Research Proposal

Topic: Relationship between strategic orientation, market orientation, service innovation with market and business performance

Submitted by:

Sheraz Arif Chughtai MBA 1.5 (Eve) MB-11-14 Prof. Hayat Awan

Submitted to:

Department Of Management Sciences Air University Multan Campus

Introduction:
Firm managers place different emphases on strategic behaviors and select strategic orientations dependent upon what they wish to accomplish (Olson et al., 2005). For example, firms with a strong customer orientation emphasize the creation and maintenance of customer value. More competitor-oriented firms encourage in-depth assessment of targeted competitors and costoriented firms pursue efficiency throughout their value chain (Day, 1990; Porter, 1985). The different types of strategic orientations are not mutually exclusive; firms commonly engage in multiple sets of behaviors at the same time (Gatignon and Xuereb, 1997). Strategic orientations are aspects of corporate culture (Deshpande et al., 1993; Hurley and Hult, 1998; Narver and Slater, 1990). Corporate or organizational culture represents intangible resources for firms (Barney, 1991; Grant, 1991). The deployment of those resources, i.e. orientations, will have different relative impacts (Day, 1994). Strategic orientation focuses resources to achieve desired outcomes. In the current context, we examine how resources impact one type of capability development service innovation. Innovation has been empirically linked with superior performance (Damanpour and Evan, 1984; Khan and Manopichetwattana, 1989). However, while much of the previous research has centered on product innovation, our research focuses on service innovation. Service innovation is a hot topic warranting greater attention (Berry et al., 2006). Service innovation represents an additional means by which firms can improve their market performance and efficiency (Chapman et al., 2003), which in turn may contribute to competitive advantages in todays business environment. Many firms elect to compete on the basis of service rather than on physical products (Gronroos, 2000; Kandampully, 2002).

Literature Review:
Innovation:

Innovation plays a critical role in the increasingly competitive business environment in which firms operate. As a result, researchers have provided insights as to how firms innovate and how innovations spread to other firms and individuals (Damanpour, 1991). However, much of the existing literature is centered on product innovation. Service innovation has been discussed from a conceptual perspective, but has received little empirical study. Defined broadly, innovation is an idea, practice, or object that is perceived as new by an individual or organization (Rogers, 2003). While the definition set forth by Rogers can be applied to the service context, a distinct definition for service innovation is warranted to recognize its unique nature. Service innovation is the development of a new service that is perceived as new and helpful to a particular focal audience (Flint et al., 2005; Grant, 1991). Service enhancements can add value for organizations. Firms often race to market with new product offerings, displaying the latest technologies and capabilities, and almost immediately encounter direct competition.

Strategic orientation as organizational culture: Strategic orientation is defined as the strategic directions implemented by a firm to create the proper behaviors for the continuous superior performance of the business (Gatignon and Xuereb, 1997; Menguc and Auh, 2005; Narver and Slater, 1990). Previous studies examining strategic orientations have pointed specifically to the behaviors associated with the organizationwide generation, dissemination, and use of market intelligence as being the key ingredients of a strategic orientation (Baker and Sinkula, 1999; Kohli and Jaworski, 1990; Narver and Slater, 1990; Sinkula, 1994). An important aspect of a strategic orientation is the creation of shared values and behaviors throughout the entire organization. When strategic orientation extends to all levels of an organization, it becomes an organizational culture. Organizational culture is defined as the pattern of shared values and beliefs that provide norms for behavior within an organization (Deshpande and Webster, 1989). As suggested by Day (1994), culture can unify an organizations capabilities into a cohesive whole. Organizational culture is reinforced through the continuous sharing of information and intelligenceamong employees.Organizational cultureswill vary among firms; the types of information and intelligence shared within firms will also vary.While later sections will highlight specific differences in the intelligence sought by firms, it is also important to discuss the general intelligence characteristics. The type of

intelligence that is shared is driven by the strategic orientation of the firm. In order to effectively share information throughout the organization, it is essential that organizations capture and codify intelligence for dissemination and use (Argote and Ingram, 2000; Spender, 1996; Turner and Makhija, 2006). Intelligence is often codified in information systems, organizational processes, and other communication mechanisms (Slater and Narver, 1995). Access to these systems and methods of communication throughout organizational levels reinforces the orientation of the firm as employees are able to quickly access and share new information with others in the firm. The following sections discuss three relevant strategic orientations, along with the type of intelligence required by each.

Customer orientation: Customer orientation is an organizational culture that facilitates the understanding of targeted buyers and allows for the continuous creation of customer value (Narver and Slater, 1990). Firms with a customer orientation generate intelligence about the current and future needs of targeted customers and disseminate the new intelligence throughout the organization. Employees within a customer-oriented organization are aware of who the customers are and how they should be served. As they learn about the needs of their customers, they are quick to share the new information with other individuals and departments within the organization to ensure that the firm can continue to keep pace with customer needs, and anticipate future needs. A critical component of customer orientation is the emphasis on seeing supply chain opportunities and constraints from the perspective of the customer (Deshpande et al., 1993; Narver and Slater, 1990). This allows the firm to identify potential new customers along with opportunities to create value for the customer.

Competitor orientation Competitor orientation is an organizational culture that stresses the understanding of the shortterm strengths and weaknesses and long-term capabilities and strategies of the current and potential key competitors (Deshpande et al., 1993; Narver and Slater, 1990). Firms adopting a competitor orientation develop an in-depth assessment of targeted competitors and potential competitors and use the resulting knowledge to match or exceed competitors strengths (Kohli and Jaworski, 1990; Olson et al., 2005). In a competitor-oriented firm, competitive assessment is

not solely the responsibility of senior management. Employees throughout the organization participate in the development of intelligence regarding competitors new products and services, as well as products and services offered by companies not considered to be direct competitors. The competitor-oriented firm is concerned with all sources customers could use to meet their needs.

Cost orientation Cost orientation refers to the pursuit of efficiency throughout all parts of a firms value chain (Olson et al., 2005; Porter, 1985). Cost orientation differs from customer and competitor orientation, as its focus is primarily internal. A cost-orientated firm places a high level of importance on in-depth knowledge regarding the costs of providing products and services to the market. Lowering average and marginal costs are typical benefits to this type of strategic orientation (Dickson, 1992). Firms that are actively engaged in the reduction of costs associated with the development of product and service offerings can benefit when competing for new business, as they are able to offer attractive pricing or additional features for potential customers. Employees within cost-oriented firms seek opportunities to eliminate waste associated with all areas of the firm. For example, a cost-oriented culture focuses on reducing non-value-added services, identifying cost-saving sourcing options, and developing lower cost alternative product and service delivery methods.

Market orientation subfactors, innovativeness, and performance: Prior work (Anand, 1993; Cooper & Kleinschmidt, 1995a, 1995b; Lee & Na, 1994) indicates substantial nuance in the how the individual market orientation subfactors relate to innovativeness, for example, customer orientation may be central in linking other orientations to innovativeness (cf. Narver & Slater, 1990). Interfunctional coordination refers to demonstrating willingness by members of different functional areas of an organization (e.g., engineering, manufacturing, and marketing) to communicate and work together to achieve organizational objectives; firms sometimes create cross functional teams to achieve interfunctional coordination (Anand, 1993). Innovation projects may stimulate such team creation and interfunctional coordination; interfunctional coordination may serve as an impetus to innovativeness because increases in communications

and team work are likely to generate new ideas and technology explorations. Thus, let us recognize the possibility of a virtuous cycle or positive feedback loop (see Sterman, 2000) between innovativeness and interfunctional coordination rather than proposing only a one-way, independent to dependent, relationship. Even though Hult et al. demonstrate that interfunctional coordination relates highly with customer orientation and competitor orientation, examining the relative associations of each with innovativeness and performance provides more nuance and insight than following the procedure of combining the three scales into a global market orientationand the factor analysis structure of the three sets of items identifies three unique factors.

Objective Of The Study:

The purpose of this paper is to determine how a firms strategic and market orientation affects service innovation capability and the resulting impact on business and market performance. This study will also include sector analysis which will help in determining that in which sector innovation capabilities affects the organizational performance more.

Reason Of Research On This Topic:

Companies cannot survive in this dynamic environment with exercising innovation either in service sectors or in manufacturing sectors. . But how much impact it has on organizational performance in order to find the relationship between service innovation capabilities and key determining variables such as customer orientation, competitor orientation, cost orientation, interfunctional coordination etc the study in this area is being conducted. Moreover this area is not being sufficiently explored by the researchers in Pakistan.

Research Gap:
Due to a developing nation and emerging economy, companies in Pakistan is trying to operate in different manner by creating and giving different innovative products and services to the customers. I found very nominal work on innovation capabilities of Pakistani companies and their impact on business performance by orienting their companies strategically focused either on customers, competitors and cost. Moreover this study will be of great significance for the

marketers of the different firms operating specially in Pakistan. In addition to this sample has

been taken from different sectors so this study will also give an insight into which sectors the innovations are contributing more and in which sectors its effect is less.

Variables: rationale
Dependent variable: Market or business performance Independent variables: Customer orientation Competitor orientation Cost orientation Service innovation Inter functional coordination

Limitations:
This study would be of limited number of empirical studies limited to service innovation and would be limited to one or two sectors. Time constraint would also be limit to complete this project. References:
1.Zhou KZ, Brown JR, Dev CS, Agarwal S. The effects of customer and competitor orientations on performance in global markets: a contingency analysis. J Int Bus Stud 2007;38(2):30319. 2.Deshpand R, Farley JU, Webster FE. Corporate culture, customer orientation, and innovativeness. J Mark 1993;57(1):237. 3.Hurley, R. F., & Hult, G. T. M. (1998). Innovation, market orientation, and firm learning: an integration and empirical examination. Journal of Marketing, 62(3), 4254. 4.Lukas, B. A.,&Ferrell, O. C. (2000). The effect of market orientation on product innovation. Journal of the Academy of Marketing Sciences, 28(2), 239247. 5.Scott J. Grawe, Haozhe Chen, Patricia J. Daugherty, (2009),"The relationship between strategic orientation, service innovation, and performance", International Journal of Physical Distribution & Logistics Management, Vol. 39 Iss: 4 pp. 282 300. 6.Robert E. Morgan, Carolyn A. Strong, (1998),"Market orientation and dimensions of strategic orientation", European Journal of Marketing, Vol. 32 Iss: 11 pp. 1051 1073 7.Nicholas O'Regan, Abby Ghobadian, (2005),"Innovation in SMEs: the impact of strategic orientation and

environmental perceptions", International Journal of Productivity and Performance Management, Vol. 54 Iss: 2 pp. 81 97 8.Klemen Kavcic, Andrej Bertoncelj, (2010),"Strategic orientation of organizations: risk management perspective", Kybernetes, Vol. 39 Iss: 5 pp. 735 - 749

Research instruments: Population: Our population includes the all service sector companies which have higher growth rate and listed on Stock exchange.