BNEJSS Balkan and Near Eastern Journal of Social Sciences

Balkan ve Yakın Doğu Sosyal Bilimler Dergisi

Ekşioğlu ve Tolunay, 2020: 06 (04)

The Role Of Market Orientation On Business Performance: An Empirical Analysis

Within Retail Sector in Turkey

Şahnaz Ekşioğlu1 Aslı Tolunay2

1
Yeditepe University / Graduate School of Social Sciences, Business Administration Department, Marketing
PhD Student, [email protected], ORCID: 0000-0001-8141-4982
2
Assistant Prof. Dr., Yeditepe University / Graduate School of Social Sciences, Business Administration
Department, [email protected], ORCID: 0000-0003-3856-8518

Abstract: In today’s competitive environment, businesses constantly innovate and improve themselves in the face of
necessity and they are in a new quest to survive. Therefore, only firms that adapt to the market conditions and changes in
the business subsist. At this point firms need an understanding of marketing approach that rely on a broad base of consumer
knowledge. Retail is one of the most important sectors, which gives direction to the economy. However, exchange rate
fluctuations, tax rates and policies affect the sector in a negative way. Within this scope, market orientation practices gain
importance for firms in the sector. Market orientation generates organizational culture, which monitors customers and
competitors, targets customer satisfaction ensuring coordination among all departments. When firms accept market
orientation, they work to guarantee consumer satisfaction and all their activities are expected to be compatible with the
conception of modern marketing (Kohli & Jaworski, 1990).
In the present study, main goal was to assess the relation between market orientation factors, namely, customer orientation,
competitor orientation and inter-functional coordination (Narver and Slater, 1990) and business performance within top 100
retail sector service companies in Turkey listed in Perapost journal. With this aim, data was collected through a questionnaire
from 510 participants that are middle and upper level managers of the strategic business units in the top 1oo retail service
firms in Turkey. Financial indicators namely sales growth rate and market share were used in measuring business performance
and Logistic Regression analyses were employed to identify factors that identify which aspects of market orientation are
highly influential in generating market share and sales growth in service companies. Findings of the study demonstrate
significant correlation with customer orientation and sales growth rate; however, competitor and inter-functional orientation
show no relation with the performance measures indicating the value of customer relationships in services in creating
financial outcomes. The study’s concentration on different service sectors further strengthens the generalizability of the
findings.
In conclusion, this study aims to contribute relevant literature by presenting a comprehensive literature review and to provide
a base for future works for various sectors in Turkish economy. Based on the research findings, it is recommended that market
orientation centered around customers is a beneficial organizational culture for retail companies to adopt. Further this work
remarks that there is a difference in business operations and social structure features of emerging markets and advanced
markets. That’s why applicability of market orientation in the form of competitor and inter-functional orientation as a
competitive advantage may be less in emerging markets. Finally, it can be highlighted that unfair competition, limited
resources infrastructure and environmental uncertainty can be cited as major impediments to the development process of
market orientation.
Keywords: Market Orientation, Business Performance, Logistic Regression
coordination among all departments. When firms
1. INTRODUCTION accept market orientation, they work to guarantee
consumer satisfaction and all their activities are
In today’s competitive environment, businesses
expected to be compatible with the conception of
constantly innovate and improve themselves in the
modern marketing (Kohli & Jaworski, 1990).
face of necessity and they are in a new quest to
Particularly, market orientation begins to find a
survive. There is a big competition among firms and
place in the literature since 1990s and various
firms work hard to establish a market presence.
research have been made in many industries and
Therefore, only firms that adapt to the market
countries. The work done in these years can be
conditions and changes in the business subsist.
classified as in two directions. The first concentrates
Within this background, customer satisfaction has
on the theoretical background and antecedents of
come to the forefront. At this point firms need an
market orientation, which includes interaction
understanding of marketing approach that rely on a
between departments and its role within the
broad base of consumer knowledge.
organization systems (Matsuno et al., 2002). The
Market orientation generates organizational second, on the other hand, puts its attention on the
culture, which monitors customers and consequences of market orientation which can be
competitors, targets customer satisfaction ensuring stated as its effect on performance, its connection

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Balkan ve Yakın Doğu Sosyal Bilimler Dergisi
Ekşioğlu ve Tolunay, 2020: 06 (04)

with variables such as customer satisfaction, Shapiro (1988) considers the issue as organizational
innovation and employee outcome and scales that decision-making period of a firm regarding time and
analyze market orientation (Narver & Slater, 1990; demand of the market. It is described as the process
Kirca et al., 2005; Bayraktar et al., 2017). where company employees gather up-to-date
information about competitors and customers
Retail is one of the most important sectors which
continuously, after spreading this fund of market
gives direction to the economy. Turkey has a
knowledge to relevant departments and
dynamic and growing population. Due to the
departments evaluation phase to satisfy customer
population growth, rapid urbanization and strong
needs.
purchasing power; young population is more eager
in spending which provides significant opportunities In their work, Kohli & Jaworski (1990) define market
for progress in the retail sector. It can be stated that orientation as execution of marketing orientation
retail is a fast-expanding modern market, which and whole organizational activities is for
quickly adapts the innovations. However, exchange understanding customers’ expectations and needs,
rate fluctuations, tax rates and policies affect the satisfying and giving high level of importance to
sector in a negative way. In this context, retailers customers. By looking at behavioral perspective, it
seek for sales and long-term investments instead of can be said that this view supports information
high profitability. Within this scope, market processing and emphasizes inter-functional
orientation practices gain importance for firms in coordination.
the sector. Present study aims to examine retail
Ruekert (1992) makes interpretation on market
sector firms in Turkey in terms of the relation
orientation from a strategic viewpoint. Regarding
between market orientation factors, namely,
the researcher, the market orientation of the
customer orientation, competitor orientation and
business unit level depends on obtain and analyze
inter-functional coordination (Narver and Slater,
of consumer information, enhancing strategies in
1990) and business performance. Furthermore,
response to necessities of buyers and degree of the
contrary to previous literature financial indicators
implementation of the strategies.
are used in measuring business performance in this
study. Deshpande and Webster (1989) describe market
orientation as values which are part of
2. THEORETICAL MODEL AND HYPOTHESIS organizational culture and marketing concept.
Thereafter, Deshpande et al. (1993) state that
Market is a place, where existing and potential customer orientation provides long term
buyers’ needs are satisfied through exchange of the profitability by holding the interests of customers at
product (Kotler et al., 1999). According to the
the forefront and at the same time it is a set of belief
understanding of the market, marketing is a factor
that look after the interests of owners, managers
which is conducted by fulfilling changes of human
and employees.
requests and satisfying them (Kotler et al., 1999).
Marketing scholars and practitioners discussed Cultural approach states that to provide superior
marketing as a topic since 1950’s (Gray & Hooley, value to customers, organizations endeavor to
2002). As the marketing concept developed to the create corporate culture, which generates superior
modern marketing thought during the 1970’s, goods and services, and offer outstanding value to
instead of selling and earning more, the necessity to customers (Narver & Slater, 1990; Webster, 1993;
pay more attention to customers has begun to be Avlonitis, 1993; Hurley & Hult 1998; Gebhardt,
discussed. Hence, eventually this principle has been Carpenter & Sherry 2006). Based upon cultural
accepted as a basic guide in the marketing concept approach, market orientation is studied under three
and during the 1990’s market orientation started to main factors which are customer and competitor
become significant in marketing exercises. With orientation as well as interfunctional coordination
time, customer perception becomes one of the along with two decision criteria which are focus on
most important value for companies. Companies long term and profitability (Narver & Slater, 1990,
are experiencing the pace of change and realize that Kibbeling et al.,2013).
customers’ requirements and wishes would get At last, market orientation approach is evaluated
changed. This process directs companies to be deeply by Narver & Slater (1990) and is defined as
market oriented. understanding customers ideally to satisfy them
now and in the future. Customer orientation begins
2.1. Approaches of Market Orientation with the companies learning of customers’ needs
Within the process, market orientation is addressed and wants and after developing and implementing
by several scholars under different approaches.

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a strategy to meet them (Shapiro, 1988; Appiah-Adu • H1: Customer orientation positively and
& Singh, 1998). directly affects (a) percentage of sales growth, (b)
market share growth of firms
2.2 Market Orientation and Firm Competitor orientation is the sum of the activities
Performance that includes observing current actions of existing
and potential competitors, knowledgeable about
All businesses are established to fulfill specific their products and services and understanding their
objectives and tasks. Performance can be identified future activities (Narver & Slater, 1990; Hong et al.,
as an outcome of a company, representing its goals 2013; Wang & Chung, 2013). Focusing on
and missions and measuring productivity most competitors provides firms the opportunity to
correctly. Nonetheless, measuring performance of improve strategies and to respond quickly to the
organization is difficult. For this reason, this subject actions of competitors also by improving their
is investigated widely in the literature and is products and services, offering lower prices and
measured by either financial or nonfinancial different product features which increase firm
measures or in some instances, by both. This study performance (Day & Wensly, 1988; Narver & Slater,
identifies business performance with percentage of 1990).
sales growth and market share growth.
Within the process certain studies support
Narver and Slater (2000) state that, customer value competitor orientation and performance relation
is provided when business profits of the products within the organizations. In their work Greenly
and services exceed the spending offered to the (1995) and Harris (2001) first specify combined
customers. Within the idea of the scope of effect between market orientation and competitor
customer-oriented marketing, to achieve positive orientation and later significant relations among
performance, creating value for customers’ interest performance and market orientation. Moreover,
is crucial for companies (Alhakimi & Baharun, 2009). there are studies, which support competitor
There are papers that took market orientation as a orientation as a strong determiner of business
whole and analyze its influence on various aspects performance indicators (Dowes, 2000; Wang &
such as financial and innovative performance of the Miao, 2015). On that account it can be hypothesized
firm into consideration (Bulut et al.,2009); that;
nonetheless, market orientation is a multi- • H2: Competitor orientation positively and
dimensional notion. Moreover, considerable directly affects (a) percentage of sales growth, (b)
research demonstrates that firms succeed more market share growth firms
when they adopt both customer and competitor
orientation (Narver & Slater, 1990; Deshpande et Interfunctional coordination can be explained as
al., 1993; Jaworski & Kohli, 1996; Sorensen, 2009; adopting to serve customers in a best way by
Hilman & Kaliappen, 2014; Adam & Syahputra, providing enhanced communication network
2016). Customer orientation is identified as “the between all departments and coordination of
sufficient understanding of customers to create company resources in the organization (Narver &
value for them” (Narver & Slater, 1990). In the Slater; 1990; Auh & Menguc, 2005; Wang & Chung,
course of time, customer orientation comprises all 2013). In another words, inter-functional
practices of an organization that generates coordination comprises internal communication
corporate culture based upon customer satisfaction between the organization and other functional
(Slater & Narver, 1995). By listening to customers, units not only marketing and management units.
employees get motivated to focus more on external This approach enables accessibility of data
environment and by sharing collected information considering consumers and competitors to all
about customers inside the organization; they members’ organization members and provide firms
promote other employees (Reed et al., 2016). This to generate outstanding value to customers (Narver
attitude can foster firm performance through & Slater, 1994).
increasing revenue, investment returns, sales In their work, Shargill & Nargundkar (2005) research
increase and rise in market share (Narver & Slater, Indian small manufacturing firms and find a relation
1990; Day, 1994; Frösen et al., 2016). Recently, among market orientation factors and
Bayraktar et al. (2017) state that customer performance. Moreover, Balas et al. (2014) remark
satisfaction can lead to high business performance. that relationship between interfunctional
Thus, it can be hypothesized that; coordination and firm performance is significant in-
service firms in the US. Therefore, it can be
hypothesized that;

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 BNEJSS Balkan and Near Eastern Journal of Social Sciences
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Ekşioğlu ve Tolunay, 2020: 06 (04)

• H3: Inter-functional coordination positively The theoretical model of the study is stated in
and directly affects (a) percentage of sales growth, Figure 1.
(b) market share growth of firms.

Figure 1.. Research Model

Market Orientation Financial Performance

Customer Orientation
H1a

H1b Sales Growth

Competitive Orientation H2a

H3a H2b
Market Share Growth

Interfunctional Coordination H3b

3. METHOD AND DATA To measure the performance of the company rather

than a subjective measure, objective measures
3.1 Research Design were used. Thus, performance of the firm is covered
In the present study, retail sector is analyzed. The by the sales growth rate and market share rate of
list of retail sector firms is taken from the study of the companies. Sector, size and age of companies
Perapost Journal and CRIF Company. This study are regarded as control variables in the study.
does not focus on certain categories in the retail After cleaning the data, the usable sample was 509
sector. It includes firms in different sub-categories, employees with different demographics who
which strengthens the generalizability of the evaluated their companies based on market
findings. The categories of the firms included in the orientation factors. SPSS 25.0 was used in data
list can be stated as food, electronics, apparel, it, analysis and exploratory factor and reliability
furniture, jewelry and construction. analyses were followed by logistic regression
Likert scale is used in assessing questions analysis.
considering market orientation. The administered
survey had two parts. First part was about 3.2 Data Analysis
understanding demographics information and the
second part was related with market orientation 3.2.1. Exploratory factor and reliability
factors. The survey was first officially translated analyses
from English to Turkish language and then back
In quantitative analysis where questionnaire is used
translated from Turkish to English to increase face
for data collection, before any analysis of the data is
validity. After being pre-tested with a small sample
carried out, it is highly recommended to apply
(n = 44) to eliminate unnecessary and confusing
validity and reliability tests. The scales used in the
items, the questionnaire was sent to middle and
questionnaire are adapted from literature and
upper level executives working in especially human
exploratory factor and reliability analyses are used
resources, marketing, research development,
to test the factor structure and internal consistency.
product development, sales and finance
departments of retail companies in the first 100 Hence, an exploratory factor analysis is conducted
ranking. The purpose was to choose a reasonable to test the dimensionality of market orientation
number of managers from the population who classified as three factors in the model. Firstly,
represent the sector and all units in the population. Kaiser Meyer Olkin (KMO) and Bartlett’s tests
showing the suitability of sample data for factor

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Ekşioğlu ve Tolunay, 2020: 06 (04)

analysis are done and produced appropriate After constituting factors, reliability analysis is done
outcomes (KMO = 0.925, Bartlett = .000) The first for each factor. Cronbach’s alpha coefficient is
question under inter-functional heading is excluded expected to be above 0,7 (Nunnally, 1978). In this
since a score is below 0.5 in anti-image correlation stage, Cronbach’s alpha scores are compared and
matrix and factor analysis are repeated. The factor one question lowering the Cronbach’s alpha scores
analysis produced 3 factor structures with a Kaiser- is excluded. Later factor analysis is repeated.
Meyer-Olkin measure of 0.925, which shows 15 Reliability analysis is done for 3 factors and the
items with medium (> 0.616) to high (< 0.824) factor alpha scores ranged from 0.821 to 0.869 showing
loadings and accounts for 65.9 percent of the total that the scale used in this study is acceptable and
variance. reliable.

Table 1: Factor and reliability results

Factor Cronbach’s
Factors Factor % Q
Loadings alpha
0,824 m1
0,805 m2
Customer Orientation 0,753 26,10% 0,862 m3
0,772 m4
0,634 m5
0,713 r1
0,82 r2
Competitor Orientation 19,15% 0,821
0,818 r3
0,726 r4
0,616 d2
0,754 d3
Interfunctional Coordination 0,82 21,64% 0,869 d4
0,633 d5
0,8 d6

In order to analyze and compare the direct there is a risk of multi-collinearity when testing the
relationship of each factor, item-to-item hypothesis in a logistic regression model.
correlations is examined. The results are shown in Nonetheless, no items are dropped, and they are
Table 2. There are several correlations above 0.5 checked according to other criteria of correlation.
among the independent variables, implying that
Table 2: Correlation table of market orientation parameters
Customer Interfunctional
Competitor
Orientation Coordination
Orientation Avg.
Avg. Avg.
Pearson
Customer Orientation Avg. 1 ,419** ,665**
Correlation
Pearson
Competitor Orientation Avg. ,419** 1 ,496**
Correlation
Interfunctional Coordination Pearson
,665** ,496** 1
Avg. Correlation
**Correlation is significant at the 0.01 level (2-tailed)

3.2.2.Logistic Regression binary dependent variable, with values 0 and 1

representing groups. Logistic regression is
Logistic regression is a type of regression with and
specifically designed to predict the likely probability
metric or nonmetric independent variables and a

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of an event. There is no need for independent During analysis, it is observed that when M_avr1 is
variables to be normally distributed and equality for added to the model, there is increase in the
the collinearity, variance & covariance matrices. predicted level and ratio becomes 78,9 %. Customer
During the evaluation of variables, it is observed orientation occurs significance change (p = 0,047) in
that logistic regression is best suited for this data. net sales growth. Secondly, R_avr1 is included to
model and predicted level declines and ratio
In logistic regression analysis, customer orientation
becomes 73,7 %. Competitor orientation generates
is symbolized as M_avr1, competitor orientation as
significant change (p = 0,094). In other respects,
R_avr1 and interfunctional coordination as D_avr1.
results demonstrate that inter-functional
Performance indicators, which include net sales
coordination is not effective in the likelihood of
growth and market share growth, are the
change. After all, analyze points out that the
dependant variables of the study. In the encoding of
likelihood of the success is supported by customer
net sales growth, 1 represents growth in sales and 0
and competitor orientation. When the table is
represents decline in sales. On the other hand, 1
investigated in detail, it can be stated that based on
represents growth in market share and 0 represents
Cox & Snell R Square result, M_avr1 and R_avr1
reduction of market shares in the encoding of
explaines the variance of net sales growth by % 9,1.
market share growth. Two models with these
dependent variables measuring firm performance
are run and interpreted separately.
Table 3: Omnibus test on model coefficients
Chi-square Df Sig.
Step 4,180 1 ,041
Step 1 Block 4,180 1 ,041
Model 4,180 1 ,041
Step 3,112 1 ,078
Step 2 Block 7,292 2 ,026
Model 7,292 2 ,026

Table 4: Summary of the intended model

Step -2 Log likelihood Cox & Snell R Square Nagelkerke R Square
1 76,613 a
,054 ,082
2 73,501a ,091 ,140

When the classification table below is investigated, other dependent variable, which is net sales
it is seen that failure ratio is more than success, growth.
which means it first categorizes failure and searches Thereafter, M_avr1, R_avr1 and Davr1 are added to
the possibility of failure of market share growth on the model. It is observed that the model removes all
market orientation outputs. It is observed that out predictor variables as M_avr1, R_avr1 and D_avr1
of 76 firms there is decline in 63 firms’ market share from the analysis. After analysis, it is observed that
growth. These results are quite the opposite of our none of the market orientation dimensions shows
significance change in the market share growth.
Table 5: Demonstration of market share growth classification tablea,b (positive/1 or negative/0)
Predicted
Observed MarketShareGrowth category
Percentage Correct
,00 1,00
Market Share Growth ,00 63 0 100,0
category 1,00 13 0 ,0
Overall Percentage 82,9

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Table 6: Variables not in the equation.

Score df Sig.
Customer Orientation Avg. ,976 1 ,323

Variables Competitor Orientation Avg. 1,630 1 ,202

Step 0
Interfunctional Coordination
,809 1 ,368
Avg.
Overall Statistics 5,181 3 ,159

In conclusion, based on the logistic regression p = 0,094). Further, when control variables are
analyses, H1a and H2a are supported. Analysis added to analysis; both firm size and firm age shows
results demonstrate that customer and competitor positive relationship with the sales growth (p = .029;
orientation have positive effects on firm p = 0,095).
performance, as well as on sales growth (p = 0,047;
Table 7: Demonstration of hypothesis results

Hypothesis P Value Results

H1a: Customer orientation positively and directly affects percentage of sales
0.047* Accepted
growth of firms
H1b: Customer orientation positively and directly affects percentage of
0.323 Rejected
market share growth of firms
H2a: Competitor orientation positively and directly affects percentage of
0.094** Accepted
sales growth of firms
H2b: Competitor orientation positively and directly affects percentage of
0.202 Rejected
market share growth of firms
H3a: Inter-functional coordination positively and directly affects percentage
0.553 Rejected
of sales growth of firms
H3b: Inter-functional coordination positively and directly affects percentage
0.368 Rejected
of market share growth of firms
* At p<0.05 level
** At p<0.10 level

weak correlation between the variables. In terms of

the explanatory power, the overall model clarifies
4. RESULTS, DISCUSSIONS AND SUGGESTIONS 9,1 % of variance in firm performance. Regarding to
In the current study, retail sector is investigated these findings, this study demonstrates that two
with the report of Perapost journal, which dimensions of market orientation (i.e., customer
demonstrates top 100 list of retail firms in Turkey. and competitor orientation) have significant effect
When the list is examined in detail, it can be stated on firm performance (i.e., sales growth).
that grocery dominates retail sector in Turkey.
This research is in line with previous studies, which
There are strong domestic players in the domestic
specify important relation with customer and
retail sector as BIM and Migros. Although grocery is
competitor orientation and firm performance
the main retail sector in Turkey, other segments
(Hilman & Kaliappen, 2014; Adam & Syahputra,
such as apparel, consumer electronics and e-
2016). Further, a similar and positive result is
commerce are worth considering in terms of their
obtained respectively in the United States SMEs
size and dynamism.
(Balakrishnan, 1996), United Kingdom retail sector
The purpose of this work is to analyze the impact of firms (Appiah-Adu & Satyendra, 1998; Sing &
market orientation factors on organization Ranchod, 2004), Malaysia SMEs (Mokhtar et al.,
performance in retail industry. Although significant 2014), and Accra metropolis manufacturing SMEs
relation is expected, analysis shows a relatively (Mensah & Issau, 2015). Interestingly, none of the

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factors of market orientations have any relation Customer Value: A Theoretical Perspective, African
with firm performance (i.e., market share growth). Journal of Marketing Management. 1(2), pp. 43- 49.
In brief, results from logistic regression analysis Appiah-Adu, K., & Satyendra, S., 1998. Customer
orientation and performance: A study of SMEs.
emphasize the growing importance of customer and Management Decision. pp. 385-394.
competitor orientation in retail sector influencing
Appiah-Adu, K., & Singh, S., 1998. Customer orientation
sales performance; however, interfunctional andperformance: A study of SMEs. (small and medium-
coordination is contrary to what is expected. sizedbusinesses). Management Decision. 36(5–6),
385(310).
Additionally, this work provides important
Auh, S., & Menguc, B., 2005. Balancing exploration and
contributions to the literature. Primarily, market exploitation: The moderating role of competitive
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competitive orientations in industrial markets.
Sheth’s (2011) remarks that there is a difference in Industrial Marketing Management. 25(4), pp. 257–269.
business operations and social structure features of
Balas, A.N, Gokus, O., & Colakoglu, S.N., 2014. Exploring
emerging markets and advanced markets. That’s the role of external environment on determining
why applicability of market orientation as a strategic focus, market orientation, and firm
competitive advantage is less in emerging markets. performance of service firms. Academy of Marketing
As a third implication, it can be highlighted that Studies Journal. 18(1), pp.19-39
unfair competition, limited resources Bayraktar, C. A., Hancerliogullar, I. G., Cetinguc, B., &
Calisir, F., 2017. Competitive strategies, innovation, and
infrastructure, environmental uncertainty and rise firm performance: An empirical study in a developing
of quotation can be cited as major impediments to economy environment. Technology Analysis &
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(Siddique, 2014). And finally, quantitative methods Crvelin, A.K., & Bakula, I.S., 2006. Market Orientation and
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Deshpande, R., Farley, J. U. & Webster, Jr. F. E., 1993.
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Gray, B.J. & Hooley, G.J. (2002). Market Orientation and
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