CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Marketing efforts and know-how are instrumental in commercializing ideas and inventions successfully. Therefore, it could be fatal for companies to ignore the importance of marketing (CF. E.G. Yli-Kovero, 2006; Salminen, 2006). Kotler (1999) emphasizes the position of marketing to even argue that, in the future, marketing has the main responsibility for achieving profitable revenue growth for the company. Today cost-efficiency does not provide long-term competitive advantage for companies whereas marketing, when well conducted, does. Especially in the field of strategic marketing, benefits are still largely waiting for realization.
Marketing has traditionally been viewed and treated more as an operational rather than strategic function in companies. It has focused on decisions related to analyzing and selecting target markets, product and brand development, promotion, and channels of distribution (Hunt and Morgan, 2001). This perhaps somewhat biased standpoint presents marketing as a task of creating, promoting and delivering goods and services to consumers and businesses (Kotler, 2003). It is generally accepted that acquiring a new customer may turn out to be considerably more expensive than building customer loyalty among firm’s current customers (e.g. Kotler, 2003). This strongly speaks for the need for higher levels of customer orientation among companies. Similarly to reward systems that base on short-term performance, short-term marketing focus may start working against longer-term market orientation, business performance and strategic intentions of a company.
From strategic point of view, as Morgan, Clark and Gooner (2002) argue, marketing budgets should be seen as capital expenditure in building revenue generating marketing assets rather than overhead expenditure; marketing resources ultimately drive long-term marketing performance. Despite general acceptance of value creation of marketing activities, marketing practitioners have found it difficult to measure and communicate to other functional executives and top management the value created by investments in marketing (Srivastava, Shervani and Fahey, 1998). To bring light to the prevalent situation, confirmatory statistical analysis basing on hypotheses from previous literatures is a justified method to explore strategic marketing and its effectiveness.
At this early phase of the project, it is necessary to conduct an international empirical study that clarifies the links between strategic marketing practices and business performance,
1.2 STATEMENT OF PROBLEMS
The main problem and discovered gap of strategic marketing involving marketing-related issues that should be concentrated on in order to maximize companies’ long-term financial performance. The primary research problem for this study can thus be presented as follows:
What kind of strategic marketing are most positively and effectively relates to companies’ financial performance in different business environments?
What is the relationship between marketing resources and business orientations, and financial performance of a firm?
How is marketing effectiveness assessed today and potentially in the future?
Further on, this problem statement will be formulated as a research question, with several underlying sub-questions.
1.3 PURPOSE OF THE STUDY
This research work primarily aim at examining the impacts of strategic marketing and how it affects organisation’s performance. Other objectives of the study include;
Examine strategic marketing concepts and their relationships with performance measures
Provide an integrated review of the origins, insights and status of strategic management
Discuss marketing performance assessment (MPA) systems and development areas related to them
Describe the structure of performance management systems.
1.4 RESEARCH QUESTIONS
Research questions are meant to generate possible answers to different aspects of the research problem and they should be clearly stated such that they act as guides in identification, collection and analysis of relevant data. In order to achieve the purpose of this research study, the study will attempt to provide answers to the following research questions.
What kind of strategic marketing are most positively and effectively relates to companies’ financial performance in different business environments?
What is the relationship between marketing resources and business orientations, and financial performance of a firm?
How is marketing effectiveness assessed today and potentially in the future?
1.5 STATEMENT OF HYPOTHESES
To provide answer to the research questions arising from this study, the following hypotheses are postulated.
Hypothesis One
Ho: There is no significant relationship between strategic marketing and companies’ financial performance
H1: There is significant relationship between strategic marketing and companies’ financial performance
Hypothesis Two
Ho: Market orientation does not positively relates to market performance
H1: Market orientation positively relates to market performance
Hypothesis Three
Ho: There is no Relationship between marketing resources and business orientations, and financial performance of a firm
H1: There is Relationship between marketing resources and business orientations, and financial performance of a firm
1.6 SIGNIFICANCE OF THE STUDY
Marketing efforts and know-how are instrumental in commercializing ideas and inventions successfully. Therefore, it could be fatal for companies to ignore the importance of marketing (Yli-Kovero, 2006; Salminen, 2006). Kotler (1999) emphasizes the position of marketing to even argue that, in the future, marketing has the main responsibility for achieving profitable revenue growth for the company. Today cost-efficiency does not provide long-term competitive advantage for