Strategic orientations and their relationship with performance: a case of a Mexican family firm.

Author:Romero, Alberto D. Malpica
 
FREE EXCERPT

INTRODUCTION

Strategic orientations in a firm have attracted the attention of scholars in diverse disciplines like marketing, entrepreneurship and management. They are seen as principles that direct and influence the activities of a business organization in their effort to achieve a better performance in the marketplace and ensure its viability (Noble, Sinha and Kumar, 2002; Hakala, 2011). Having their roots in the strategy research field, the concept of Strategic Orientation of a Business Enterprises (STROBE) has been studied as a multidimensional construct trying to advance in the operationalization of measures that test theoretical relationships proposed by researchers (Venkatraman, 1989; Morgan and Strong, 2003).

Strategy--as an academic field--has been considered as fragmented and lacked of coherence identity (Nag, Hambrick and Chen, 2007); however, strategic management is undoubtedly a successful emerging field producing a rich research line for scholars.

There is a tacit agreement that argues that the strategic management concept can be categorized in a three-level mode: business, corporate and functional (Venkatraman, 1989). According to this, business strategy can be characterized as the manner in which a firm decides to compete (Morgan and Strong, 2003). Several approaches have been used in order to develop a strategy measurement (narrative, classificatory and comparative). For the comparative approach, Venkatraman (1989) specifies six a priori dimensions: aggressiveness, analysis, defensiveness, futurity, proactiveness and riskiness. As an example of the use of this approach, Morgan and Strong (2003) found that firms' emphasis upon analysis, defensiveness and futurity are related to business performance. For a more detailed description of each of the six dimensions, see Venkatraman (1989).

One typology of strategic orientations used in strategy research-that is widely adopted- is suggested by Miles and Snow (1978; cited by Morgan and Strong, 2003):

  1. Prospector: firms that conduct externally oriented business.

  2. Defender: organizations internally oriented, focusing on efficiency and low cost operations.

  3. Analyzer: firms that have the characteristics of prospector as well as defender, depending on the market environment.

  4. Reactor: firms that respond to competitive circumstances when they are forced.

    Another typology of strategic orientations mainly used in the marketing research area, was proposed by Narver and Slater's (1990) and Slater and Narver's (1994) articles that are considered pioneer studies of the impact of market orientation (MO) on firm performance; Lumpkin and Dess (1996) pioneering entrepreneurial orientation (EO); Gatignon and Xuereb's (1997) technology orientation (TO) and Sinkula, Baker and Noordewier (1997) studying learning orientation. Other strategic orientations have been acknowledged, such as employee orientation, customer orientation, competitor orientation, and production orientation or selling orientation (Grinstein, 2008; Calantone, Cavusgil and Zhao, 2002; Noble et al, 2002; Gatignon and Xuereb, 1997). However, for the purposes of this study, only market orientation, entrepreneurial orientation, learning orientation and technology orientation are considered.

    Research in marketing has focused almost exclusively on maintaining a market orientation emphasis, based on the adoption and implementation of the marketing concept (Noble et al., 2002; Hult, Ketchen and Slater, 2005); however, some scholars have addressed a caution point about relying only on market orientation because customers do not necessarily know what they really want, due to the lack of information about the latest market trends or technologies (Zhou, Yim and Tse, 2005). Little is reported about multiple orientations studies and how strategic orientations are related between them and its relationship with performance (Lee, 2011; Hakala, 2011). For instance, Hakala (2011) reports that he did not find studies relating entrepreneurial and technology orientation or entrepreneurial, technology and learning orientation and their relationship with the firm performance, declaring that a window is open for future research, not only through empirical studies, but also through the use of qualitative research.

    Many authors have researched the relationship between market orientation and performance with the purpose of contradicting or fortifying the paradigm in marketing research about the superior contribution of market orientation to performance (Grinstein, 2008). However, empirical studies have shown mixed results about the linkage between market orientation and performance, several studies have tried to assess how alternative strategic orientations are related to market orientation and how these relationships have an impact on the firm performance (Noble et al, 2002; Grinstein, 2008). These studies suggest that research should be shifted from the binomial relationship of market orientation-performance toward the multiple orientations performance form. However, few studies have used more than one strategic orientation (Grinstein, 2008; Hakala, 2011), so this field remains open and researchers are encouraged to deepen in this research field.

    Even though a significant amount of literature has been developed over the last two decades regarding strategic orientations, few qualitative studies can be founded. The present case study has the purpose of collaborating to the understanding of how managers set up a competitive strategy for the firm; how top management contributes to set up this competitive strategy and how a firm relates strategic orientations in order to enhance its performance. Company X (Real name is disguised for confidentiality reasons) was selected for the case study by two main reasons; on April of 2012, they received from Endeavor Global -an international organization devoted to catalyze long-term economic growth by selecting, mentoring and accelerating the best high-impact entrepreneurs around the world (Endeavor, 2013)-the International Endeavor Entrepreneur Certificate, which is an international distinction for innovative enterprises around the world. Second, this company received the highest number of mentions when it was asked what firm was considered an extraordinary example of success in the metropolitan area of Guadalajara, considering the opinion of several local businessmen.

    The study is organized as follows: section two describes the theoretical framework for the case study, setting the knowledge background. In section three, the methodology is presented and the results are presented in section four. The discussion, theoretical and practical implications are presented in the final section.

    THEORETICAL FRAMEWORK

    Resource-based View

    Businesses are always trying to advance in their competitive advantage in order to survive and thrive. The resource-based view theory (RBV) claims that firm's resources influence performance and hence, provide a competitive advantage for the firms. Resources are defined as physical assets, intangible assets, and organizational capabilities that are tied semi-permanently to the firm (Wernerfelt, 1984), but if these resources can provide a competitive advantage in a short term, a sustainable competitive advantage is required for these resources to be heterogeneous in nature (Peteraf, 1993). When resources become neither perfectly imitable nor substitutable without great effort, they are considered resources that can be labeled like valuable, rare, in-imitable and non-substitutable (Barney, 1991).

    From the RBV perspective, the strategic orientation of the firm has been considered an important business capacity (Zhou et al., 2005; Hult and Ketchen, 2001), and if this capacity can be translated into a rare, valuable and in-imitable resource, it is possible for the firm to acquire a competitive advantage (Hult and Ketchen, 2001). Four strategic orientations have been acknowledge to provide a significant impact on firm performance: market orientation (MO), entrepreneurial orientation (EO), learning orientation (LO) and technology orientation (TO) (Calantone et al.; Hakala, 2011).

    Market Orientation

    Market orientation can be viewed as the activities of the organization that effectively create the behaviors required for superior performance (Kohli & Jaworsky 1990; Narver & Slater 1990). Two different approaches have been identified by scholars regarding market orientation. The first one appreciates market orientation related to the organization-wide generation and dissemination of market information and the response to that information. The second one splits market orientation into elements of customer and competitor orientation (Kohli & Jaworsky 1990; Narver & Slater 1990). Market orientation may be perceived as a hybrid construct containing elements of exploration, but emphasizing exploitation of market opportunities. There is evidence of a positive link between market orientation and firm performance, although it is a link that may require the support of entrepreneurial behavior in high-technology industries (Renko, Casrud and Brannback, 2009).

    Entrepreneurial Orientation

    Entrepreneurial orientation is a strategic orientation which captures the specific entrepreneurial aspects of a firm's strategy (Covin & Slevin 1989; Lumpkin & Dess 1996). The entrepreneurial tendencies toward risk-taking, innovativeness and proactiveness are considered central to entrepreneurial orientation. The main proposition of entrepreneurial orientation is that organizations acting entrepreneurially are more able to adjust their operations to dynamic competitive environments (Covin & Slevin 1989). Entrepreneurial oriented organizations shape the environment and are willing to commit resources to exploit uncertain opportunities. They explore new and creative ideas which may lead to changes in the market place, and do so proactively ahead of the competition in anticipation of future...

To continue reading

FREE SIGN UP