Effect of Market Orientation on Business Profitability

Question: Discuss about the Effect of Market Orientation on Business Profitability. Answer: Introduction: This essay explains advantages and disadvantages of selling some commodities to the business customers as well as the ordinary consumers. Hutt Speh, (2017, p. 5) argues that mobile phones, computers, furniture, and software are examples of commodities which are sold to both markets. Ordinary consumers include the individuals and households. On the other hand, business customers include institutions, the government, and other corporations. The following are advantages of using this marketing strategy. Selling several products to the two markets improves the sales of a company. Companies such as Dell, IBM, Intel, and HP sell their commodities to the consumers and other businesses. Hutt Speh (2017, p. 6) notes that Dell has established close relationships with many companies such as the Boeing and still is dominating the consumer market. That diversifies the company products enabling it to distribute its commodities to the two markets globally. The diversification approach widens the market being served by the company. Similarly, starting a firm to deal with the two markets will improve sales which in turn increase the total revenue. Participating in several markets reduces competition of companies operating within the same industry. A company which has more markets establishes a superior game to the other related firms. It will have greater investments, efficient systems and facilities, and better brand equity (Day, 2006, p. 38). Starting a company to operate in various markets is ideal since it will be a step ahead of other starting businesses that may cause a competitive threat. That will happen if they are competing for one market. When other companies are trading the same way, the competitive impact will not be that significant. The markets would be huge having very many clients. Trading in both markets makes a company improve its products through market orientation. This is a model which assists a firm to deliver its goods to according to consumer likes, desires, tastes, and preferences. Slater Narver, 2010 p.20) advocated that a company which has increased market orientation is likely to have a better performance. Due to many customers, the company will be able to get comments and feedbacks of the commodities. Most of the consumers would have probably used similar goods and would recommend how they want the company to modify its commodities. These reports will aid the enterprise to improve the commodity. The company will have improved product segmentation within the two markets. It is an activity where products are grouped according to the different target groups available. Most companies produce similar commodities but for diverse groups. For example, Dell and HP companies build computers for corporations and institutions. Similarly, they manufacture mobile gadgets, minicomputers, and laptops for households, individuals, and students. Their involvement in the two markets has improved their product segmentation. In return, they obtain double revenue from the sale of their products. Lastly, when a company starts trading in two markets, that condition paves the way for it to become global. There will be adequate funds for growth and expansion. Moreover, the firm will be attractive since it will be serving many customers in different geographical regions. The management may use this opportunity to establish subsidiaries in other countries. That would make the company a multinational selling its products all over the world. Gaubinger, Rabl, Swan Werani (2015, p. 264) acknowledged that Toyota and Caterpillar are international companies which sell their products to individuals, institutions, corporate bodies and even brokers. The method still has several pitfalls. First of all, it is quite expensive to deal with two markets. Utilizing the marketing theory, a business has to position its goods and services within the market in a way that the buyers would see the essence of buying the product to achieve benefits from it (Hill, Canniford Mol, 2014, p. 381.) That means the company will use all promotion means applicable to advertise and create more awareness of the commodities. Heavy promotional expenses will be incurred which have to be recovered by more sales to raise significant revenues. The process consumes time and other company resources. The firm will have to hold meetings, employ advisors, auditors and other personnel to assist in strategically planning for the market diversification. As usual, a research team will be hired to survey and conduct field interviews for the project (Jaworksi Kohli, 2000, p.2). Financial analysts will also be included to guide the management on the segmentation and orientation activities. Eventually, the firm will have wasted many resources in implementing the marketing decision. The decision would either succeed or fail due to pressure from competitors, government policies and financial distress (Challagalla, Murtha Jaworski, 2014, p. 18) The central administration will be stressed by increased functions which might be beyond control. The bureaucracy theory which requires a company to have the primary administrator and a hierarchy structure may not work (Tummers Bekkers, 2014, p.537). The supply chain will be disorganized since there will be different types of commodity demands. According to Hutt Speh, (2017, p. 13) such companies experience stimulating, fluctuating, derived and price sensitivity demands. It might become difficult especially for the administration to process all activities in time. Possible frauds and theft might also occur. Plank Canedy (2015, p. 260) opined that a new company may be faced with a straight rebuy problem. The consumers have somehow used some products from other suppliers. It might be a routine for an institution to be using certain brands and will not consider new providers in the market. Secondly, households have very little or new information regarding the new commodity. The may just opt to stick to the older companies. It is quite difficult for corporations and institutions to change the vendors. That would make it difficult for the company to succeed in the market. For the company to win the present vendors, a modified rebuy has to be conducted. This entails changing the product designs, material, and advancing the commodity to the latest technology (Quigley, Bingham Patterson, 2015, p.66). For example, a new cooking gas supplier may improve to produce less heavy nonmetallic gas cylinders. The attempt will be driven towards winning the market. However, the activity may raise social evils and unnecessary competition. Moreover, if the advanced products perform lesser than the original, the consumers may never buy the company products again. Lastly, the organization is likely to grow to a large multinational company. This will expose it to diseconomies of scale. Wiseman (2014, p.235) says as the firm grows; it will reach a point where the inputs will have a limited output. That is explained as the law of diminishing marginal return. Small enterprises dealing with one market rarely encounter this problem. A firm may experience high factor prices, inefficient management (due to too many activities to control), technical difficulties to tackle arising challenges, and financial constraints. They will result due to commitment in more than one market. To conclude, the essay has explored and explained various advantages as well as pitfalls associated with participating in a dual-market. For one to start such a company, adequate research is essential to understand the nature of the market first before venturing into the trade. The data about the customers tests and preferences is important before the positioning of the product in the market. This gives a marketer the estimate size of the market to serve. The company should also implement one strategy at a time to avoid the possible constraints might make the enterprise to collapse. This will be supplemented by carrying out the SWOT analysis of the chosen marketing strategy to determine its effectiveness. References Challagalla, G., Murtha, B.R. and Jaworski, B., 2014. Marketing doctrine: a principles-based approach to guiding marketing decision making in firms. Journal of Marketing, 78(4), pp.4-20. Gaubinger, K., Rabl, M., Swan, S. and Werani, T., 2015. Globalization and Innovation. In Innovation and Product Management (pp. 259-281). Springer Berlin Heidelberg. Hill, T., Canniford, R. and Mol, J., 2014. 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