Directory UMM :Data Elmu:jurnal:J-a:Journal Of Business Research:Vol50.Issue3.2000:

Market Orientation in the Transition
Economies of Central Europe:
Tests of the Narver and Slater Market
Orientation Scales
Graham Hooley
ASTON BUSINESS SCHOOL

Tony Cox
ASTON BUSINESS SCHOOL

John Fahy
UNIVERSITY OF LIMERICK

David Shipley
TRINITY COLLEGE

József Beracs
BUDAPEST UNIVERSITY OF ECONOMIC SCIENCES

Krzysztof Fonfara
POZNAN UNIVERSITY OF ECONOMICS

Boris Snoj
UNIVERSITY OF MARIBOR

The Narver and Slater (Narver, J.C., and Slater, S.F.: The Effect of
Marketing Orientation on Business Profitability. Journal of Marketing
54 (1990): 20–35.) market orientation scale is tested in the context of
the transition economies of central Europe and found to be both valid
and reliable. Relationships between market orientation and both marketing
strategy and performance broadly follow predictions from the Western
literature indicating that the adoption of a market orientation is equally
applicable in transition as in Western economies. A number of different
approaches, however, are evident in the transition economies suggesting
that other business orientations may coexist with a market orientation
creating a richer and more complex set or organizational drivers. J BUSN
RES 2000. 50.273–285.  2000 Elsevier Science Inc. All rights reserved.

T

here has been a great deal of recent research in the

area of market orientation following the seminal works
of Narver and Slater (1990) and Kohli and Jaworski

Address correspondence to Professor Graham Hooley, Aston Business School,
Aston University, Birmingham B4 7ET, United Kingdom.
Journal of Business Research 50, 273–285 (2000)
 2000 Elsevier Science Inc. All rights reserved.
655 Avenue of the Americas, New York, NY 10010

(1990). Researchers such as Hart and Diamantopoulos (1993),
Cadogan and Diamantopoulos (1995), Greenley (1995a,
1995b), Siguaw and Diamantopoulos (1995), and Gray, Matear, and Matheson (1998) have tested, developed, and refined
the early market orientation scales to create useful tools for
measuring the degree of market orientation Western firms
exhibit. To date, however, there has been relatively little research into the extent of market orientation in developing
economies in general and the transition economies of central
Europe in particular. The question remains whether the construct is equally applicable in such different and turbulent
environments.
Gray, Matear, and Matheson (1998) summarize the findings of recent market orientation studies, concluding that only
a small number have investigated the moderating effects of

environmental variables on the relationship between market
orientation and performance. Those that have searched for
such moderators, however, generally have found them. Researchers in the United States and other developed economies
have found that the relationship between market orientation
and performance is stronger in cases of high market and
technological turbulence (Slater and Narver, 1994; Greenley,
ISSN 0148-2963/00/$–see front matter
PII S0148-2963(99)00105-8

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1995b; Doyle and Wong, 1996; Cadogan, Diamantopoulos,
and Siguaw, 1998). The explanation appears to be that in
more turbulent markets managers need to be more sensitive
to market changes (Gray, Matear, and Matheson, 1998).
The transition economies of central Europe exhibit a high
degree of environmental turbulence. Three macroeconomic

indicators in particular point to the turbulence of the economies of the region: fluctuating growth rates, rising unemployment, and high levels of inflation.
The first factor has been the large, and relatively difficult
to predict, swings in economic performance and growth rates.
In Hungary, for example, the decline in GDP of 11.9% in
1991 was halted by 1993 and reached an annual growth rate
of 1.3% by 1996. In Poland, decline of 11.6% in GDP in
1990 was converted to strong growth of approximately 7%
per annum (pa) by 1995. Slovenian GDP decline peaked at
8.9% in 1991 and by 1996 was showing an annual growth
of 3.1%. Future predictions remain, however, subject to wide
margins of error. A second factor has been the significant rise
in unemployment rates, a phenomena not known (or at least
not officially acknowledged) during the period of central planning. In Hungary unemployment rose from 2% of the workforce in 1990 to 10% in 1996, whereas in Poland the rise
over the same period was from 6% to 11% (with a peak of
16% in 1993–94). In Slovenia, unemployment rose from 5%
in 1990 to 14% in 1996. The rapid rise of unemployment
has created a great deal of insecurity that has translated itself
to the marketplace. The third factor is inflation. The economic
shock measures taken in 1989–90 in Poland and Slovenia
resulted in exceptionally high rates of inflation in those years

(590% in Poland and 550% in Slovenia). Although never
reaching such levels since, inflation continues to be a significant factor in all economies of the region. In Hungary, annual
inflation peaked at 35%pa in 1991 but has stabilized at approximately 20%pa since. In Poland, the annual rate was
brought down to 19% in 1996 and in Slovenia to 9% in 1996.
Despite the success in reducing inflation levels, they remain
significantly higher that in many Western, developed economies (see Business Central Europe, 1998).
Hooley et al. (1998) have discussed the microeconomic,
or industry specific environment facing firms in the region.
This is characterized by increasingly price sensitive customers
(directly related to the economic and employment pressures
noted above) demanding better quality products and services.
Because of the deregulation of markets and the encouragement
of inward investment (especially in Hungary and Poland),
customer choice is increasing, and new market segments are
beginning to emerge; new products are coming to market
more rapidly, and new technologies are being introduced. All
these factors lead to markets experiencing rapid, and often
unpredictable, change. In short, highly turbulent markets resulted. Under such circumstances, the relationship between
market orientation and performance might be expected to be
strong.

G. Hooley et al.

If market orientation is a reliable and valid construct, it
should be applicable in environments and economies other
those in which it originally was developed and tested. Testing
and extension of the construct to date has largely occurred
in similar, Western developed economies. This study set out to
investigate the reliability and validity of the market orientation
construct in the very different economic and business environments of central Europe. Specifically content validity was assessed through the use of in-depth interviews with managers,
nomological validity was assessed through the ability of the
market orientation construct to perform as predicted by marketing theory with relation to other strategy constructs, including performance, and internal reliability and consistency of
the scale was assessed through the use of split-half testing by
using Cronbach’s coefficient alpha (see Malhotra, 1996).

Theoretical Background and
Research Propositions
Building on earlier theoretical and empirical work (e.g., Houston, 1986; Shapiro, 1988; Day and Wensley, 1988; Deshpande
and Webster, 1989), two significant approaches to measuring
market orientation emerged in the early 1990s. Kohli and

Jaworski (1990) conceptualized market orientation as the acquisition of, dissemination of, and organization-wide responsiveness to, market intelligence. Their approach was further
refined in Kohli, Jaworski, and Kumar (1993) and Jaworski
and Kohli (1993, 1996). In parallel, Narver and Slater (1990)
and Slater and Narver (1994, 1995, 1996) developed market
orientation as a unidimensional construct (a single scale) with
three underlying behavioral components (customer orientation, competitor orientation, and interfunctional coordination).
Both the Kohli and Jaworski’s and Narver and Slater’s approaches have been tested and refined in the literature (see,
e.g., Hart and Diamantopoulos, 1993; Deng and Dart, 1994;
Siguaw and Diamantopoulos, 1995; Greenley, 1995b). The
Narver and Slater (1990) scale, in particular, is both conceptually and operationally appealing because it encapsulates the
main aspects of the Kohli and Jaworski intelligence gathering,
dissemination, and responsiveness constructs while at the
same time assessing cultural factors (see Deshpande, Farley,
and Webster, 1993; Hunt and Morgan, 1995). In addition,
Wrenn (1997) has pointed out that the Kohli and Jaworski
(1990) construct more accurately reflects marketing orientation (the implementation of the marketing concept) than market orientation (a concern with both customers and competitors). Below, we term the Narver and Slater scale “MO” for
brevity.
The substantive issue for this research was to assess both
the reliability and the validity of the MO construct in the
turbulent economies of central Europe. If the scale is to be

adopted as a measure of MO in environments other than those

Market Orientation in Central Europe

in which it was developed, it must be demonstrated to be
both valid and reliable.
Validity concerns the ability of a construct to measure what
it purports to measure (Malhotra, 1996) and can be tested in
a number of ways. Most basic is content validity, assessing
the extent to which it appears to contain all relevant aspects
of the phenomenon under study. Assessing content validity
perhaps is best approached through qualitative research and
probing and exploring meaning and comprehension. Nomological validity concerns the relationship between the construct and other theoretically related constructs. Essentially
the issue is “does the construct behave as predicted by theory
with regard to other phenomena?” Reliability is the extent to
which a measurement is replicable (Malhotra, 1996). Internal
reliability can be tested through split half analysis by using
Cronbach’s alpha coefficient of reliability.
To test the nomological validity of the construct in central
Europe, we developed a number of propositions from the

Western marketing literature concerning the theoretically expected behavior of the construct with relation to other marketing and strategy constructs. First, the links between market
orientation and marketing strategies pursued were addressed.
Hunt and Morgan (1995), for example, suggest that market
orientation is likely to guide the choice of marketing strategy.
The recent strategy literature (see, for example, Kotler, Fahey,
and Jatusripitak, 1985; Doyle, Saunders, and Wong, 1986;
Doyle and Hooley, 1992; Doyle, Saunders, and Wong, 1992;
Porter, 1996; Doyle, 1998) has drawn attention to the shortterm, financial orientation of many firms in the West compared
with the longer term, market domination goals of many Southeast Asian firms (though recent economic problems in Southeast Asia may lead to a reevaluation of these perspectives).
Doyle and Hooley (1992) report greater emphasis on longterm market position building rather than short-term financial
returns by market oriented firms. Wong and Saunders (1993)
report an emphasis on competitive aggression amongst more
market-oriented firms. Davidson (1997) also suggests that
more market-oriented firms will exhibit a greater degree of
aggression in their markets. Similarly, a growing number of
researchers (e.g., Abrahams, 1996; Doyle, 1995; Porter, 1996)
have expressed concerns that excessive internal focus on efficiency (doing things right and at minimum cost) may be at
the expense of an external perspective on effectiveness (doing
the right things in the first place). These lead to the first
proposition designed to test nomological validity:

P1: Firms exhibiting a higher degree of market orientation
will exhibit more aggressive, externally focused, longterm strategic priorities than less market-oriented
firms.
The next set of issues of interest center around the implementation of the marketing strategy. Following Webster’s
(Webster, 1992) conceptualization of three levels of marketing
(orientation or culture, strategy definition, and operational

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implementation), the issues of strategy definition were addressed through examination of competitive positioning
choices. With regard to targeting, firms are faced with a number of options along a targeting continuum. At one end of
the continuum, firms might attempt to market their offerings
across the whole, mass market. In undifferentiated and unsegmented markets, such as commodity markets, this approach
may make good strategic sense because it maximizes the potential market for the offerings (Porter, 1985). The other end
of the spectrum, typically adopted by firms operating in highly
fragmented markets, is to target individual customers. Firms
operating in high value markets where individual customers

represent high potential returns (such as accountants working
with valuable corporate clients) know they need to tailor their
products and services closely to the needs of these individual
customers. Recent developments in one-to-one and direct
marketing (see Peppers and Rogers, 1994) recognize that many
markets are moving in this direction (see Payne, Clark, and
Peck, 1995). Between these two extremes, however, lie most
current markets and marketing where customers can be usefully grouped to form relatively homogeneous market segments and marketing efforts focused or targeted accordingly
(Brown, 1993; McDonald and Dunbar, 1995; Hooley, Saunders, and Piercy, 1998). A high degree of MO implies a greater
level of understanding of, and responsiveness to, the specific
needs of customers and therefore is likely to be associated
with a more focused, or targeted, marketing approach. The
second proposition can be stated:
P2: Firms exhibiting a higher degree of market orientation
are likely to pursue more focused and targeted approaches in their marketing than less market-oriented
firms.
A further pillar of current strategic thinking is the need to
create and exploit competitive advantage. Early theories of
competitive advantage (see Porter, 1980, 1985) stressed product differentiation or cost leadership as means of creating
competitive advantage. More recent theories stress the importance of service provision, even in predominantly productbased markets (see, e.g., Levitt, 1986; Peters, 1986; Berry
and Parasuraman, 1991; Grönroos, 1994; Morgan and Hunt,
1994; Zielke and Pohl, 1996). Thus, whereas physical product
quality might be at parity with competitor offerings, differentiation and advantage might be achieved through superior service or lower prices. The competitor orientation component
of the MO construct would suggest that more market-oriented
firms will seek to differentiate their offerings from competitors.
This leads to the third proposition:
P3: Firms exhibiting a higher degree of market orientation
are more likely to seek to differentiate their offerings
from those of competitors (through product quality
differences, service provision, or pricing) than their
less market-oriented counterparts.

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Finally, our interest turns to the links between market
orientation and performance. A high degree of consensus has
now emerged in the literature concerning the links between
market orientation and firm performance. The marketing literature (see, e.g., Kohli and Jaworski, 1990; Narver and Slater,
1990; Ruekert, 1992; Hart and Diamantopoulos, 1993; Jaworski and Kohli, 1993; Hooley and Lynch, 1994; Slater and
Narver, 1994, 1996; Doyle and Wong, 1996; Pelham and
Wilson, 1996; Avlonitis and Gounaris, 1997; Cadogan, Diamantopoulos, and Siguaw, 1998; Gray, Matear, Matheson,
1998) suggests that more market-oriented firms outperform
their less market-oriented competitors.
Scholars from other research traditions, however, such as
the resource based view of the firm, dispute this (see Grant,
1991, 1995) suggesting that sustainable superior performance
comes primarily through an internal focus on capabilities and
resources rather than an external focus on customers. Day
(1994) has attempted to reconcile these two opposing views
by pointing out that resources only assume value in creating
sustainable competitive advantage if they are deployed to create something of value to customers.
It also has been suggested (Day and Wensley, 1988) that a
competitive environment could moderate the effects of market
orientation on performance and that market orientation may
only be necessary for superior performance in some environments (see discussion above). Given the highly turbulent nature of the market environment in central Europe, the final
proposition is:
P4: Firms exhibiting a higher degree of market orientation
will outperform their less market-oriented counterparts.
The above propositions, developed from the Western marketing literature are designed to test the nomological validity
of the market orientation construct as measured using the
Narver and Slater (1990) scale.

Methodology and
Construct Development
To test the above propositions, we undertook fieldwork in
the transition economies of central Europe during 1995 and
1996. As stated above, the transition economies exhibit a high
degree of environmental turbulence and change, and hence
a context in which to test the propositions. Indeed, Grant
(1995), a leading proponent of the resource based view of
the firm, has stated:
In general, the greater the rate of change in a company’s
external environment, the more it must seek to base longterm strategy upon its internal resources and capabilities,
rather than upon an external market focus.
The above would imply a severe test for the market orientation construct in such economies.

G. Hooley et al.

A two-stage research design was considered most appropriate for testing the reliability and validity of the Narver and
Slater market orientation scale in the transition economies.
First, in-depth, qualitative research of a case study nature was
undertaken to assess the content validity of the scale and to
both develop and test the other constructs of interest. Through
a series of personal interviews between local research colleagues and senior managers, conducted in the local language,
the constructs were presented, discussed, and, where necessary, refined. This was deemed essential to ensure that the
research did not simply superimpose Western, developed
economy preconceptions in these different market environments.
The second stage consisted of a quantitative survey of a
broader, more representative sample of companies to test the
nomological validity and reliability of the market orientation
construct. Data gathered during this second stage were used
for the quantitative analyses reported below that set out to
test both by using established procedures.
Data collection and construct development are discussed
in more detail below.

Data Collection
Data were collected in two phases in each country. First, a
series of in-depth case studies were researched by local academics covering issues of market orientation, marketing strategy, marketing implementation, performance, issues relating
to the privatization process and foreign direct investment
(where applicable). In Hungary, 11 cases were completed, in
Poland 12, and in Slovenia 11. The cases were conducted in
a variety of industries including retailing, electronics, and
brewing. Because the cases were exploratory, no attempt was
made to create a representative sample of businesses in the
region. Rather, a broad cross-section was attempted.
The second phase of the research was quantitative in nature
by using structured questionnaires administered through
mailed surveys. Questionnaires were developed first in English
for use in the three countries under investigation. They then
were translated into local languages by the local academics
and tested on independent executive directors of local firms.
After testing, a number of minor modifications were made to
the questionnaires to correct misinterpretation.
The study focused on enterprises employing 20 people
or more. In Hungary, a mailing sample of 3,000 firms was
constructed. In Poland, the sample was of 2,000 firms. In
Slovenia, the population of firms employing over 20 people
was 1,581, and all were surveyed. In the cases of Hungary
and Poland, the samples were constructed from official mailing
lists and designed to be broadly representative of industry
categories, firm sizes, and ownership types (state-owned as well
as recently privatized, former state-owned firms, those with part
or full foreign ownership and “organic” start-up firms).
The questionnaires were dispatched in three waves addressed to chief executives in autumn 1996. Each question-

Market Orientation in Central Europe

naire was accompanied by a covering letter, requesting cooperation, guaranteeing anonymity and indicating the importance
of participation. Reply paid envelopes also were included for
return of completed questionnaires,and respondents were offered a free copy of the summary results as a further inducement to participate. By the cutoff date of end December 1996,
a total of 1,619 responses had been received. The response
rate varied by country with 629 from Slovenia (40% response
rate), 589 from Hungary (20%), and 401 from Poland (20%).
The higher response rate in Slovenia may indicate the relatively
low level of academic research amongst businesses conducted
in the country compared with the more extensively research
Polish and Hungarian businesses. Samples were found to be
broadly representative in terms of industry sectors but there
was a slight bias towards larger firms.

Constructs
The market orientation scale developed in the United States by Narver and Slater (1990) was
used as the basis for measuring market orientation in central
Europe. The parsimonious set of key indicators of market
orientation covering the three underlying components of customer orientation, competitor orientation, and interfunctional
coordination was presented to respondents as seven-point
scales where 1 5 strongly agree, and 7 5 strongly disagree.
Two approaches to computing overall market orientation
have been adopted in the literature. In the original Narver
and Slater (1990) approach, orientation was calculated first
on three separate scales (customer orientation, competitor
orientation, and interfunctional coordination) and then averaged across the three scales to give one market orientation
score for each firm. Reliability tests on each subscale produced
alphas above 0.7 indicating each scale was separately reliable
(Nunnally, 1967). The averaging across the three separate
subscales implies equal weight given to each of the three
underlying components. Other researchers, however, (e.g.,
Deng and Dart, 1994) suggest that different weightings should
be given to the components, specifically more weight attached
to customer orientation than the other two dimensions.
The second approach (Greenley, 1995b) has been to average across the original scales directly rather than using subscales as intermediaries. Given that six of the fourteen items
are components of customer orientation, whereas four each are
components of competitor orientation and of interfunctional
coordination, this approach automatically gives greater weight
to the customer orientation items (six-fourteenths of the overall market orientation score rather than one-third). To test
the reliability of the MO scale, we collected data on the 14
original scale items and analyses performed both on the separate components and on the composite scale.

MARKET ORIENTATION.

Business Approach
Through the initial, in-depth interviews, it became clear that
Western conceptualizations of strategic orientation were lim-

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277

ited in their power to explain the diverse approaches and
priorities apparent in the transition economies. In particular
a number of respondents expressed the view that their main
objectives, and the strategies they subsequently adopted, were
to provide security and continuity of employment for their
managers and employees, an approach not specifically addressed in the market orientation scales developed in the West.
A further approach to strategic orientation assessment, originally developed by Kotler (1977) as an approach to assessing
marketing effectiveness (see Hooley, Lynch, and Shepherd,
1990; Norburn et al., 1990) has been used successfully in
Southeast Asia (Huang et al., 1992), western Europe (Willenborg, Alsem, and Hoekstra, 1998) and eastern Europe (Marinov
et al., 1993). This approach attempts to uncover orientation
through presenting respondents with a set of alternative priorities and asking them to indicate the statement that most closely
describes their company’s approach to doing business. The
review of previous research in the region and the preliminary
interviews conducted revealed seven alternative orientations,
or sets of priorities (see Table 2). These were carefully worded
to use the language of the respondents and tested through
the pilot survey. After refinement, they were incorporated in
the main survey, and their association with the MO scale was
assessed.

Strategic Priorities and Objectives
The in-depth case studies in the transition economies revealed
that many firms were simply setting their sights on survival
as their prime objective in the difficult trading conditions of
the mid-1990s. A three-point construct therefore was developed to encapsulate the three main priorities emerging
through both the literature and this specific study: survival,
short-term profit orientation, and longer term building of
market position.
Hooley, Saunders, and Piercy (1998) discuss strategic focus. They identify two underlying alternatives, the second of
which has two subalternatives. The basic distinction is between an internal, efficiency focus, and an external, market
development focus. Under the former, the firm is driven by
the constant need to find economies in its actions and operations. This may lead to reductions in product variety and
tight control over marketing investment expenditures (such
as customer relationship building, promotional activities, and
marketing research). Under the latter, market development
focus firms seek either to expand their total market (typically
a strategy adopted during the introductory and growth stages
of the market life cycle) or to win a greater share of the market
from their competitors (more often pursued once growth of
the total market has been exhausted, during maturity and
decline). The three alternatives (efficiency focus, market
expansion focus, and market share focus) were tested in the
in-depth interviews and the pilot studies and shown to encapsulate the views of the respondents.
Whereas priorities were conceptualized according to time

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horizon addressed, the marketing objectives being pursued
centered around the degree of aggression pursued in the market place. Kotler and Singh (1981) have emphasized the fundamental differences between attack and defense strategies.
Three broad sets of marketing objectives emerged from review
of the literature and the in-depth interviews: defense of current
position, the achievement of steady sales growth, and the
achievement of more aggressive growth to dominate the
market.

Marketing Strategy Variables
A central tenet of marketing theory (see Brown, 1993; McDonald and Dunbar, 1995) is focus or targeting. As discussed
above, targeting decisions fall along a spectrum from targeting
the whole market to targeting individual customers. Based on
the preliminary case studies, and drawing on previous work
on targeting in central Europe (see Hooley, Beracs, and Kolos,
1993), three levels of targeting were examined: attack the
whole market, attack selected market segments, and target
specific individual customers. These encapsulate the main
alternatives open to firms.
Competitive positioning (see Ries and Trout, 1981; Hooley,
Saunders, and Piercy, 1998) was explored on three main
dimensions: technical product quality, level of customer service and support offered, and pricing. All were measured
compared to major competitors in the firm’s own market
sector. Conceptually, it is possible for each to be higher, the
same, or lower than major competitors.

Performance
Initially, performance was measured in financial terms as return on investment. This measure was very familiar to respondents (CEOs), and most were prepared to give return on
investment (ROI) results in categories. Percentage return on
investment provides a readily understood and accepted financial measure of commercial success. The categories selected
followed from the preliminary case research.
Absolute performance figures, however, such as ROI and
profit levels, sales volume, and market share, are notoriously
difficult to compare between firms of different sizes, operating
in different markets, using different accounting standards, and
defining their markets in different ways. For the purposes of
this study, therefore, performance also was measured on a
relative, as well as absolute, (ROI) basis.
First, performance was judged against original objectives
set. This shows the extent to which firms are achieving their
original goals and is consequently an indicator of managerial
satisfaction with results achieved. Second, performance was
judged against performance in the previous financial year.
This shows the extent to which firms are improving year on
year. Third, performance was judged against major market
competitors. This shows where firms are outperforming similar firms facing similar market conditions. Whereas the first
two comparators can be influenced by managerial expectations

G. Hooley et al.

(less ambitious managers may set less ambitious objectives)
and market or industry factors (it may be relatively easy to
improve performance in some industries, but more difficult
in others), this final set of performance measures compare
like with like and in many ways form the most useful measures
available. On each of the three bases, performance was judged
against four criteria, two financial (profit and ROI) and two
market based (sales volume and market share). Respondents
were asked to judge whether results on each were above,
below, or the same as budget, previous financial year, and
competitors. Scores were averaged over the four criteria for
each basis forming three performance scales of four items
each. Alphas were 0.76, 0.82, and 0.82 for each scale, respectively, all at acceptable levels.

Results and Discussion
Reliability of the
Market Orientation Scale
A total of 1,396 firms provided data enabling MO to be calculated. Initial analyses of the three underlying scales produced
an acceptable alpha (0.79) for the customer orientation subscale but unacceptable alphas (0.58 and 0.57, respectively) for
the competitor orientation and interfunctional coordination
subscales. This suggests that the separate scales are unreliable
as measures of competitor orientation and interfunctional coordination. Overall market orientation then was computed
following the procedure used by Greenley (1995b), as the
average score across the 14 scales. The alpha for the scale was
acceptable at 0.86 (see Nunnally, 1967), and item-to-total
correlations were all in the expected direction and statistically
significant demonstrating internal consistency of the scale (see
Table 1). The averaging across the 14 scales without the intermediary step of subscales also up-weights the customer orientation component of market orientation.
Across the 1,396 respondents that the overall market orientation (MO) score was computed, the mean orientation was
2.97 with a standard deviation of 0.94. The sample then was
divided into three roughly equal groups based on the market
orientation score labeled “high MO,” “medium MO,” and “low
MO” for further analyses. These three groups represented
significantly different levels of market orientation as measured
by the Narver and Slater scales.
Differences between the three MO groups were tested
across standard criteria. No differences in market orientation
category were found with regard to industry sector (10 standard SIC codes) or market type (consumer vs. industrial,
services vs. manufacturing, fast moving vs. durables). Small
but significant differences were found by size of enterprise.
Perhaps surprisingly smaller firms (less than 100 employees)
appeared slightly more market oriented whereas larger firms
(3001 employees) appeared less market oriented. This difference is due to the presence in the sample of state-owned firms
that are typically larger than their privately owned counter-

Market Orientation in Central Europe

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279

Table 1. Market Orientation (MO) Scale
Meana
(n 5 1396)

Standard
Deviation

Item-Total
Correlationb

Alpha if Item
Removed

2.56
3.28

1.40
1.86

0.64
0.49

0.83
0.85

2.03
3.06

1.29
1.59

0.61
0.64

0.84
0.83

2.82

1.71

0.54

0.84

3.69

1.96

0.44

0.85

2.58

1.40

0.68

0.83

2.78

1.60

0.65

0.83

2.56
3.51
3.45

1.41
1.73
1.78

0.59
0.66
0.62

0.84
0.83
0.84

3.29

1.71

0.64

0.83

3.02

1.56

0.62

0.83

2.93

1.64

0.43

0.85

MO Scale Characteristics

Mean

Standard
Deviation

MO (n 5 1396)
Low MO (n 5 442)
Medium MO (n 5 468)
High MO (n 5 486)

2.97
4.07
2.96
1.98

0.94
0.54
0.24
0.40

Market Orientation Item
Our commitment to serving customer needs is
closely monitored
Sales people share information about competitors
Our objectives and strategies are driven by the
creation of customer satisfaction
We achieve rapid response to competitive actions
Top management regularly visits important
customers
Information about customers is freely
communicated throughout the company
Competitive strategies are based on understanding
customer needs
Business functions are integrated to serve market
needs
Business strategies are driven by increasing value
for customers
Customer satisfaction is frequently assessed
Close attention is given to after sales service
Top management regularly discuss competitors’
strengths and weaknesses
Our managers understand how employees can
contribute to value for customers
Customers are targeted when we have an
opportunity for competitive advantage

a

Mean score on seven-point scale where 1 5 strongly agree and 7 5 strongly disagree.
Product moment correlations all significant at 0.001 level.
Cronbach alpha for scale 0.86

b

parts and because of their previous monopoly positions under
state planning that did little to encourage a market orientation.
Differences also were observed by country with Hungarian
firms scoring highest on the MO scale and Polish firms lowest.
These differences can be attributed to the longer and faster
pace of market reform in Hungary and to the relatively high
influx of foreign investment bringing in Western marketing
approaches and attitudes. They also may be related to differences in national privatization processes (see Cox et al., 1998).

Content Validity of the Scale
The case studies were used to explore local managers’ understanding of marketing terminology, concepts, and tools. In
particular, the appropriateness of the MO scales for measuring
orientation was preliminarily assessed during the case studies
as a first step in assessing content validity. Case investigators
explored alternative business goals and orientations. A key
finding from this stage was that, whereas the market orienta-

tion concept generally was understood, many managers indicated that their goals and subsequent guiding principles in
doing business were more complex. Specifically many mentioned the need to provide security of employment for managers and workers being a major driver. Others indicated that
decisions were driven primarily by a focus on short-term
financial goals, irrespective of market requirements. Still others suggested that they actually were implementing a market
orientation through focusing on producing technically the
best possible products in their industry. Thus, whereas the
market orientation concept demonstrated a degree of content
validity, it was clear that it was only one of many approaches
to doing business in central Europe.
Table 2 shows the relationship between the MO groups
and the answers to the business orientation question. The
spread of answers across the total sample is first of interest
indicating a wide variety of orientations prevalent in the transition economies.

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Table 2. Market Orientation and Business Approach

Use selling and advertising to help sell our
products and services
Endeavor to offer the best technical product in
our industry
Identify the demands and requirements of
customers and ensure our products and
services meet them
Concentrate on manufacturing efficiency to
achieve low unit costs to sell our products at
lowest possible prices
Use our assets and resources to maximize shortterm profits or other financial measures
Organize our activities to provide security and
continuity of employment for our staff and
employees
Provide the goods and services society in general
needs rather than simply satisfying individual
customers

Total Sample
(1371) (%)

Low MO
(436) (%)

Medium MO
(458) (%)

High MO
(477) (%)

12.0a

11.7

13.5

10.7

22.1

16.5

20.3

28.9

29.8

24.5

31.4

32.9

11.5

14.0

11.6

9.0

4.9

7.1

5.0

2.7

15.8

20.6

14.6

12.4

4.1

5.5

3.5

3.4

Chi-square 5 52.1, significance 5 0.0001.
a
Figures are column percentages.

The single most often cited approach approximates to a
customer orientation (identifying and meeting the needs of
customers) and as such would be expected to be closely related
to MO. Indeed, it is evident that the High MO group show
a significantly greater tendency to select this orientation than
Low MO firms (but not a significantly different tendency
than the Medium MO firms). There is also, however, a high
incidence of the High MO firms reporting a focus on offering
the best technical product in the industry (a classic product
orientation in the terminology of Doyle, 1998). Among the
Low MO firms, a relatively high proportion report a focus on
providing continuity of employment.
The results suggest that, whereas the questions in the MO
scale were considered relevant by managers in both the indepth interviews and the final survey, a high proportion of
firms more readily identified with other strategic orientations
when forced to choose the best description of their firm. This
suggests that measurement of MO alone is incomplete in
encapsulating strategic orientation in the transition economies. Indeed, it begs the question whether MO alone is adequate in other economies.
Recent research in the West has sought to take a stakeholder
perspective on orientation (see, e.g., Greenley and Foxall,
1996, 1997), and it is becoming increasingly evident that
different orientations are not necessarily mutually exclusive.
Simon (1996), for example, found that amongst his “hidden
champions” (mid-sized German firms that were world leaders
in their very focused market niches) a balance was struck
between a technical/innovations orientation and a high degree
of market sensitivity (market orientation). Wong and Saunders
(1993) also found that their better performers achieved a

balance between market and product orientation. Similarly,
Parkinson and Chambers (1998) found that market orientation and quality orientation were complementary rather than
contradictory orientations.
In the research reported above, it can be seen that the High
MO firms were almost equally divided in taking a customer
focus or a product quality focus in their operations. Thus,
market orientation and technical product quality orientation
are not necessarily mutually exclusive alternatives as suggested
in the mainstream marketing literature (see, e.g., Kotler, 1997;
Doyle, 1998). Similarly, nearly one-third of High MO firms
adopted other strategic priorities, most notably providing security and continuity of employment provision (an “employment orientation”). These different emphases also are not necessarily contradictory. Whereas measurement of the degree of
market orientation has been, perhaps understandably, a major
focus in the marketing literature, there has been relatively
little development of scales to measure other (complementary
and/or contradictory) orientations. Much as it is now recognized that firms can exhibit a degree of market orientation,
in the same way they may exhibit simultaneously a degree of
other orientations that, when combined, give a unique business orientation for the firm.

Nomological Validity
The nomological validity of the scale was assessed through
testing the propositions P1 to P4 developed above. Table 3
shows the responses to the three questions designed to test
the first proposition. In all three cases, a statistically significant
difference was found in the direction proposed.

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Table 3. Market Orientation and Strategic Priorities

Strategic Priorities over last two years
Survival
Good short-term financial returns or profits
Long-term building of market position
(Chi-square 5 39.5, significance 5 0.0001)
Strategic Focus over last two years
Focus on cost reduction and efficiency gains
Focus on expanding the total market for our
products
Focus on winning market share from competitors
(Chi-square 5 14.6, significance 5 0.01)
Marketing objectives
To maintain or defend our current position
To achieve steady sales growth
To achieve aggressive sales growth or to dominate the market
(Chi-square 5 26.0, significance 5 0.0001)

Total Sample (%)

Low MO (%)

Medium MO (%)

High MO (%)

(1372)
49.0
15.6
35.4

(437)
57.0
15.6
27.5

(460)
49.8
18.0
32.2

(475)
40.8
13.3
45.9

(1326)
58.4

(423)
62.9

(446)
59.2

(457)
53.4

30.5
11.1

29.6
7.6

30.3
10.5

31.7
14.9

(1391)
29.9
63.0

(440)
38.0
57.3

(466)
27.0
66.5

(485)
25.4
64.9

7.0

4.8

6.4

9.7

The High MO firms were more likely to adopt long-term
market position building goals, more likely to focus on winning market share and more likely to pursue growth or market
domination objectives. These all add up to a more aggressive,
long-term stance in their markets. The Low MO firms, on
the other hand, were more likely to focus on survival, cost
reduction and efficiency gains, and defensive objectives. Proposition P1 therefore is supported.
Targeting and positioning (see O’Shaughnessy, 1995) decisions are presented in Table 4. Statistically significant differences emerged with regard to targeting and product and service positioning, but not with regard to pricing. In addition,

note that the differences found in targeting contradict proposition P2. Indeed, whereas more than half of all firms surveyed
report the adoption of a target market approach (segments
and individuals), the High MO firms are more likely than
others to seek to attack the whole of their markets. An explanation might lie in their general levels of aggressiveness and
desire to dominate their markets.
Further analyses were able to shed more light on the finding. A later question in questionnaires concerned the degree
of product standardization or adaptation used across the markets in which the firm operates. Firms were asked to indicate
the extent of their agreement with the phrase: “We modify our

Table 4. Market Orientation and Marketing Strategy

Market targeting approach
Attack the whole market
Attack selected market segments
Target specific, individual customers
(Chi-square 5 22.17, significance 5 0.001)
Product positioning
Technical quality higher than main competitors
About the same as main competitors
Lower than main competitors
(Chi-square 5 41.28, significance 5 0.0001)
Service positioning
Service quality higher than main competitors
About the same as main competitors
Lower than main competitors
(Chi-square 5 59.78, significance 5 0.0001)
Price positioning
Price higher than main competitors
About the same as main competitors
Lower than main competitors
(Chi-square 5 3.63, Ns)

Total Sample (%)

Low MO (%)

Medium MO (%)

High MO (%)

(1388)
20.6
58.1
21.3

(439)
21.4
55.1
23.5

(465)
14.4
62.8
22.8

(484)
25.8
56.4
17.8

(1281)
32.1
66.4
1.6

(406)
24.6
71.9
3.4

(423)
29.3
70.0
0.7

(452)
41.4
58.0
0.7

(1352)
38.2
58.9
2.9

(424)
27.8
67.2
5.0

(452)
34.7
62.6
2.7

(476)
50.8
47.9
1.3

(1383)
13.0
67.2
19.8

(440)
13.9
65.2
20.9

(463)
11.0
70.2
18.8

(480)
14.2
66.0
19.8

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Table 5. Market Orientation and Performance
Total Sample
(%)
Return on Investment
Loss
Break even
1–9%
10–19%
20% or more
Chi-square 5 39.67, significance 5 0.0001
Performance relative to budgeta (n 5 1,343)
Performance relative to last yeara (n 5 1,335)
Performance relative to main competitorsa (n 5 929)

(1281)
19.5
12.1
45.1
15.7
7.6
2.08
1.78
1.99

Low MO
(%)
(413)
27.1
12.1
44.8
11.4
4.6
2.20
1.86
2.14

Medium MO
(%)
(428)
18.7
12.1
45.6
15.2
8.4
2.08
1.79
2.00

High MO
(%)
(440)
13.2
12.0
45.0
20.2
9.5
2.00
1.71
1.87

High MO group significantly different from other groups on all three scales at 0.05 level by using t-tests.
a
Performance scales are average summed score across profit, sales volume, market share, and ROI on scale 1 5 better than target/last year/competitors, 2 5 on target/same as last
year/same as competitors, 3 5 below target/worse than last year/worse than competitors.

products and services according to different markets’ needs”.
Analysis of firms that had indicated market-wide targeting
showed that the High MO firms were more likely to agree
with this statement than the Low MO firms. Indeed, 76%
agreed with the statement compared to only 50% of Low MO
firms (statistically significant difference at 0.001 level). It thus
seems that the High MO firms adopting market-wide targeting
are achieving this through offering a range of products designed to meet the needs of their different markets.
Significant differences were found between the MO groups
with regard to product and service positioning, but not price
positioning. The High MO group were the most likely to adopt
both higher technical product and service quality positions
than the other firms. Low MO firms more often positioned
their offerings at competitive parity. With regard to price, however, no statistically significant differences were observed between groups. Proposition P3 thus is supported in part only.
Avoiding reliance on low price as a means of differentiation
by high MO firms is consistent with their superior product
and service quality positioning. Given the emphasis of High
MO firms on superior product and service quality, low prices
could be seen as incompatible with those premium positions
(Aaker, 1991). Congruent with these positions, however,
might be higher prices, used both as quality signals and to
cover the costs (usually) associated with superior quality delivery. Why higher prices are not evident is unclear. A possible
explanation is the stage of development of these transition
economies where limited purchasing power puts added pressure on pricing. Indeed, such pressures are increasingly evident in Western markets as well where brand premiums have
been under attack in recent years (see Doyle, 1995).
These findings show that the more market-oriented firms
indeed do attempt to differentiate their offerings, but on the
basis of quality rather than price. They do not typically adopt
low price positions as a means of differentiation despite their
more aggressive stance in the market and their desires to build

long-term position. These they see better achieved through
higher quality than through cut price deals.
Finally, Table 5 presents the results of the analyses of
performance variables by market orientation group. Significant differences were found with regard to both the absolute
and the relative performance measures, all in the direction
proposed. With regard to ROI, a higher proportion of the High
MO group reported higher returns (10% or more), whereas the
Low MO group were more likely to report a loss.
On the relative performance scales, the High MO group
consistently reported better market and financial performance
against all three criteria—budget, previous financial year, and
main competitors. The High MO firms are more likely to
exceed their targets, to show year on year improvement in
performance and outperform their sectoral competitors. The
weakest performance on each scale was observed among the
Low MO firms. Overall both absolute and relative performance
results support proposition P4.

Conclusions, Future Research
Directions, and Limitation
The research has demonstrated that the overall Narver and
Slater (1990) MO scale is both valid and reliable as a measure
of market orientation in the transition economies of central
Europe. When presented with the scale items, managers had
little difficulty relating to them and discussions during the
qualitative phase of the research suggested that the construct
at least maintained face validity. The reliability coefficient
(Cronbach alpha) for the overall MO scale was good, and all
items contributed in the manner predicted by the theory. In
addition, analysis of results shows that in most, but not all,
instances the relationships between MO and business approach, strategy, and performance is as predicted from the
Western market orientations literature demonstrating nomological validity. Adopting a market orientation appears equally

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beneficial in turbulent transition economies as in Western
developed markets.
The research also has shown, however, that other business
orientations may coexist with a market orient