European Journal of Marketing

Emerald Article: A firm's role in the marketplace and the relative

importance of market orientation and relationship marketing orientation
Alan C.B. Tse, Leo Y.M. Sin, Oliver H.M. Yau, Jenny S.Y. Lee, Raymond Chow

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Marketing, Vol. 38 Iss: 9 pp. 1158 - 1172
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http://dx.doi.org/10.1108/03090560410548915
Alan C.B. Tse, Leo Y.M. Sin, Oliver H.M. Yau, Jenny S.Y. Lee, Raymond Chow, (2004),"A firm's role in the marketplace and the
relative importance of market orientation and relationship marketing orientation", European Journal of Marketing, Vol. 38 Iss: 9
pp. 1158 - 1172
http://dx.doi.org/10.1108/03090560410548915
Alan C.B. Tse, Leo Y.M. Sin, Oliver H.M. Yau, Jenny S.Y. Lee, Raymond Chow, (2004),"A firm's role in the marketplace and the
relative importance of market orientation and relationship marketing orientation", European Journal of Marketing, Vol. 38 Iss: 9
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EJM
38,9/10

1158
Received September 2001,
June 2002, January 2003

The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0309-0566.htm

A firms role in the marketplace

and the relative importance of
market orientation and
relationship marketing
orientation
Alan C.B. Tse and Leo Y.M. Sin
The Chinese University of Hong Kong, Shatin, Hong Kong

Oliver H.M. Yau, Jenny S.Y. Lee and Raymond Chow

City University of Hong Kong, Kowloon Tong, Hong Kong
Keywords China, Market orientation, Relationship marketing, Marketing strategy
Abstract A study was conducted to determine the relationship between a firms role in the
competitive environment and the appropriate strategies to use. Using firms sampled from China, it
was found that market-oriented and relationship marketing-oriented strategies are both important
for market leaders, and market-oriented strategies are the best for market challengers, while
relationship marketing-oriented strategies serve market followers and market nichers best.

Introduction
Being a fundamental construct in marketing, market orientation has received a great
deal of attention from marketing scholars (examples, Day and Wensley, 1988; Kohli
and Jaworski, 1990; Narver and Slater, 1990; Ruekert, 1992; Wong and Saunders, 1993;
Slater and Narver, 1994; Greenley, 1995; Kumar et al., 1998). Systematic inquires for a
richer understanding of the construct was undertaken by Kohli and Jaworski (1990).
Kohli and Jaworski interviewed 62 managers in 47 organizations and developed the
three pillars of the marketing concept:
(1) customer philosophy identifying and satisfying customers wants and needs;
(2) goal attainment focus on achieving an organizations goals while satisfying
customer needs; and
(3) integrated marketing organization integration of all functional areas of the
organization to attain corporate goals by satisfying customer needs and wants.
According to Kohli and Jaworski (1990), while the marketing concept is commonly
defined as a philosophy or way of thinking that guides the allocation of resources and
formulation of strategies for an organization, market(ing)[1] orientation is considered
to be activities involved in the implementation of the marketing concept. With this
definition, three sets of activities intelligence generation, intelligence dissemination
European Journal of Marketing
Vol. 38 No. 9/10, 2004
pp. 1158-1172
q Emerald Group Publishing Limited
0309-0566
DOI 10.1108/03090560410548915

The authors gratefully acknowledge the funding granted by City University of Hong Kong to
support this study, and Dr Lorett B.Y. Lau of the Hong Kong Polytechnic University for her help
in collecting the data.

and responsiveness to market intelligence, represent the operationalization of market

orientation. Similar conceptualizations and scales, tested for reliability and validity
were also reported by Narver and Slater (1990), as well as by Ruekert (1992).
In the past decade, a steady stream of research has focused on the impact of market
orientation upon business performance. A summary of past empirical studies on the
relationship between market orientation and business performance can be found in Sin
et al. (2000), which reported that nearly all studies, including those conducted in
Chinese environments found support for a positive association between market
orientation and performance. Performance measures used in these studies ranged from
hard measures such as return on investment, sales growth and market share to soft
measures including organizational commitment and esprit de corps.
Although literature on market orientation (MO) has provided sufficient evidence of
the positive relationship between MO and firms business performance, some scholars
have highlighted the importance of relationship marketing orientation (RMO) to
compete effectively (Paul, 1988; Perrien et al., 1992). The concept of relationship
marketing was formally introduced by Berry (1983), who defined relationship
marketing as attracting, maintaining, and enhancing customer relationships. Later, a
more comprehensive definition was proposed by Gronroos (1991) who delineates
relationship marketing as attempts by firms to establish, maintain, and enhance
relationships with customers and other parties at a profit so that the objectives of all
the parties involved are met by mutual exchange and fulfillment of promises. Recently,
Harker (1999), after a comprehensive review of 26 definitions of relationship marketing,
proposed the following description:
An organization engaged in proactively creating, developing and maintaining committed,
interactive and profitable exchanges with selected customers (partners) over time is engaged
in relationship marketing.

Although the above three definitions differ somewhat, they all indicate that relationship
marketing focuses on individual buyer-seller relationships, that these relationships are
longitudinal in nature, and that both parties in each individual buyer-seller relationship
benefit. In short, from a firms perspective, the relationship marketing concept can be
viewed as a philosophy of doing business successfully or as a distinct organizational
culture/value that puts the buyer-seller relationship at the center of the firms strategic or
operational thinking. Limited empirical research has been done on examining the
relationship between RMO and business performance. A few studies in the past decade
indicate that relationship marketing has had a positive impact on firms business
performance. For example, Smith (1991) studied direct marketing in the insurance sector
and found that relationship marketing will help maximize long-term profitability.
Robicheaux and Coleman (1994) incorporated relationship marketing into a new
conceptualization of the structure of marketing channel relationships and commented that
the level of interaction among channel members determines the relationship structure
and, in turn, influences the performance of members in the channel. Abramson and Ai
(1997) studied the business-to-business sector in China and concluded that guanxi-style
buyer-seller relationships (similar to relationship marketing) were strongly related to
reduced levels of perceived uncertainty about the business environment and a variety of
improved performance outcomes. Wong (1998) performed a study on guanxi and
relationship performance on industrial buying in China and suggested that firms should

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adapt relationship-marketing plans to the changing environment of the Chinese market.

Yau et al. (1999) developed and validated a scale making up of four subscales bonding,
empathy, reciprocity and trust using firms in China and found that RMO yields a
significant impact on the determination of the firms performance across all industries.
Despite the rich body of literature that supports the positive relationship between
MO/RMO and performance, relatively little work has been done on the relationship
between the role played by a firm in its competitive environment and the relative
importance of market orientation and relationship marketing orientation. To fill this
gap in the literature, we have conducted an empirical study to compare the relative
importance of these two strategic orientations in the Peoples Republic of China (PRC).
PRC was chosen as the country for this study for the following reasons: first, PRC is a
transitional economy undergoing transformation from a centrally planned economy to
a market-driven economy. However, the scant literature regarding marketing
strategies in transitional economies has focused primarily on Russia (Huddleston
and Good, 1999), very little research has been conducted on marketing in the Chinese
economy (for notable exceptions, see Deng and Dart, 1999; Sin et al., 2000). As such, a
study like the one reported in this paper should be very useful for both academics as
well as practitioners focusing on China marketing. Second, the economic
transformation in the PRC has led to a remarkable growth in GNP, averaging about
10 percent annually over the past two decades. The rapid pace of economic
development has brought prosperity to the Chinese population and has enhanced their
purchasing power. This burgeoning consumer market has attracted companies from
all over the world to promote their products and services in China. As the market
becomes more competitive, empirically based research results like those reported in
this paper should help marketers improve their operation in China, an important and
emerging consumer market for international marketers in the twenty-first century.
MO and RMO are both strategic orientations that a firm can adopt in various
degrees dependent upon the conditions in its competitive environment. Previous
studies in the strategic management and marketing literature have firmly established
that environmental characteristic is a construct for consideration in the choice,
development and implementation of strategy (Dess and Beard, 1984; Lusch, 1987;
Narver and Slater, 1990; Slater and Narver, 1994). Often firms strategies reflect their
external conditions (Pinchot, 1985; Sebora et al., 1994). Studies of Snow and Hrebiniak
(1980), Hambrick (1983) and McKee et al. (1989) have shown that the effectiveness of a
particular strategic orientation depends on the dynamics of the business environment.
Hence, depending upon the characteristics of the competitive environment and the role
a firm intends to play in the marketplace, a firm may experience different levels of
performance contingent upon its choice of the appropriate blend of MO and RMO.
Given that marketing is an adaptive, boundary-spanning business function, we
believe that MO is basically an offensive strategy that can be used to capture market
share and expand a firms position in a marketplace. By its very own definition, MO
embraces activities coordination of various functional areas in an organization to
satisfy customers needs and monitor competitive moves all geared at capturing
market share and promote a firms level of performance. On the other hand, RMO is
more concerned with relationship building by cultivating trust, empathy, bonding and
reciprocity between a firm and its customers. Unlike MO, strategies based on RMO
need time to realize results on business performance. Hence, RMO can be regarded as a

defensive strategy aiming at maintaining loyalty and continual patronage from

customers.
While it is apparent that both MO and RMO have direct impact on performance, the
relative importance of MO and RMO may depend on the role of the firm in the
competitive environment. In the case of a market leader, unless it enjoys a legal
monopoly, it must keep itself constantly vigilant on challenges by other firms in price
changes, new product introductions, distribution coverage, and promotional
intensities. It must also try to maintain its leadership position by monitoring
customer needs, and invest in research and development for new products and services
that satisfy these needs. All these require the adoption of MO as a competitive strategy.
RMO would also be important for market leader if it wants to maintain its leading
position in the long run. It is deemed necessary for a leader in a marketplace to
cultivate trust, be empathetic with customers requirements, and strengthen its bonds
with customers to maintain a strong relationship with them. This is particularly
important in a business environment like China where personal relationship has been
accepted as a key to make things done and ensures continual patronage from
customers (Yau et al., 1999). In sum, for a firm in China to emerge as a market leader
and maintain its position as a leader, it must adopt both MO and RMO. This gives rise
to the following hypothesis:
H1. Both MO and RMO significantly affect a market leaders business
performance in China.
Firms that occupy second, third, and lower ranks, and which are attacking the leader in
an aggressive bid for market share are market challengers. Dolan (1981) found that
market challenger strategies are characterized by competitive rivalry, price-cutting
and other intensive offensive market behaviour. In fact, all the nine attack strategies
used by market challengers (Kotler, 1991) can be classified as MO-type strategies.
Hence, it is hypothesized that:
H2. MO is relatively more important than RMO for market challengers in China.
No previous study can be found regarding the best strategic orientation for market
followers and market nichers. Firms that can play ball but avoid rocking the boat are
market followers. These companies tend to preserve the status quo by knowing how to
hold current customers and win a fair share of new customers. Hence, they are
companies that are oriented towards adopting a RMO strategic orientation. This is also
true for market nichers. Market nichers are generally smaller firms that must avoid
direct competition with large market players. To survive, they must use RMO to
maintain customers. To test this assertion, we put forward the following hypothesis:
H3. RMO is relatively more important than MO for market followers and market
nichers in China.
Methodology
Scale and measurement
Market orientation. The market orientation construct was measured by the market
orientation scale developed by Narver and Slater (1990) with minor modification. One
of the statements in Narver and Slaters original scale concerning interfunctional

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customer calls was deleted after several in-depth interviews with a number of target
respondents. It was found that such calls are often perceived as stepping into another
departments territory and would be considered as rocking the boat and stir up schism
among staff in different departments. This kind of behavior is regarded as very
annoying in a Chinese community that stresses social harmony. To further
substantiate our decision to drop the item, a follow-up study was conducted using a
class of part-time students who enrolled in an MBA course. These students are all
middle-level management personnel working full-time in companies that engage in
China trade. Using data obtained from this study, we found that the corrected
item-to-total correlation for the item in question is less than 0.3, thus justifying our
decision to drop the item. After deleting this item, the 14 remaining items and the other
questions were translated into Chinese and then back translated to ensure that the
meanings of all items in the Chinese version of the questionnaire is about the same as
the original English version.
The instrument consisted of three subscales used to measure customer orientation,
competitor orientation and inter-functional coordination. This instrument has received
widespread support in the literature for its reliability and validity (e.g., Chan and Ellis,
1998; Greenley, 1995; Kumar et al., 1998; Slater and Narver, 1994; Van Egeren and
OConnor, 1998). Although the scale of Kohli and Jaworski (1990) can also be used,
Oczkowski and Farrell (1998) showed that Narver and Slaters scale, in general, is
superior to Kohli and Jaworskis scale in explaining variations in measures of business
performance. In addition, in another study with respondents from New Zealand,
Matear et al. (1997) found that Narver and Slaters (1990) model outperformed Jaworski
and Kohlis (1993) model in regards to NCP, GFI and ECVI fit statistics in model fitting
with confirmatory factor analysis. Moreover, the scale developed by Ruekert (1992)
was also not adopted in this study, as its focus is on organizational issues (see
Greenley, 1995). To measure market orientation with Narver and Slaters scale, a
seven-point scoring format (1 strongly disagree; 7 strongly agree) was employed
for all the 14 items.
Relationship marketing orientation. RMO measures the extent to which a company
engages in developing a long-term relationship with its customers. In this study, RMO is
hypothesized as a one-dimensional construct consisting of four behavioral components
bonding, empathy, reciprocity, and trust and each of the four components can be
measured reliably with a multi-item scale. Alongside this study, a measurement scale was
developed in China to capture these four dimensions of RMO (Yau et al., 1999) based on
the findings from a survey of firms operating in the country. The scale successfully met
standards for internal validity, content validity, construct validity and criterion-related
validity. To measure RMO, a seven-point scoring format (1 strongly disagree;
7 strongly agree) was employed for the four dimensions bonding (three items),
empathy (three items), reciprocity (three items) and trust (three items).
Business performance. Although performance can have a variety of meanings (e.g.
short- or long-term, financial or organizational), it is broadly viewed from two
perspectives in the previous literature. First, there is the subjective concept, which is
primarily concerned with performance of firms relative to that of their competitors
(Golden, 1992). The second method is the objective concept, which is based on absolute
measures of performance (Chakravarthy, 1986; Cronin and Page, 1988). For this study,
a subjective rather than an objective approach was used for the following two reasons.

First, company information is usually classified as highly confidential in Chinese

societies, especially in Mainland China. Respondents may be reluctant to provide hard
financial data. Second, past studies have reported a strong association between
objective measures and subjective responses (Dawes, 1999; Jaworski and Kohli, 1993;
Pearce et al., 1987; Robinson and Pearce, 1988; Venkatraman and Ramanujam, 1986).
To measure business performance, each respondent in this study was asked to
evaluate his/her companys current business performance relative to its major
competitors with respect to the following four items: sales growth, customer retention,
(ROI, and market share. Responses were made on a seven-point scale ranging from
better than to worse than major competitors. The reliability of the four-item
business performance scale is 0.884, an acceptable level as suggested by Nunnally
(1978).
Sample and data collection
The data for the study were collected from companies located in Beijing, the national
capital of Mainland China, Shanghai and Guangzhou. The sampling design is the same
for all the three cities. For example, in Beijing, with the help of a major university there,
1,200 companies were randomly selected from the Beijing Yellow Pages
Commercial/Industrial Telephone Directory. Telephone calls were made to the top
administrator of each company to explain the purpose of the study, as well as to solicit
agreement for survey participation. Out of the 1,200 companies, 300 companies agreed
to participate. Then, a total of 300 questionnaires were hand delivered to the top
administrator of each of the companies. The questionnaire entitled Business practice
survey, with a cover letter explaining the purpose of the survey, contained questions
on the following five areas:
(1) market orientation (14 items);
(2) relationship marketing orientation (14 items);
(3) business performance (four items);
(4) company background (four items); and
(5) the respondents background and self-reported market position of the
company[2].
The questionnaire was administered in Chinese. To ensure the meanings of all items in
the Chinese version of the questionnaire were the same as the original English version,
all the questions in the questionnaire were translated into Chinese and then back
translated into English. Altogether, 210 completed questionnaires were returned,
representing a successful response rate of 17.5 percent. Exactly the same method was
employed for data collection in Shanghai and Guangzhou using the corresponding
Yellow Pages directories with response rates of 17.9 percent and 18.4 percent
respectively. The total sample size is therefore 646 firms, comprising of 210 firms in
Beijing, 215 firms in Shanghai and 221 firms in Guangzhou. The profile of the
respondents and their companies is shown in Table I.
As can be seen from Table I, about 35 percent of the respondents are CEOs and
senior managers. The inclusion of engineers, accountants and economists, which
accounts for 5 percent of the sample, is considered appropriate since the Chinese
economy has been opened to the outside world for not a very long time, and a lot of

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Table I.
Characteristics of
firms/respondents

Characteristic

Number

Percent

(I) Firm
Industry
Mining, quarrying
Manufacturing
Electricity, gas
Building and construction
Transport, storage and communications
Wholesaling, retailing, trading, catering, hotel
Finance, insurance, real estate, business services
Community, social, personal services
Others
No response

3
259
10
63
26
124
53
25
64
19

0.5
40.1
1.5
9.8
4.0
19.2
8.2
3.9
9.9
2.9

Number of employees
100 or less
101-500
501-1000
1001-5000
5001 or above

143
187
162
88
66

22.1
28.9
25.1
13.6
10.2

(II) Personal
Age (years)
20-29
30-39
40-49
50-59
60 or above
No response

119
203
223
84
8
9

18.4
31.4
34.5
13
1.2
1.4

Gender
Male
Female
No response

444
159
43

68.7
24.6
6.7

Educational level
Grade school
High school
Post-secondary
Bachelors degree or above
No response

4
39
408
184
11

0.6
6.0
63.2
28.5
1.7

Respondents job title

CEO or senior manager
Section manager
Engineer/Accountant/Economist
Others
No response
Total

33
199
32
156
226
646

5.1
30.8
5.0
24.1
35.0
100.0

corporate decision-making positions in public and private enterprises are still held by
these technocrats. The 24.1 percent respondents in the others category are mainly
communist party secretaries, who are the most powerful figures in a Mainland
company because they set the future strategic direction of the firm.

Results
Reliability and validity of the market orientation scale and relationship marketing
orientation scale
Reliability analysis. Table II reports the reliability of the market orientation scale and
relationship marketing orientation scale using Cronbachs coefficient alpha (Churchill,

A firms role in
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1165
Item
(I) Market orientation (MO)
Customer orientation
Measure customer satisfaction
Create customer value
Understand customer needs
Customer satisfaction objectives
After-sales service
Customer commitment

Cronbach
alpha
0.8180

0.5148
0.5400
0.6308
0.5164
0.6436
0.6601

Competitor orientation
Respond rapidly to competitors actions
Salespeople share competitor information
Target opportunities for competitive advantage
Top managers discuss competitors strategies

0.7036

Inter-functional coordination
Functional integration in strategy
Share resources with other business units
Information shared among functions
All functions contribute to customer value
Alpha coefficient for whole scale

0.7910

(II) Relationship marketing orientation (RMO)

Bonding
We keep in touch constantly
We work in close co-operation
We both try very hard to establish long-term relationship

Item-total
correlation

0.4938
0.4925
0.4833
0.4911
0.5962
0.5719
0.6640
0.5684
0.9080
0.6908
0.5375
0.4840
0.4956

Empathy
We always see things from each others view
We share the same views on most things
We have common feelings on things around us

0.6930

Reciprocity
If anyone helps my company to solve difficulties, I am responsible to
repay his/her kindness
We always regard never forget a good turn as our business motto
Gift giving during seasonal festivals is a good opportunity to repay
others for kindness or favor

0.5772

Trust
He/she is trustworthy on important things
I trust him/her
According to our past business relationship, I think he/she is a
trustworthy person
Alpha coefficient for whole scale

0.5719

0.3845
0.5815
0.5711

0.4280
0.4825
0.2640
0.4778
0.4142
0.2680
0.8034

Table II.
Reliability analysis

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Table III.
Correlation matrix:
correlations among the
three components of
market orientation

Table IV.
Correlation matrix:
correlations among the
four components of
relationship marketing
orientation

1979; Nunnally, 1978). The overall coefficient alpha for the MO scale is 0.908 and that
for the RMO scale is 0.803, both are greater than 0.7 as suggested by Nunnally (1978).
As far as individual subscales are concerned, the reliability coefficient of the three MO
components all satisfies the standard of 0.7 which is about the same as those obtained
in previous studies conducted in China (for example, see Tse et al., 2002; Sin et al.,
2000), while reliability of the four components of the RMO scale is marginally
acceptable.
Construct validity. For determining construct validity, the MO and RMO scales were
tested for both convergent and discriminant validity. Convergent validity refers to the
degree of agreement in two or more measures of the same construct. Evidence of
convergent validity of the MO and RMO scales was examined through simple
correlations among the components of the respective scale. Results reported in Table III
and Table IV show that correlations among the three components of market orientation
ranged from 0.698 to 0.763, and all correlations were significant at p , 0.01. Each of
the components was also highly correlated (0.896 and above) with the overall measure
of MO. For the RMO scale, correlations among the four components ranged from 0.311
to 0.470. All correlations were significant at p , 0.01. Each of the components was
highly correlated (0.700 and above) with the overall measure of RMO. The pattern of
correlations indicates that components of each of the MO and RMO scales are
convergent on a common construct, thereby providing evidence of convergent validity.
Discriminant validity concerns the degree to which measures of conceptually
distinct constructs differ. In order to test for discriminant validity, a simple factor test
was performed on the data collected in this study (see Podsakoff and Organ, 1986). The
MO subscales, RMO subscales and business performance variables were factor
analyzed together, using principal component analysis. As shown in Table V, the
analysis produced three factors with eigenvalues greater than unity, which account for
a total of 70.3 percent of the variance. A very clean solution results as the business
performance variables, MO subscales and RMO subscales loaded on three separate

Customer Orientation
Competitor orientation
Inter-functional coordination
Market orientation

Customer
orientation

Competitor
orientation

Inter-functional
ooordination

Market
orientation

1.000
0.763*
0.700*
0.906*

1.000
0.698*
0.905*

1.000
0.896*

1.000

Note: Statistically significant at 0.01 level

Bonding
Empathy
Reciprocity
Trust
RMO

Bonding

Empathy

Reciprocity

Trust

RMO

1.000
0.470*
0.311*
0.338*
0.700*

1.000
0.415*
0.410*
0.788*

1.000
0.386*
0.727*

1.000
0.723*

1.000

Note: *Statistically significant at 0.01 level

Factor 1
Performance

Variables
Performance
Sales growth
Customer retention
ROI
Market share

Factor 2
MO

Factor 3
RMO

0.853
0.823
0.837
0.819

MO
Competitor orientation
Customer orientation
Inter-functional coordination

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0.880
0.879
0.816

RMO
Bonding
Empathy
Reciprocity
Trust
Eigenvalue
Percentage of variance

2.956
26.87

2.508
22.80

0.629
0.805
0.723
0.726
2.267
20.61

Table V.
Results of single-factor
test for discriminant
validity

factors. Therefore, the results suggest that the respondents discriminated between the
MO, RMO and business performance constructs, suggesting discriminant validity
within the measures.
The impact of MO and RMO on business performance
Regression analysis was conducted to examine the relationship between MO, RMO and
business performance for the four types of firms in this study. Using the ordinary least
square method, the estimated standardized regression coefficients for the regression
model were obtained and shown in Table VI. Table VI presents the regression results
for five dependent variables, viz. overall performance, sales growth, customer
retention, ROI and market share. In addition, Table VI also contains the mean scores of
the four types of firms on both MO and RMO.
For market leaders, both MO and RMO were found to have a significant association
with all the five performance variables employed. That is, MO and RMO are both
important in affecting market leaders performance. The mean score of market leaders
on MO is 5.521, which is significantly greater than the mean scores of all the three other

Market leader
MO
RMO
Mean
n
Sales growth
Customer retention
ROI
Market share
Overall performance
Notes: *p , 0.01;

**

Market
challenger
MO
RMO

Market follower
MO
RMO

Market nicher
MO
RMO

5.521 5.094
5.198 4.794
5.193
4.648
5.163
4.809
133
133
288
290
135
136
59
60
0.304* 0.240*
0.302* 0.103*** ns
0.248*
ns
0.406*
0.272* 0.193** 0.376*
ns
0.229** 0.166*** ns
ns
Table VI.
0.363* 0.147*** 0.290*
ns
0.202** 0.175*** 0.246*** 0.265***
Relative importance of
*
*
*
*
***
***
0.289 0.287
0.358 0.208
ns
0.159
ns
0.271
MO and RMO for the four
0.441* 0.247*
0.401* 0.215*
0.185* 0.311*
ns
0.401*
types of firms
p , 0.05;

***

p , 0.10

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types of firms at alpha , 0.01. Similarly, the mean RMO score for market leaders is
5.094, which is also significantly greater that the mean scores of the three other types of
firms (alpha , 0.01). Hence, H1 is supported by the data.
As for market challengers, Table VI shows that MO significantly affects all the five
measures of performance, while RMO only significantly affects a challengers sales
growth and market share. Hence, it can be concluded that MO should be the dominant
strategy for challengers. That is, H2 is also supported by the data.
The relative importance of MO and RMO are reversed when we come to market
followers and market nichers. From Table VI, for market followers, we can clearly see
that RMO significantly affects all the five measures of performance, when MO is only
significantly associated with customer retention and ROI. As for market nichers, the
results show that MO only affects a firms ROI but not the other performance
measures. However, RMO significantly affects sales growth, ROI, market share and
overall performance. Thus, we can conclude that H3 is supported by the data.
Another interesting finding of our research is that customer retention is not
associated with RMO for challengers and nichers. This can be explained by the fact
that like their Western counterparts, challengers in China usually think in terms of
market share rather than relationships. The offensive MO strategies used by them are
all aimed at gaining market share instead of building loyalty. Likewise, market nichers
in China serving small markets are not particularly concerned about customer loyalty.
The strategy adopted by a typical nicher is to work on a market niche ignored by other
market players. Once other larger players invade the niche they are working on, they
have to look for another one. To survive, market nichers must act like a guerilla fighter
and be ready to identify gaps in the marketplace and shift from one niche to another.
As such, they may not focus heavily on customer retention.

Discussion and implications

With respect to the relative importance of market orientation and relationship
marketing orientation in affecting a firms level of performance, our findings indicate
that the importance depends on the position of the firm in the marketplace. MO and
RMO are found to be both important for market leaders. For market challengers, MO
was found to be more important than RMO. The relative importance of MO and RMO
is reversed for market followers and market nichers.
The findings of this study have important implications for firms operating in China.
First, firms operating in China must identify its market position that would determine
its appropriate choice of MO and RMO strategies. For market leaders, the appropriate
strategies to use are MO and RMO strategies used in combination. The appropriate
mix of these strategies would enable a market leader to maintain its leading position in
the marketplace. For market challengers, they should focus on MO more than RMO
strategies to capture market share from market leaders and other firms. Finally, for
market followers and nichers, they should be better off focusing on RMO strategies to
achieve an overall satisfactory performance.
Another implication for firms operating in China is that a firm intending to move
from one market position to another must change its strategic orientation accordingly.
For example, a market challenger looking forward to becoming a market leader must
not emphasize on market-oriented strategies alone. Instead, it should start to build

relationship by allocating more resources on RMO practices in the hope that one day it
would become one of the market leaders.
Although this study has provided relevant and interesting insights to the
understanding of the relative importance of MO and RMO on business performance for
different types of firms, it is important to recognize the limitations associated with this
study. First, data for this study were collected by the key informant approach.
Although senior managers as key informants are adequate for reliable and valid data
(Tan and Litschert, 1994), future study on market orientation in Mainland China could
attempt to use multiple informants.
Second, the respondents provided all the measures of the independent and
dependent variables, and these measures were obtained at the same time using similar
scaling procedures. Method variance, therefore, may have magnified the strength of
some of the relationships. Statistical analysis using structural equation modeling, for
example LISREL (Joreskog and Sorbom, 1984) may provide an appropriate approach to
handle this particular problem.
Third, the reliabilities of the RMO subscales obtained in this study are only
marginally acceptable. Further refinement of the scales is therefore necessary in future
research.
Fourth, although our results apply to firms in China generally, the sample spreads
thinly across firms from different sectors and of different size. Consequently,
application of our results to specific industries requires more thorough examination. In
future research, a larger sample from each industry comprising firms of different size
should be selected to verify the results obtained in this study.
Finally, this study has not looked into the impact of environmental variables such
as market turbulence, competitive hostility and market growth on the relative
importance of MO and RMO. Future research in Mainland China can expand on the
present study by including these variables. Additional research should also be
conducted to look into the impact of demographic variables like firm age, whether the
firm is serving industrial or consumer markets, on the relative importance of MO and
RMO in affecting performance.

Notes
1. Following Slater and Narver (1994), market orientation and marketing orientation are taken
to be synonymous in meaning, and the term market orientation will be used instead of
marketing orientation in this article.
2. Firms were asked to indicate in the questionnaire which category of the four market
positions namely market leader, market challenger, market follower and market nicher
they belong to. To verify if the self-reported market position corresponds with the actual
market position, we use ANOVA to check if the four types of firms differ significantly in
terms of a composite measure of business performance comprising four items, namely
market share, sales growth, customer retention and return on investment. We find that that
there is significant difference between the mean composite scores of the four types of firms
(F 15.209, p , 0.000), and the direction of the group means is also consistent with our
expectation.

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