, previous experiential knowledge of the firm and the firm’s learning ability. In this respect both firms differed and exhibited diversity in export expansion behaviour and a variation in the choice of foreign sales strategy and partnership structures. Diversity in learn-ing ability and the market characteristics of the respective industry of each firm affected their competency in utilizing a foreign market strategy for subsequent export expansion. Company A focused on developing a coordination capability with its partners and also channel management, while company B focused more

2 In the economics of organization literature, the interest of the early Austrian economists has been on understanding the link between the economic organizational outcome and the knowl-edge of particular circumstances, time and location. This was later adopted by the evolution-ary and knowledge-based theories of the firm, which focused on the learning capacity of a firm to utilize location-specific knowledge, its transfer to and from the firm and the implica-tions of the relaimplica-tionship for capability development. (cf. Boerner, Macher and Teece 2001).

on developing a product-based capability in order to respond to the diverse needs of the customers.