2 THEORIES OF EXPORT EXPANSION AND MARKET
2.3 Export expansion and the market orientation perspective
Market orientation is a well-established phenomenon in market strategy research.
This perspective views export expansion as a strategic behaviour of firms, where they strategically attempt to collect information regarding customers’ needs and the export markets. Market orientation is considered as an organization- wide priority to respond to changing customer needs and competitor activities in order to exploit opportunities and circumvent threats (Hunt and Morgan 1995; Kohli and Jaworski 1990; Narver and Slater 1990). Kohli and Jaworski (1990) explain
market orientation as an appreciation by the firm to understand present and poten-tial customer needs and perform coordinated activities for the systematic gather-ing of information regardgather-ing present and potential customers and competitors.
Kohli and Jaworski (1990) conclude that market orientation refers to the organi-zation-wide generation, dissemination and responsiveness related to current and future customer needs and preferences. Market knowledge is considered as the knowledge of customers’ needs and the export information.
There are two streams of literature on market orientation: one focuses on market knowledge acquisition and the other on the utilization of market knowledge. Stud-ies related to market knowledge acquisition acknowledge knowledge of custom-ers’ needs as a key factor which influences a firm’s export expansion (McAuley 1993; Kohli and Jaworski 1990; Diamantopoulos and Souchon 1999; Narver and Slater 1996; Day and Glazer 1994; Diamantopoulos 2003). These studies link export expansion to a customer orientation of firms. These studies describe cus-tomer orientation as the sufficient understanding of cuscus-tomer needs and prefer-ences in order to create a superior value for them. A superior value is created by increasing the product-related benefits and decreasing the cost of these benefits to the customers. Information collection of the future needs of the customers is one of the factors that these studies relate to the success of a firm’s export strategy.
The core idea in these studies relates market orientation to competitive advantage.
The understanding of customer needs requires responsiveness from the firm’s side in order to develop certain activities, processes, procedures and marketing strate-gies. When a firm uses the acquired information for the purpose of customer-related value creation such as new product development, it in fact develops inter-nal core processes and certain capabilities which in turn enhance organizatiointer-nal performance. The customer orientation process in that way strengthens a firm’s export-related core processes and firms develop a long-term orientation of their position in the market. With a long-term focus firms constantly discover and im-plement additional value for their customers.
The degree of market orientation appears to be significantly different for firms from varying industries, depending on certain processes, systems and procedures which can limit a firm’s ability to respond to necessary changes and collect mar-ket information (Jaworski and Kohli 1993). Narver and Slater (1990) maintain that market orientation is an organization’s culture and desire to create a superior customer value that leads a firm to develop necessary behaviours and activities to create and maintain that culture.
Some studies focus on export information and suggest that the aim of information acquisition for firms is to collect information for the purpose of detecting and/or
solving a specific marketing problem (Leonidou and Theodosiou 2004). This is further supported by Yeoh (2005), who describes export information acquisition as the process involved in bringing information about the external environment into the boundary of the organization (Moorman 1995). Further, Toften (2005) reports that export information are used to overcome decision-making uncer-tainty, originating from unfamiliar and uncertain foreign markets. The importance of export information as a key factor influencing a firm's export expansion has widely been acknowledged as responsible for a firm's success or failure in foreign markets (Diamantopoulos 2003; Hart and Tzokas 1999; Kohli and Jaworski 1990;
Narver and Slater 1990). Indeed, a lack of export information is found to be a major barrier to expanding export activity.
In the market orientation concept, export expansion is explained by another or-ganizational factor – the coordinated marketing effort. This suggests that market knowledge acquisition is a coordinated activity for which the marketing depart-ment is solely not responsible. Inputs from various departdepart-ments such as new pro-duct development and the R&D teams as well as competitors’ strategies are as-sumed to influence the market orientation of a firm. This factor also explains the relationship of market orientation to competitive advantage and enhanced organ-izational performance. A coordinated effort is again fundamental in creating a strategy fit for exports.
The other stream of studies related to market knowledge utilization in fact ana-lyzes the export and market information use within firms. These studies stress a positive relation between export and market information use and market knowl-edge development (Toften 2005; Diamantopoulos and Souchon 1999). Toften and Olsen (2003) describe export information as the information which is collected with the intension of increasing export knowledge. They maintain (2005) that market knowledge is an outcome of export information use. More specifically, it implies that in order to create knowledge within a firm, individuals, teams and departments utilize the available information. Export information utilization leads to improvements in export information use, practices and market intelligence pro-cedures (Diamantopoulos and Souchon 1999).
In this stream of literature however, it must be noted that it is not only the acquisi-tion of market knowledge, rather its utilizaacquisi-tion for expanding export activity that has frequently been seen as a critical determinant to export performance (Diaman-topoulos and Souchon 1999). The utilization of market knowledge is emphasized due to the fact that competitors may collect the information at the same time;
firms which efficiently utilize the information are able to sustain competitive ad-vantage. Thus, an efficient reaction to the available information is positively
linked to a better understanding of the market (Sinikula 1994). Consequently, if the market knowledge needs of a firm match the international experience, market knowledge is more likely to be utilized within the firm and in turn, evolves into export capabilities.
Export expansion rationale in the market orientation perspective: Export expansion in market orientation studies is conceptualized as acquiring knowledge of the customers’ needs and other export related information. It is viewed as a coordinated and systematic effort by different departments to share an under-standing of customers’ current and future needs, factors affecting the needs, communication of the needs across inter-firm level and the implementation of activities to meet those needs. It must be noted here, however, that the aim of ac-quiring the customers’ knowledge is not only to produce a new product for the market. Rather, through the use of this knowledge firms change and restructure certain procedures related to marketing. The market orientation approach views customers’ knowledge as the intangible resource for successful export activity.
Thus, Jaworski and Kohli (1993) specifically relate market orientation ‘to mean the implementation of the marketing concept’.
In market orientation literature market knowledge competence is a synonym for market orientation and scholars from this research tradition view it as a valuable asset and an organizational core competence (Day 1994a; Glazer 1991; Wright and Ashill 1998; Cavusgil and Zou 1994; Cooper 1994). Market orientation is the ability of the firm to collect information regarding customers’ needs and the ex-port markets and to strategically utilize this information to respond to such needs in a timely manner. Thus, such firms address both expressed and latent needs of customers and their focus of producing products is to serve the current needs of customers as well as create products that may serve their future needs (Hult et al.
2007). Studies related to market orientation acknowledge information as a key factor influencing a firm’s export expansion (Diamantopoulos 2003; Diaman-topoulos and Souchon 1999; Narver and Slater 1999; 1996; Kohli and Jaworski 1990; Day and Glazer 1994; McAuley 1993).