Olson Eric M., Stanley F. Slater, and G. Tomas M. Hult (2005), “The Performance
Implications of Fit Among Business Strategy, Marketing Organization Structure, and
Strategic Behavior
Adopting a contingency perspective, the authors present and test a fit-as-moderation model
that posits that overall firm performance is influenced by how well the marketing
organization's structural characteristics (i.e., formalization, centralization, and
specialization) and strategic behavioral emphases (i.e., customer, competitor, innovation,
and cost control) complement alternative business strategies (i.e., prospector, analyzer, low-
cost defender, and differentiated defender). Responses from 228 senior marketing managers
provide support for the model and demonstrate that each strategy type requires different
combinations of marketing organization structures and strategic behaviors for success.
The model we depict in Figure 1 illustrates the thesis of this study; that is, the relationship
between marketing organization structure and strategic behavior (predictor variables) and firm
performance (criterion variable) is moderated by the business strategy a firm adopts
(moderator variable).
Venkatraman (1989) describes this as the “fit as moderation” perspective. Porter (1996, p. 73)
notes, “Strategic fit among many activities is fundamental not only to competitive advantage
but also to the sustainability of that advantage. It is harder for a rival to match an array of
interlocked activities than it is merely to imitate a particular sales-force approach, match a
process technology, or replicate a set of product features.”
Business strategy refers to how firms compete in an industry or market. The two dominant
frameworks of business strategy (Hambrick 2003) are the Miles and Snow (1978) typology,
, which focuses on intended rate of product-market change, and the Porter (1980) typology,
which focuses on customers and competitors.
Miles and Snow (1978) develop a comprehensive framework that addresses the alternative
ways that organizations define and approach their product-market domains (the
entrepreneurial problem) and construct structures and processes (the administrative and
technical problems) to achieve competitive advantage in those domains. Miles and Snow
identify four archetypes of how firms address these issues: (1) “Prospectors” continuously
attempt to locate and exploit new product and market opportunities, (2) “defenders” attempt
to seal off a portion of the total market to create a stable set of products and customers, (3)
“analyzers” occupy an intermediate position by cautiously following prospectors into new
product-market domains while protecting a stable set of products and customers, and (4)
“reactors” do not have a consistent response to the entrepreneurial problem. In contrast, Porter
(1980) proposes that business strategy should be viewed as a product of how the firm creates
customer value compared with its competitors (i.e., differentiation or low cost) and how it
defines its scope of market coverage (i.e., focused or marketwide).
Organizational structures are established to coordinate work that has been divided into
smaller tasks:
- Formalization: the degree to which formal rules and procedures govern decisions and
working relationships.
- Centralization: whether decision authority is closely held by top managers or is
delegated to middle- and lower-level managers (decentralization)
- Specialization: refers to the degree to which tasks and activities are divided in the
organization and the degree to which workers have control in conducting those tasks.
Organizational behavior refers to organizational members’ work-related activities
(e.g., Ouchi 1977; Robbins 2002). According to Snell (1992), management attempts to
influence organizational behavior through the use of control systems. In this study, we
examine strategic behaviors that have the potential to create superior performance through
enhancing the execution of business strategy:
- Customer-oriented behaviors: pursue competitive advantage by placing the highest
priority on the creation and maintenance of customer value.
- Competitor-oriented behaviors: simply to beat the competition.
- Innovation-oriented behaviors: the firm is not only open to new ideas but also
proactively pursues these ideas.
- Internal/cost-oriented behaviors: pursue efficiency in all parts of the value chain.
H1: The highest-performing prospector firms have marketing organizations that are
characterized by a high number of specialists who operate in a decentralized, informal
organization and who place a greater emphasis on customer and innovation orientations.
H2: The highest-performing analyzer firms have marketing organizations whose behaviors are
focused on customers and competitors.
H3: The highest-performing low-cost defender firms have marketing organizations that are
characterized by few marketing specialists; formal and centralized decision-making processes;
and a behavioral focus on internal operations, cost control, and competitors.
Implications of Fit Among Business Strategy, Marketing Organization Structure, and
Strategic Behavior
Adopting a contingency perspective, the authors present and test a fit-as-moderation model
that posits that overall firm performance is influenced by how well the marketing
organization's structural characteristics (i.e., formalization, centralization, and
specialization) and strategic behavioral emphases (i.e., customer, competitor, innovation,
and cost control) complement alternative business strategies (i.e., prospector, analyzer, low-
cost defender, and differentiated defender). Responses from 228 senior marketing managers
provide support for the model and demonstrate that each strategy type requires different
combinations of marketing organization structures and strategic behaviors for success.
The model we depict in Figure 1 illustrates the thesis of this study; that is, the relationship
between marketing organization structure and strategic behavior (predictor variables) and firm
performance (criterion variable) is moderated by the business strategy a firm adopts
(moderator variable).
Venkatraman (1989) describes this as the “fit as moderation” perspective. Porter (1996, p. 73)
notes, “Strategic fit among many activities is fundamental not only to competitive advantage
but also to the sustainability of that advantage. It is harder for a rival to match an array of
interlocked activities than it is merely to imitate a particular sales-force approach, match a
process technology, or replicate a set of product features.”
Business strategy refers to how firms compete in an industry or market. The two dominant
frameworks of business strategy (Hambrick 2003) are the Miles and Snow (1978) typology,
, which focuses on intended rate of product-market change, and the Porter (1980) typology,
which focuses on customers and competitors.
Miles and Snow (1978) develop a comprehensive framework that addresses the alternative
ways that organizations define and approach their product-market domains (the
entrepreneurial problem) and construct structures and processes (the administrative and
technical problems) to achieve competitive advantage in those domains. Miles and Snow
identify four archetypes of how firms address these issues: (1) “Prospectors” continuously
attempt to locate and exploit new product and market opportunities, (2) “defenders” attempt
to seal off a portion of the total market to create a stable set of products and customers, (3)
“analyzers” occupy an intermediate position by cautiously following prospectors into new
product-market domains while protecting a stable set of products and customers, and (4)
“reactors” do not have a consistent response to the entrepreneurial problem. In contrast, Porter
(1980) proposes that business strategy should be viewed as a product of how the firm creates
customer value compared with its competitors (i.e., differentiation or low cost) and how it
defines its scope of market coverage (i.e., focused or marketwide).
Organizational structures are established to coordinate work that has been divided into
smaller tasks:
- Formalization: the degree to which formal rules and procedures govern decisions and
working relationships.
- Centralization: whether decision authority is closely held by top managers or is
delegated to middle- and lower-level managers (decentralization)
- Specialization: refers to the degree to which tasks and activities are divided in the
organization and the degree to which workers have control in conducting those tasks.
Organizational behavior refers to organizational members’ work-related activities
(e.g., Ouchi 1977; Robbins 2002). According to Snell (1992), management attempts to
influence organizational behavior through the use of control systems. In this study, we
examine strategic behaviors that have the potential to create superior performance through
enhancing the execution of business strategy:
- Customer-oriented behaviors: pursue competitive advantage by placing the highest
priority on the creation and maintenance of customer value.
- Competitor-oriented behaviors: simply to beat the competition.
- Innovation-oriented behaviors: the firm is not only open to new ideas but also
proactively pursues these ideas.
- Internal/cost-oriented behaviors: pursue efficiency in all parts of the value chain.
H1: The highest-performing prospector firms have marketing organizations that are
characterized by a high number of specialists who operate in a decentralized, informal
organization and who place a greater emphasis on customer and innovation orientations.
H2: The highest-performing analyzer firms have marketing organizations whose behaviors are
focused on customers and competitors.
H3: The highest-performing low-cost defender firms have marketing organizations that are
characterized by few marketing specialists; formal and centralized decision-making processes;
and a behavioral focus on internal operations, cost control, and competitors.
