Burning Ideas

Market-driven companies, or those with a strong market orientation, are superior in two important ways. First, market-driven companies do a better job of market sensing, or anticipating market requirements ahead of competition. Market sensing is the gathering of information from the market. Market research, is one form of market sensing, but market sensing can be achieved through listening to the sales force, observing competition at trade shows, and developing stronger ties with innovative customers and suppliers.

Similarly, the second important difference is that market-driven companies are able to develop stronger relationships with their customers and their channels of distribution. Stronger relationships include more direct lines of communication; instead of all communication going between a purchasing agent and a salesperson, interaction among engineers in all three firms (customer, manufacturer, and supplier) can occur. Stronger relationships can result in greater attention to the customer throughout the firm.
Research indicates several outcomes of a market orientation. Increased profit is one outcome, although increased market share does not necessarily follow a market orientation. That higher profit is due to the better pricing and product development that occur because of market orientation. In fact, in studies conducted in Japan, India, Australia, the United States, and Hong Kong, market orientation was found to influence performance.

A market orientation influences performance more in economies or industries that are rapidly changing. There is some evidence from transitional economies, such as Ghana or China, that firms with market orientations may last longer and respond better to dynamic economies. In stable markets, market orientation seems to be less important, but there are few markets that stay stable. As competition grows more fierce, market orientation becomes essential.
Companies that want to adopt a market orientation must have adequate spanning processes, processes that link internal processes with the customer. New product development is one such spanning process, as it links market requirements with internal processes such as manufacturing. All companies have new product development processes; the difference is how the process incorporates the voice of the customer. For internal processes to contribute to the value delivered by the value chain, there must be adequate spanning processes.