1. Welcome to the presentation on
How Market Orientation and Outsourcing Create Capability and Improve Performance in Emerging Markets
Dr. Satyendra Singh
Director, Centre for Emerging Markets
Professor, Marketing and International Business
Editor, International Journal of Business and Emerging Markets

2. Outline Introduction Objectives Definitions2
Outline
Introduction
Objectives
Definitions
Conceptual Model, Hypotheses
Methodology
Analysis, Results
Managerial Implications

3. Introduction Why study this?3
Introduction
Why study this?
Firms in Emerging Markets (EM) are catching up with West
Costs – Tata, Nano; Chery, QQ
Quality – Indian leather, Chinese silk
Product development pace – Films
Indicates ↓ in capability of West
↑ important in recession

4. Objectives Firms need to be strategic and competitive4
Objectives
Firms need to be strategic and competitive
If, Market Oriented - Outsourcing strategy  Competitive Advantage
If so, trade off?
Competition vs. Cooperation

5. What is Market Orientation (MO)?5
What is Market Orientation (MO)?
Narver and Slater (1990)
Customer, competitor, co-ordinaiton
Kohli and Jaworski (1990)
Information generation/dissemination
Greenley (1995)  Economic
Cadagon et al. (1999)  Export
Deshpande (1993)  Culture
Pitt (1996)  European

6. In general, MO strategy Meets customers’ needs6
In general, MO strategy
Meets customers’ needs
Anticipates market conditions
Explores and develops new products
Develops more desirable products  $
Takes long-term perspective, so viable
MO may  firms capability

7. But in EM, MO is different!7
But in EM, MO is different!
Demand > Supply!?
No feedback
No culture of product return
Shy, contamination by touch!
Not obsessed with change
Like permanence, memory, colony

8. 8
What is Outsourcing?
Outsource activities despite its ability to make in-house, so focus  core capability (Deavers, 1997)
Quick response to market turbulences
On time delivery,  lead time
Competitive, if benefits > costs

9. If outsourced from EM Abundant skilled labor!9
If outsourced from EM
Abundant skilled labor!
 Fixed costs and wages   BE point
 performance, if  firms’ capability
OS may  existing capabilities, but  borrowed capabilities
Masks the decline skills, as firms may not learn
It is risky

10. Trade-off between MO and OS10
Trade-off between MO and OS
↑ Costs
Time
Complex
Expertise OS
 Costs
↑ Savings
Labor
Mrf.
Performance MO
Risks
Capability

11. Conceptual Model MO Risk Capability Bus Perf OS H2 H6a H1 H5 H4 H6b H311
Conceptual Model MO H2
H6a H1
Risk H5
Capability
Bus Perf H4
H6b H3 OS
Source-position-performance model
(Day, 1994; Day and Wensley, 1988)

12. Competing Model - I MO Risk Capability Bus Perf OS H2 H6a H1 H5 H4 H6b12
Competing Model - I MO H2
H6a H1
Risk H5
Capability
Bus Perf H4
H6b H3 OS

13. Competing Model - II MO Risk Capability Bus Perf OS H2 H6a H1 H5 H413
Competing Model - II MO H2
H6a H1
Risk H5
Capability
Bus Perf H4
H6b H3 OS

14. Theory -- Hypotheses H1: MO  ↑ Capability14
Theory -- Hypotheses
H1: MO  ↑ Capability
H2: MO  ↑ Business Performance
H3: OS  ↑ Capability
H4: OS  ↑ Business Performance
H5: Capability  ↑ Business Performance
H6a: MO-BP ↑, if risk ↓
H6b: OS-BP ↑, if risk ↑

15. Methodology

16. Market Orientation – Scale16
Market Orientation – Scale
Customer orientation (Narver and Slater, 1990)
Customer commitment, create value, understand customer needs and satisfaction , after sales service
Competitor orientation
Salespeople share competitors’ info, respond quickly to competitors’ actions, top managers discuss competitors’ strategies, target opportunities for competitive advantage
Inter-functional dept co-ordination
Info sharing, functional integration strategy, all depts contribute to customer value, share resources with other business units

17. Outsourcing – Scale Core and Peripheral Outsourcing17
Outsourcing – Scale
Core and Peripheral Outsourcing
(new scale developed by me)
Ratio of outsourced production to in-house production
Ratio of outsourced products to manufactured products

18. Capability – Scale Adapted from (Atuahene-Gima, 2005)18
Capability – Scale
Adapted from (Atuahene-Gima, 2005)
Speedy introduction of new products to markets
Access to distribution network for products
Creative marketing strategies for new products
Secure resources for marketing new products

19. Risk Aversion – Scale Adapted from (Jaworski and Kohli, 1993)
Financial risks are worth the reward
Managers take big financial risks
Managers develop innovative but risky marketing strategies
Managers are likely to play it safe (R)
Managers implements activities only if it works

20. Business Performance - Scale20
Business Performance - Scale
Adapted from (Kotabe and Murray, 1990)
Pre-tax profitability
Market Growth
Market Share

21. Data Collection Kompass directory  Delhi and Bombay21
Data Collection
Kompass directory  Delhi and Bombay
Stratified quota sampling  PIN method
Personally collected – 3 months period
213 responses/1200 calls  18% response
Multiple respondents  all 7-pt scales
Respondents’ knowledgeable about the concept (+6. on 7-pt scale)

22. Sample Characteristics22
Sample Characteristics
Firms Foreign Indian
Total sample size (N=426)
Manufacturing products 104 (47%) 115 (56%)
Providing services (53%) 90 (44%)
Turnover (<Rs. 99m) 69 (31%) 88 (43%)
Turnover (b/w Rs. 100 and 149m) 95 (43%) 74 (36%)
Turnover (> Rs 150m) 57 (26%) 43 (21%)
Turnover (<49) 64 (29%) 66 (32%)
Turnover (between 50 and 99) 104 (47%) 84 (41%)
Turnover (>100) 53 (24%) 55 (27%)
CEO/MD/Proprietor) (57%) 125 (61%)
Senior manager) 77 (35%) 57 (28%)
Mid-level manager) 18 (8%) 23 (11%)
Proportion of outsourcing activities 62% 48%
Business experience (in years)

23. Analysis Factor Analysis Confirmatory Factor Analysis AMOS 4.023
Analysis
Factor Analysis
Confirmatory Factor Analysis
AMOS 4.0
Cross-group measurement validation
Reliability > .7
Fit indices > .9
Multicollinearity < 4
Non-response bias ok

24. Results MO Risk Capability Bus Perf OS24
Results
Model Fit Indices (Foreign/Indian):
X2 (392, /412, ); RMSEA (.05/.06), GFI (.88/.89), CFI (.95/.96) MO
H2 (.14/.07)
H6a
H1 (.31**/.29*)
H5 (1.33**/1.31*)
Risk
Capability
Bus Perf
H4(.36**/.37**)
H6b
H3 (.19*/.21*) OS
Unstandarised structural Ceffficients
(Foreign/Indian), * p< .05, ** p<.001

25. Direct, Indirect, and Total Effects (Hair, 2006)25
Direct, Indirect, and Total Effects (Hair, 2006)
Direct indirect(Cap) Total Effects
Full sample For. Ind. For. Ind. For. Ind.
MOBP ** .38** .55* .45*
OSBP * .28* .61** .65**
Low risk sample For. Ind. For. Ind. For. Ind.
MOBP .27* .31* .36* .21* .63** .52**
OSBP
High risk sample For. Ind. For. Ind. For. Ind.
MOBP
OSBP .39* .34* .33* .39* .72** .73**
Model Fit Indices: X2 (87, 97.43), GFI=.87, AGFI=.82, NFI=.91, RMSEA=.05, NNFI=.93, TLI=.95, CFI=.97); * p< .05; ** p<.001

26. Implications for managers26
Implications for managers
Firms need both—MO and OS
 MO because difficult to imitate
Trade-off exists
OS needed, not to  costs but  MO
No difference b/w Indian and foreign firms
Low-risk firm  MO, high-risk firm  OS to build capability

27. Conclusion: Competition vs. Cooperation27
Conclusion: Competition vs. Cooperation
Comp/Coop?
Comp/Coop?
Create value
 Capability
 OS
Manage risks
LO risk-taking firms   MO
HI risk-taking firms   OS HI I II MO
Comp?
Initially  OS to be MO
 MO
 MO
Coop? LO IV
III
LO OS HI
Future study: OS vs. Technology Transfer
Kenya, Africa

28. Acknowledgements
The financial support from the Social Sciences and Humanities Research Council (SSHRC 4A grant # ) is gratefully acknowledged.
This presentation is based on
Singh (2009). How market orientation and outsourcing create capability and impact business performance, Thunderbird International Business Review 51(4):

29. References
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30. Question?