Discuss about the Market Orientation and Profitability for Customer Purchasing.
The modern business environment has undergone significant changes. Particularly, competitive attributes of the present business setting forces enterprises to restructure their investment strategies. Currently, the customer has emerged as the key factor in defining the profitability and competitiveness of firms. As a result, firms are increasingly shifting from being product-oriented to being market-oriented in their business strategy. Market orientation makes enterprises to focus on meeting the needs and wants of customers. In this strategy, the desires of the customers are the centre of all the activities undertaken by enterprises. Consequently, it is instrumental to ascertain how market orientation affects a firm’s profitability. Scholars illustrate contrasting opinions on the relationship between a market orientation and profitability. A section of scholars points out that market-orientation increases a firm’s profitably while other refute this stance. Despite these varied opinions, market orientation increases the profitability of enterprises by allowing them to produce products that align with needs of the customers thus enhancing their sales volumes.
A positive correlation exists between a firm’s profitability and customer purchasing activities. Precisely, the higher the customers’ purchasing actions, the higher a firm’s profitability. Since market orientation makes firms attractive to customers, it increases the sale volumes. Clients procure goods or services that they believe fit their needs (Slater & Narver, 2000). Consequently, firms that utilise market-orientation attract more customers than those that use product orientation as they offer products and services suites the needs of consumers. Zhou, Brown, and Dev (2009) agree that market orientation allows enterprises to offer differentiated and quality services thus making them highly competitive. In a business environment where enterprises produce almost similar products and services, customers only select those that they feel satisfies their desires. Besides, Mullins et al. (2014) confirm that the customers’ purchasing actions define a firm’s profitability. Firms which is not attractive to customers experience low sales which lower their profits. Consequently, market orientation increases the profitability of enterprises by making them more attractive to customers.
Enhancing the competitive abilities of an enterprise is one of the fundamental ways of warranting profitability ( Dobbs, 2014). An uncompetitive enterprise struggles to make profits as it is subdued by its competitors. In his model, highlight issues such as customers, competitors, and substitute products as being the essential forces that define competitiveness of an enterprise ( Dobbs, 2014). Consequently, market-orientation empowers a firm to lower the influence of its competitors by offering products and services that fit the desires and preferences of the customers. Moreover, Ozkaya et al. (2015) acknowledge that market orientation improves the relationship between a firm and its customers as well as enabling it to produce in-demand services and products by interacting with the customers. In reality, most of the market-oriented enterprises are knowledge about the changing and emerging trends in the markets as they have a cordial relationship with the customers. As a result, such enterprises offer unique products and services that allow them to control the prices, thus enhancing their profitability.
Besides, market orientation is empowers enterprises to correctly predict the future desires of the customers. In their analysis, Ozkaya et al. (2015) point out that the intimate relationship that market-oriented enterprises have with their clients enables them forecast the future tendencies in shoppers’ behaviours. Also, this strategy makes firms to be impartial in their production and service delivery by focusing on matters that are in high demand. Consequently, this trait allows enterprises to exploit on the market forces of demand and supply. According to Kealeboga, Job, and Nelson (2017), high demand increases a firm’s profitability by increasing sale volumes. In this respect, market orientation enhances the profitability of enterprises by enabling them to produce products and services that are in high demands. By utilising market research, market-oriented enterprises invent new products and services that align with the preferences of the customers thus increasing their profitability.
Essentially, market-orientation increases the profitability of enterprises by enhancing the trust of customers in a firm. In their article, Cheung, Xiao, and Liu (2014) highlight that customers’ purchasing decision is not solely based on product or service quality. Factors such the relationship between an enterprise and its customers also affect purchasing decisions meaningfully. Consequently, market orientation enables enterprises to enhance their customer loyalty by spotting and addressing any flaws affecting their bond with consumers in the right time and sufficiently. As a consequence, clients of market-oriented firms tend to ignore products or services from other enterprises as a result of the special connection that they possess with the enterprises. Umashankar, Bhagwat, and Kumar (2017) in their research endorse that loyal customers are insensitive to prices enabling enterprises to increase their revenue generation. Market orientation enable firms to improve the attitudinal loyalty of their clients. Specifically, this tactic makes the clients move their focus from the price to reward and convenience. For instance, experts attribute Samsung’s outstanding profitability to market orientation. As such, market orientation improves the profitability of enterprises by making customers insensitive to prices by enhancing their loyalty.
However, market-orientation can also impact on the profitability of an enterprise undesirably. Practically, profitability is shaped by the cost and revenue factors (Lun et al., 2016). Moreover, profitability is also influenced by enterprise resource abilities. In spite of the fact that it is instrumental to address the wishes of the customers, some of these desires can makes firms to incur significant losses. The primary role of an enterprise is to make profits. As a result, enterprises tend to engage in activities that are profitable. In this respect, market orientation can lower the profitability of a firm by leading it to invest in areas that exceeds its resource capability in a move to satisfy its customers’ desires. Unlike investors or enterprises, customers have inadequate knowledge on how enterprises operate. Customers do not care if the enterprises make profits or losses. Instead, consumers focus only satisfying their desires. As a result, Frösén et al. (2016) advise that enterprises should conduct a comprehensive cost-benefit analysis before implementing the insights from their customers to avert their risk of incurring substantial financial losses.
Consequently, Frösén et al. (2016) state that market orientation is beneficial and detrimental to a firm’s profitability depending on how it is utilised. This view direct that enterprises need to be cautious about the desires of their customers that the implement. Precisely, managers need to make sure that they attain a balance between the wishes of the customers and those of the firm. In reality, an idea may be unviable in the present but profitable in the future. As such, enterprises need to integrate customer insights into their strategic planning actions. Besides, addressing customer desires is not the only way increasing a company’s profitability. According to Mullins et al. (2014), profitability is a complex concept that is influenced by multiple factors such as customer desires, cost of production, competition, and marketing strategies. In this respect, it is a vital for an enterprise to be inclusive in its production or service delivery decisions. However, satisfying customer desires remains a fundamental principle in enhancing enterprise profitability.
Conclusively, market orientation enhances enterprise profitability. This approach permits firms to provide products and services that satisfy desires of the customers. As a consequence, market-oriented enterprises illustrate high profitability as a result of sales increase, customer loyalty, and invention of in-demand products and services. Nonetheless, firms need to be vigilant on the customer preferences that they implement to avert losses. In this respect, it is advisable for enterprises to conduct a thorough analysis to establish the viability and profitability of implementing the wishes of their clients.
References
Dobbs, M. E. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.
Cheung, C. M., Xiao, S. B., & Liu, I. L. (2014). Do actions speak louder than voices? The signalling role of social information cues in influencing consumer purchase decisions. Decision Support Systems, 65, 50-58.
Frösén, J., Luoma, J., Jaakkola, M., Tikkanen, H., & Aspara, J. (2016). What counts versus what can be counted: The complex interplay of market orientation and marketing performance measurement. Journal of Marketing, 80(3), 60-78.
Kealeboga, S. T., Job, L. K., & Nelson, T. M. (2017). Profitability of Small Scale Vegetable Production in Southern District, Botswana. Journal of Agricultural Studies, 5(1), 35-49.
Lun, Y. V., Shang, K. C., Lai, K. H., & Cheng, T. C. (2016). Examining the influence of organisational capability in innovative business operations and the mediation of profitability on customer satisfaction: An application in intermodal transport operators in Taiwan. International Journal of Production Economics, 171, 179-188.
Mullins, R. R., Ahearne, M., Lam, S. K., Hall, Z. R., & Boichuk, J. R. (2014). Know your customer: How salesperson perceptions of customer relationship quality form and influence account profitability. Journal of Marketing, 78(6), 38-58.
Ozkaya, E. H., Droge, C., Hult, G., Calantone, R., & Ozkaya, E. (2015). Market orientation, knowledge competence, and innovation. International Journal of Research in Marketing, 32(3), 309-318.
Slater, S. F., & Narver, J. C. (2000). The Positive Effect of a Market Orientation on Business Profitability: A Balanced Replication. Journal of Business Research, 48(1), 69-73.
Umashankar, N., Bhagwat, Y., & Kumar, V. (2017). Do loyal customers really pay more for services?. Journal of the Academy of Marketing Science, 45(6), 807-826.
Zhou, K. Z., Brown, J. R., & Dev, C. S. (2009). Market orientation, competitive advantage, and performance: A demand-based perspective. Journal of Business Research, 62(11), 1063-1070.
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