Quantitative Article--- The Effect of Alternative Market Orientation Strategies on Firm Performance

The purpose of this research was to examine the importance of a market orientation, relative emphasis, learning, innovativeness, and a cost focus on firm performance across various value disciplines within the Illinois beef industry. In business world, good firm performance and making good profit are the objectives of the corporation and there are lots of factors that affect the performance. Hence, analyzing the relationship between the factors and the firm performance is significant for the executives and managers to make the right decisions. 

In this research paper, a series of ordinary least squares (OLS) regressions were conducted to test the 7 hypotheses as follows:
H1a: An increase in the market orientation of the firm will lead to an increase in firm performance.
H1b: An increase in the market orientation of the firm will lead to an increase in firm performance for customer intimacy producers.
H1c: An increase in the market orientation of the firm will lead to an increase in firm performance for operational excellence producers.
H2: An increase in the relative emphasis of a customer orientation will lead to an increase in firm performance for firms within a customer intimacy value discipline.
H3: An increase in the relative emphasis of a customer orientation will lead to a decrease in firm performance for firms within an operational excellence value discipline.
H4: An increase in the firm’s learning orientation will lead to an increase in firm performance.
H5: An increase in the level of innovativeness will lead to an increase in firm performance.
H6: An increase in the cost focus of a firm will lead to an increase in firm performance for firms within the operational excellence value discipline.
H7: An increase in the cost focus of the firm will lead to a decrease in firm performance for firms within the customer intimacy value discipline.

The key findings in the paper are that a market orientation and innovativeness contributed to firm performance (Han et al., 1998; Slater & Narver, 1995). But there are not enough evidences that support other hypotheses. The results are based on the samples from Illinois beef industry, which implied the results might not be applicable in other market or industries.

For practicing executives and managers, they have to be prudent regarding the decision-making which is crucial to the performance of the firm. From implication of the findings we can see that the relationship between them may be differentiated in different industries. The factor which is a powerful resource in one industry maybe a weak resource in the other one. This is the managers concern to make the right decision.

Reference:

Slater, S. F., & Narver, J. C. (1995). Market Orientation and the Learning Organization. Journal of Marketing, 59(3), 63-74. http://dx.doi.org/10.2307/1252120

Han, J. K., Kim, N., & Srivastava, R. K. (1998). Market Orientation and Organizational Performance: Is Innovation a Missing Link? Journal of Marketing, 62(4), 30-35. http://dx.doi.org/10.2307/1252285

Source:

http://www.ccsenet.org/journal/index.php/ijms/article/view/14864/11892

CURRENT EVENT---Small U.S. Manufacturers Give Up on 'Made in China'

MADE IN China is a controversial issue and is criticized by the United States. MADE IN China label is one of the prevailing labels all over the world due to China’s increasingly developing manufacturing industry. The reason why the companies outsource the production overseas rather than manufacture in the USA is low labor cost.  

Now everything constantly changes. Small U.S. Manufacturers Give Up on 'Made in China'. It is clear that it is probably 30% cheaper to manufacture in China, but there are other issues the owners are more concern about now: The rising costs in China, difficult communication with manufacturers, the hassles of using factories that are far away, time value, the good that are sometimes got stuck in customs for weeks, the continuously changing rules and the regulations, and “increasingly competitive,” American production. Taking into account of the issues above, the manufacturing in the U.S. is probably cheaper or more or less the same. These are the reasons resulting in manufacturing shift.  For example, Unilife (UNIS) moved production to the U.S. The most advanced automobile of today -- the Tesla Roadster -- is already being manufactured in the United States using robotic and AI technologies. .  This is just the beginning of the trend. The Future of Manufacturing Is in America, Not China.   

 

For practicing manager, low manufacturing cost is not the only consideration for a firm to decide either offshore outsourcing. Other comprehensive factors should be considered for good performance.

Sources:

1. http://www.businessweek.com/articles/2012-06-21/small-u-dot-s-dot-manufacturers-give-up-on-made-in-china#p1

2. http://www.nytimes.com/2012/09/21/nyregion/a-manufacturing-about-face-made-in-america-but-sold-in-china.html

3.http://www.foreignpolicy.com/articles/2012/07/17/the_future_of_manufacturing_is_in_america_not_china

Current event post—China’s corporate debt’s has risen the highest number since 2008

According to the GK Dragonomics’s research, China’s corporate debt “has risen from 108 percent of the entire economy last year to 122 percent in 2012”. (Dexter, 2012) However, according to Li Yang’s study, who is vice president of the Chinese Academy of Social Sciences (CASS), this number is 105.4 percent in the middle of 2012 although it is highest in the 20 countries he studied. At the article, He alerted that China cooperate debt had touching “alarm level”. Unfortunately, this trend did not reverse in the end of 2012. Based on GK’s research, although some selected main key economic indicators showed that economic performance were good, such as industrial production or manufacturing index., this high debt has affected the Chinese company.

Normally, high debt is not a problem for China companies. For a long time, since most of main Chinese companies are in manufacturing industry, they had to survive within high debt. According to the report of Bloomberg Businessweek, the account payable of industrial companies had reached 1.3 trillion dollars. It included private and state-owned firms. As the Bloomberg’s table showed, the ratio of Chinese debt to GDP has been above 150 percent since 1999. However, the situation should be different at this time. This debt wave started at late 2008. When the central government issued 4 trillion loan to help companies deal with sub-prime mortgage crisis. The projected goal was that the companies would pay back when the economic picked up. However, the slow economic recovery speed caused that most of key industries had to face overcapacity and more debt. Moreover, since the sales decreased, lots of companies, either privacy or stated-owned, had invested real estates in last few years. As a result, the real estates price irrational increased in China and had a high risk of “bubbled burst”. 

In fact, the lawsuit about debt disputes has increased. Cited from Bloomberg, the logistics units of one of bigged steel corporation in China “had filed 23 lawsuits for the recovery of money and goods it was owned”(Dexter, 2012). Under Bloomberg’s viewpoint, bad bank loans will highly increase in future. On the other word, there will be a hard landing. To avoid the risk, first, state-owned bank will shut the government loan, as the Zhou, head of the People's Bank of China (PBOC),said, “we are tightly controlling new loans and will ensure no new loans to the sector”.(Reuters, 2012.11.11). Second. The China government will try to slow economic growth to adjust the economic structure.

This is not a specific business event, such as Facebook’s IPO or iPhone 5 going public. However, in my opinion, since China has been the second largest economy in the world, most of manager may need to face the fact that China will slow its growing speed. For example, the U.S. Investors may need to be cautious when they decide to invest Chinese local companies or decide to expand their business. Also, the company depending on China import may reduces their sales forecast in next few years. The local supplier may ask U.S. multinational corporations provide more finance support, which it was easy to loan from bank if the company proved they had enough orders. This good old time is over.

Reference

1. Dexter Roberts, Corporate China's Black Hole of Debt, Bloomberg Businessweek, 2012-11-15, Retrieved from:
http://www.businessweek.com/articles/2012-11-15/corporate-chinas-black-hole-of-debt

2. Gordon G. Chang, How Will China Pay Off Its Debt?. Forbes, 2012.2.26. Retrieved from: http://www.forbes.com/sites/gordonchang/2012/02/26/how-will-china-pay-off-its-debt/

3. Reuters, China banks turns blind eye as corporate debt piles up, Asian legal business,2012.11.23, Retrieved from:
http://asia.legalbusinessonline.com/news/analysis/china-banks-turn-blind-eye-as-corporate-debt-piles-up/109660

4. Xinhua Press .Corporate debt reaches 'alarming level', China Daily, 2012.5.18, Retrieved from:
http://www.chinadaily.com.cn/business/2012-05/18/content_15328186.htm


5. Reuters, China Economy Recovering, Bad Debt Risks Dismissed, CNBC, 2012.11.11. Retrieved from: http://www.cnbc.com/id/49784016

Current Event Post - Plane Makers Under Pressure to Cut Costs as Competition Looms

While consumers have considered Boeing and Airbus the only rivals in creating large innovative aircrafts, the market may have overlooked a rising dragon in the East,  China’s state owned Comac is creating a C919 and C929 that will rival the Boeing and Airbus airplanes (Cameron 2012). Comac’s C929 has been labeled a “game changer” in the industry providing a 10% reduction in cost compared to Boeing and Airbus ³(Cameron 2012). The plane will carry 165-180 passengers and will benefit from China’s growing need to replace retiring airplanes (Cameron 2012). An important point advantage China has over Boeing and Airbus is supply of low cost labor in the country. Although the article explains that this advantage is minimized when looking at the bigger picture because most of the parts are from the west it still will be a long term advantage over the United States and European labor unions that increase labor costs (Cameron 2012). Also, it does not take a country like China to build the know how to create these parts reducing the competitive advantage of Boeing and Airbus in the long run. Increased competition in the industry pushes downward pressures on prices decreasing margins giving China’s labor cost and important strategic advantage. Comac has had success and traction with their current C919 selling over 380 orders². The company is expecting to sell anywhere from 4,000- 20,000 airplanes over the next 20 years³.

            China’s state owned enterprises low labor costs creating increased competition in the global market place is important for every industry in the world. The country has a strategic competitive advantage in low labor costs that pushes downward pressure on price and increases competition globally. Also, it is important that we recognize there is a new Asian tiger in the aircraft market providing competition for the traditional Airbus and Boeing.

            Implications of China becoming competitive in the aircraft market means decreased margins for the top 2 aircraft companies. Downward pressure on prices will require that western companies tighten supply chain and reduce the cost of materials or add value that allows price competition to cease to exist. Managers should keep an eye out for state owned enterprises that provide increased competition through low labor costs.

  

¹Cameron, D. (2012, Nov 09). Plane makers under pressure to cut costs as competition looms. Wall Street Journal (Online). Retrieved from http://search.proquest.com/docview/1143674269?accountid=7108

²http://www.reuters.com/article/2012/11/13/us-china-airshow-idUSBRE8AC03B20121113

³http://www.globaltimes.cn/content/744184.shtml