Industry Environment And Business Strategy: A Comparison Of Contingency Theory Expectations And Relationships Between Small Manufacturing Firm Managers Perceptions Of Environment And Strategy

Contingency theory suggests that that an appropriate match must be made between strategy and industry environment conditions. This study compared contingency theory expectations with the associations between perceptions of industry environment conditions and reported firm strategy, as reported by the firms president and national sales manager. Confirming theory expectations, there were significant and positive associations between perceived industry technical/market turbulence and reported growth/differentiation strategy as well as significant and negative associations with low cost strategy. The direction and significance of these associations were similar regardless of which manager supplied the perception of technical/market turbulence or the reported strategy. However there were differences across the two managers reports in the associations between strategy and perceptions of product differentiation, customer differentiation, and competitive intensity. Confirming theory expectations, there were significant and positive associations between perceptions of industry competitive intensity and the sales managers reported use of low cost strategy, but not the presidents reported use of that strategy. Confirming theory expectations, there was a significant and positive association between the presidents (but not the sales managers) perceptions of industry product differentiation and managers reported use of growth/differentiation strategy. There was a significant and positive association between the sales managers (but not the presidents) perceptions of industry customer differentiation and managers reported use of growth/differentiation strategy. The presidents and sales managers perceptions of product and customer differentiation had significant negative associations with the sales managers (but not the presidents) reported use of low cost strategy. The authors discuss potential explanations for these results and implications for managers

Market Orientation and the New Product Paradox.

The extant literature shows that the strength of the market orientation–performance relationship decays as the terminal measure of performance shifts from new product success to profitability to market share. As Day (1999) concluded, a broader nomological inquiry is needed to more fully understand the nature and limits of market orientation\u27s effects. This suggests that a broader nomological inquiry is needed to fully understand the nature and limits of market orientation\u27s effects. Utilizing a national sample of marketing executives, the present study\u27s purpose is to build a fuller understanding of the effects of market orientation on firm performance. Its structural equations model includes measures of new product success, profitability, and market share. The research reinforces a strong positive relationship between market orientation and new product success. The expanded nomological network under study, however, implies barriers to market orientation\u27s effectiveness. First, market-orientation-inspired increases in the priority firms place on “breakthrough” learning without commensurate increases in the priority placed on “breakthrough” innovation capabilities can boomerang and negatively impact new product success. Second, market-orientation-inspired new product development programs that are unable to increase market share can negatively impact profitability. These gatekeepers to the success of market orientation underscore the need for firms to coordinate a strong market orientation with resources and capabilities that increase the effectiveness of the marketing function. Without such coordination, the positive effect of market orientation on new product success may be limited to incremental innovations, and the overall effect of successful new products on profitability may be limited