Business strategy, marketing organization culture,

and performance
Stanley F. Slater & Eric M. Olson & Carol Finnegan
Published online: 4 August 2010
#
Springer Science+Business Media, LLC 2010
Abstract Drawing on configuration theory, we develop and test a model which
posits that overall firm performance will be influenced by how well the marketing
organizations cultural orientation (i.e., market, adhocracy, hierarchy, or clan)
complements alternative business strategies (i.e., Prospector, Analyzer, Low-Cost
Defender, Differentiated Defender) after controlling for other, key firm-level
variables. Responses from a sample of senior marketing managers provide partial
support for the model and demonstrate that high-performing businesses of one
strategy type have a different cultural orientation than high-performing businesses of
the other strategy types. And, contrary to previous research, the results of this study
show that each of the cultural orientations may play a role in creating superior
performance. We conclude with a discussion of the implications for scholars and for
managers.
Keywords Business strategy
.
Organizational culture
.
Performance
.
Configuration
theory
.
Strategy implementation
.
Miles and snow
.
Marketing organization
Mark Lett (2011) 22:227242
DOI 10.1007/s11002-010-9122-1
S. F. Slater (*)
Business Administration, College of Business, Colorado State University, Fort Collins,
CO 80523-1278, USA
e-mail: stan.slater@business.colostate.edu
E. M. Olson
College of Business Administration, University of ColoradoColorado Springs,
Colorado Springs, CO 80933-7150, USA
e-mail: eolson@uccs.edu
C. Finnegan
College of Business Administration, University of ColoradoColorado Springs,
Colorado Springs, CO 80933-7150, USA
e-mail: cfinnega@uccs.edu
1 Introduction
Marketings contribution to business strategy success has been a central theme in
marketing scholarship since, at least, the publication of Walker and Ruekerts (1987)
Maynard Award winning article, Marketings Role in the Implementation of
Business Strategies: A Critical Review and Conceptual Framework. The basic
question they asked (p. 15) was, Given a specific type of strategy, what marketing
structures, policies, procedures and programs are likely to distinguish high
performing business units from those that are relatively less effective, efficient,
and adaptable? The proposition that the firms organizational architecture must
match its business strategy is the essence of configuration theory (e.g., Drazin and
Van de Ven 1985; Miller and Mintzberg 1988). Configuration theory posits that for
each business strategy there is a configuration of organizational characteristics that
best complements the strategy to yield superior performance (e.g., Doty et al. 1993).
Walker and Ruekert's (1987) seminal article has spawned a rich set of studies that
have addressed the contribution of marketing strategy and marketing organization
characteristics to the success of the different strategy types. For example, in the
context of different business strategy types, Matsuno and Mentzer (2000) studied the
relationship between market orientation and performance McKee et al. (1989) and
Slater and Olson (2001) studied the relationship between marketing strategy and
performance, while Olson et al. (2005) and Vorhies and Morgan (2003) studied the
relationship between the structure of the marketing organization and performance.
All found that different business strategy types were more effective when supported
by appropriate marketing organization characteristics.
An area that has yet to be studied is the match between business strategy and
organizational culture. As Barney (1986, p. 656) noted, Firms that have cultures
with the required attributes can obtain sustained superior financial performance
Just as different business strategies benefit from different marketing strategies and
from different marketing organization structures, we expect to find that different
marketing organization cultures are required for the success of different business
strategies.
2 Overview of the major constructs
2.1 Business strategy
Business strategy is concerned with the organization-wide decisions that focus on
achieving competitive advantage. The two dominant frameworks of business
strategy are the Miles and Snow, and Porter typologies. Miles and Snows (1978)
framework addresses alternative ways in which organizations approach their
productmarket domains (the entrepreneurial problem) and construct structures and
processes (the administrative and technical problems) to successfully implement
their strategy. They identified four archetypes of how firms address the entrepre-
neurial problem. Prospectors continuously seek to locate and exploit new product
and market opportunities while Defenders attempt to seal off a portion of the total
market to create a stable set of products and customers. Analyzers occupy an
228 Mark Lett (2011) 22:227242
intermediate position by cautiously following Prospectors into new productmarket
domains while also protecting a stable set of products and customers. A fourth type,
the Reactor, does not have a consistent response to the entrepreneurial problem.
Porter (1980) proposed that business strategy should be viewed as a product of how
the firm creates competitive advantage (i.e., differentiation or low cost) and how it
defines scope of market coverage (i.e., focused or market wide). Walker and Ruekert
(1987) synthesized these strategy typologies by discriminating between Low-Cost
Defenders and Differentiated Defenders.
Consistent with the concept of equifinality (e.g., Hrebiniak and Joyce 1985), we
found no significant differences among the average performance levels of the four
proactive strategy types. As within-group performance variation is greater than
between-group performance variation, we assert that, along with matching strategy
to environmental conditions (e.g., market turbulence and competitive intensity) and
possessing appropriate resources, a major reason for the achievement of superior
performance for a particular strategy is an appropriate organizational configuration.
2.2 Organizational culture
Larry Bossidy, former CEO of AlliedSignal and Honeywell, argued (Bossidy and
Charan 2002, p. 15) that Strategies most often fail because they aren't executed
well. Things that are supposed to happen don't happen. This begs the question of
what does it take to make sure that the right things happen? We posit that this is
largely a matter of ensuring that behaviora product of cultureis aligned with
strategy. Deshpande and Webster (1989, p. 4) describe culture as the pattern of
shared values and beliefs that help individuals understand organizational functioning
and thus provide them norms for behavior (our emphasis) in the organization.
Barney (1986, p. 657) elaborates, further explaining that a firm's culture not only
defines who its relevant employees, customers, suppliers, and competitors are, but it
also defines how a firm will interact with these key actors. Thus, a strong culture
facilitates understanding of the business's strategy by employees and motivates
supportive behaviors by socializing members through mentoring, storytelling, and
example. Consequently, if the success of business strategy is dependent on
appropriate behavior, then it is essential for the organization to have a supportive
culture.
Furthermore, culture is a source of competitive advantage when it enables the
business to execute its strategy more effectively or efficiently. An organizations
culture should have characteristics that are not common to the cultures of its
competitors, and, as an invisible asset, should be difficult for competitors to imitate
(Barney 1986, 1991). Culture, when matched to business strategy as we describe
below, is a valuable resource as it promotes both effectiveness and efficiency. The
competing values framework is an established model for representing culture (Quinn
and Rohrbaugh 1983). This framework recognizes that managers must make choices
that reflect two kinds of the tensions that exist in organizationsinternal vs. external
orientation and the need for control vs. the need for flexibility. This two-dimensional
representation produces four culture types. The Adhocracy type is characterized by
flexibility and an external orientation that produces entrepreneurial and creative
behaviors. The Market type is distinguished by control and an external orientation
Mark Lett (2011) 22:227242 229 229
that produces highly competitive behaviors. The Clan type is exemplified by
flexibility and an internal orientation that produces relationship-building behaviors.
The final type is the Hierarchy, characterized by control and an internal orientation
that produces behaviors focused on predictability and smooth operations. While all
organizations exhibit attributes of each of the culture types, one culture type tends to
dominate.
Deshpande et al. (1993), in their study of the impact of culture, customer
orientation, and innovativeness on performance in Japanese firms, found a Market >
Adhocracy > Clan > Hierarchy ordering in impact on performance. Deshpande and
Farley (2004) summarized the results of the original study along with those from five
other studies that replicated the earlier study in a variety of national contexts. They
found positive relationships between both the Market and Adhocracy cultures and
performance and negative relationships between the Clan and Hierarchy cultures and
performance in all six studies although the relationships were not always significant.
They concluded that As a general matter, relatively open, externally oriented
organizational cultures related to better performance, while relatively closed, internally
oriented organizational cultures related to poorer performance (p. 18).
While these findings suggest an orderly cultureperformance path (M > A >
C > H), configuration theory suggests that, just as other organizational
architecture elements (e.g., structure, strategy formation process, capabilities)
should be matched to context, so too should organizational culture. Rather than
conclude that one culture is inherently superior to others, we believe it is the
development of a reinforcing set of strategy, structure, systems, capabilities, and
culture that produces a high-performance organization (e.g., Galbraith and
Kazanjian 1986). Thus, culture and strategy are codependent. It is only when
appropriate matches are made that the chances for superior firm performance are
optimized. In this study, we focus on these issues within the marketing
organization because of marketings central role in strategy formation and
implementation (e.g., market scanning, target market selection, customer need
identification that influences product feature assortments, pricing, customer
relationship management approaches, and sales force management).
We now turn to the development of hypotheses that describe the most appropriate
matches between culture and strategy. Each strategy type, with the exception of the
Analyzer which has a dual focus, has a primary focus (Miles and Snow 1978;
Walker and Ruekert 1987), and as such our first hypothesis is our primary
hypothesis. However, the descriptions of the strategy types suggest the presence of
behaviors that are the product of different cultural orientations. Thus, we also offer a
second, complementary hypothesis based on a shared focus on external orientation,
internal orientation, flexibility, or control.
3 Hypotheses
3.1 Prospectors
Prospectors are the most entrepreneurial of the strategy types (Miles and Snow
1978). Because of the uncertainty surrounding the development of new products that
230 Mark Lett (2011) 22:227242
either cause a low-end disruption by providing a reduced feature set product at a
lower price or a high-end disruption by providing an innovative product
(Christensen and Bower 1996), the Prospector must maintain flexibility in
strategy-making process so that it can adapt quickly to new information (Conant et
al. 1990; McKee et al. 1989). Prospector performance is enhanced when decision-
making authority is extended down to lower-level managers within the marketing
organization and rigid rules and policies are supplanted by discretion and informal
coordination mechanisms (Vorhies and Morgan 2003). To find opportunities, the
most effective Prospectors are oriented externally to understand customers latent
needs and on the technological environment that may be the source for solutions to
those needs (Slater et al. 2007). At the same time, Prospectors are results-oriented
(Miles and Snow 1978, p. 63) and utilize structured product development programs
(e.g., Cooper 2008). These are characteristics of the Market culture. Thus, we predict
the following:
HP1: There is a positive relationship between emphasis on the values in an
Adhocracy culture and performance for Prospector businesses.
HP2: There is a positive relationship between emphasis on the values in a
Market culture and performance for Prospector businesses.
3.2 Analyzers
If Prospectors are the most entrepreneurial of the strategy types, Analyzers may be
the most competitive. They have the dual challenge of competing with Prospectors
for early adopters by introducing more innovative, higher-quality, or lower-priced
versions of the Prospectors products and of competing with other Analyzers and
with Defenders in the mass market to protect the core products and markets that
generate the necessary resources for their entrepreneurial activities (Slater et al.
2007). Analyzers require an external focus on both competitors, to develop an in-
depth understanding of their customer value propositions, and on customers, to
understand their perceptions of the strengths and weaknesses of competitive
offerings to develop and bring their new and improved products to market (Olson
et al. 2005). They must have rigorous processes for market scanning so that they can
move quickly once a Prospector demonstrates the viability of a new product or a
new market. And, because they will identify more opportunities than they can
pursue, they must have a rigorous process for evaluating those alternatives (Conant
et al. 1990). Thus, we predict the following:
HA1: There is a positive relationship between emphasis on the values in a
Market culture and performance for Analyzer businesses.
HA2: There is a positive relationship between emphasis on the values in a
Hierarchy culture and performance for Analyzer businesses.
3.3 Low-Cost Defenders
To develop, distribute, and promote quality products or services at the lowest
overall cost, which enables them to compete on price, Low-Cost Defenders
Mark Lett (2011) 22:227242 231 231
focus on efficiency through standardized practices in both operations and
marketing rather than on effectiveness that stems from creativity (Walker and
Ruekert 1987). Strategy making is a formal process that proceeds through a
sequential set of steps that are both efficient and effective (Conant et al. 1990).
The most effective Low-Cost Defenders tend to be mechanistic with coordination
achieved through formal rules, procedures, and integration devices (Miles
and Snow 1978; Vorhies and Morgan 2003) which are characteristic of the
Hierarchy.
Another aspect of this strategy is price competition (Slater and Olson 2001). Price
competition is a particularly aggressive strategy in that it may provoke price wars
(Porter 1980). Low-Cost Defenders benchmark both prices and cost structure
through their outward focus on competitors. This aggressiveness and outward focus
are characteristics of a Market culture. Thus, we predict the following:
HLC1: There is a positive relationship between emphasis on the values in a
Hierarchy culture and performance for Low-Cost Defender businesses.
HLC2: There is a positive relationship between emphasis on the values in a
Market culture and performance for Low-Cost Defender businesses.
3.4 Differentiated Defenders
Successful Differentiated Defenders provide consistently superior service and/or
product quality at a premium price. Consistency is the product of the operationally
excellent firm (e.g., Zeithaml et al. 1988). The Differentiated Defenders value
proposition is based on a nuanced understanding of its customers. Meehan et al.
(2007) found that customer-oriented behaviors were more prevalent in Clans and
Adhocracies than in Markets or Hierarchies. On the one hand, the finding that Clans
are highly customer-oriented is counterintuitive since their focus is internal, on
creating teamwork and a sense of family. However, employees of Clan organizations
may see customers as part of their extended family and treat them as they would
fellow employees. Furthermore, delivering consistently superior service requires
intense communication among team members (Zeithaml et al. 1988), another
characteristic of the Clan.
Differentiated Defenders also have an entrepreneurial quality. As Walker and
Ruekert (1987, p. 21) argue, Differentiated Defenders can maintain their
profitability only if they continue to differentiate themselves from competitors by
offering superior products, services, or other advantages. And, because customer
contact personnel are the ones who ultimately deliver service, it is imperative that
these employees are able to make decisions regarding customer relations without
having to check with higher-level managers on every decision. These are character-
istics of the Adhocracy. Thus, we predict the following:
HDD1: There is a positive relationship between emphasis on the values in a
Clan culture and performance for Differentiated Defender businesses.
HDD2: There is a positive relationship between emphasis on the values
in an Adhocracy culture and performance for Differentiated Defender
businesses.
232 Mark Lett (2011) 22:227242
4 Research design
4.1 Sample and data collection
We focused this study on manufacturing and service firms operating in 20
different two-digit SIC code industries (classification categories 20, 30, 40) to
provide a reasonably similar context for respondents but also to be broad enough
for the results to be generalizable. We purchased a commercial mailing list of
2,400 senior marketing managers in businesses with 500 or more employees
operating in these industries. In collecting the data, we followed the guidelines
by Huber and Power (1985) on how to obtain high-quality data from key
informants. We selected senior marketing managers because they should be
knowledgeable about marketing organization culture, business strategy, and firm
performance.
A personal letter, a description of our project, and a questionnaire were sent to
the 2,400 senior marketing managers with a postage-paid return envelope. The
questionnaire defined the meaning of strategic business unit (SBU) and asked
each respondent to refer to either the largest SBU in the organization or the one
with which they were most familiar. Each letter contained a separate self-
addressed postcard with instructions to distribute to another senior manager
familiar with the focal SBU. Serving as a source of validation in a single-
informant study, the cards contained performance measure questions and
requested the participants title. Four weeks after the initial mailing, a follow-
up mailing was sent out with a duplicate copy of the questionnaire and a return
envelope. We received 217 completed questionnaires (Prospectors, 67; Ana-
lyzers, 48; Low-Cost Defenders, 42; Differentiated Defenders, 54; Reactors, 6)
that, after accounting for undeliverables, constituted a 9.2% response rate. We
also received matching postcards from 127 (62%) of the businesses that returned
questionnaires. Seventy-five percent of the participants who returned perfor-
mance postcards indicated they held positions of director or vice president of
marketing within their respective firms.
A relatively low response rate might raise concerns about whether the sample
is representative of the population of interest. However, we are studying
relationships among variablesnot attempting to estimate population parameters.
As Blair and Zinkhan (2006, p. 5) noted, if a relationship is observed across the
full range of the related variables, the measurement of the extent to which the two
variables co-vary is likely to be relatively accurate even if sampling is
disproportionate at different levels of the variables. Calder et al. (1981) argued
that respondent quality is a more important issue than response rate. Respondents
averaged 17 years of experience in their business unit and 22 years in the industry.
All respondents, except one, which we deleted, described themselves as at least
knowledgeable about strategic issues in their SBU and industry, while 96% of the
respondents characterized themselves as very or extremely knowledgeable. When
we compared our analyses using the entire sample with the group of very or
extremely knowledgeable respondents, we found no difference in regression
coefficients. We concluded that all of these respondents were sufficiently
knowledgeable to participate in the study.
Mark Lett (2011) 22:227242 233 233
4.2 Description of the measures
All constructs with the exception of business strategy were measured with five-point
Likert scales and inserted randomly in the questionnaire to prevent order bias. Quinn
and Spreitzer (1991) tested the psychometric properties of the Likert scale measures
of cultural orientation and concluded that it may be used where the data will be
submitted to more complex analyses such as inferential statistics requiring interval
scales (p. 25). We assessed strategy type with the commonly used self-typing
paragraph approach. Several studies (e.g., Conant et al. 1990; Shortell and Zajac
1990) have shown that this is a valid measurement approach. We used Slater and
Olson's (2001) performance measure.
Business unit effects have much greater influence on profitability than do industry
effects (Rumelt 1991). Thus, we focused on and developed measures of the
following covariates because of their influence on performance for specific strategy
types. For example, product innovativeness, customer relationship building, and
price advantage should be related to performance for Prospectors; product quality,
price advantage, and product innovativeness for Analyzers; relationship marketing,
operational excellence, and product innovativeness for Differentiated Defenders; and
product quality, price advantage, and operational excellence for Low-Cost Defenders
as described in Section 3. By controlling for these key variables, we ensure a
relatively strong test of the impact of culture on performance.
We found that the questionnaire and postcard assessments of performance were
strongly correlated (r=0.88, p<0.001). We conducted regression analyses on both
sources of performance data. We regressed those DVs on the five control variables
and found no significant differences in the magnitude or direction of the regression
coefficients. This gives us confidence that the self-reported performance measure
does not suffer from common respondent bias. Our measures are reported in Table 1.
We found appropriate evidence of reliability and validity of the scale items used
in the analysis. We examined construct means, standard deviations, average variance
extracted, composite reliabilities, factor loadings, fit statistics, and the correlation
matrix, following accepted procedures (e.g., Bagozzi and Yi 1988; Hu and Bentler
1999; Fornell and Larcker 1981; Anderson and Gerbing 1988; Hancock and Mueller
2001). Given a CFI close to 0.95 in combination with SRMR0.09 and RMSEA
0.06, our measurement model exhibits reasonable fit (Hu and Bentler 1999).
In assessing the threat of common method bias, we found our measurement model
had a considerably better fit than the single-factor model (McFarlin and Sweeney
1992; Podsakoff and Organ 1986; Sanchez et al. 1995). Finally, given the small
sample sizes of our strategy types, we conducted a power analysis. We achieved
adequate statistical significance (b>0.95, p<0.05) in each subgroup (R
2
range, 0.554
to 0.677; adjusted R
2
range, 0.482 to 0.604).
5 Analysis and results
Before testing the hypotheses, we undertook a discriminant analysis to classify high
and low performers on the basis of culture. Deshpande and Farley (2004) found that
externally oriented businesses generally outperformed more internally focused
234 Mark Lett (2011) 22:227242
Table 1 Measures
Product quality (CR=0.78)
1. The quality of our current products/services compares well with past offerings
2. The quality of our products/services compares well with competitor products
3. Our products/services are of higher quality than competing products/services
Relationship marketing (CR=0.84)
1. We develop and maintain long-term relationships with key customers
2. Our key customers view us as partners
3. A substantial portion of our business is based on repeat purchases from existing customers
Price advantage (CR=0.66)
1. We charge lower prices than our competitors.
2. Our customers define value primarily based on low prices
a
3. Premium pricing is an important element of our strategy (R)
Marketing operational excellence (CR=0.59)
1. The timeliness of after-sale service in this business unit is excellent
2. We are able to substitute product or service offerings in the event of a delay or stockout
a
3. We have a consistent approach to performing key marketing tasks
Product innovativeness (CR=0.80)
1. Customers believe that our products/services offer significant advantages relative to earlier
generation products/services
2. Customers perceive our products/services to be leading edge
3. Customers purchase our products/services because they are innovative
Adhocracy (CR=0.86)
1. The leadership in the marketing organization is generally considered to exemplify entrepreneurship,
innovating, or risk taking
2. The marketing organization emphasizes acquiring new resources and creating new challenges.
Trying new things and prospecting for opportunities are valued
3. The glue that holds the marketing organization together is commitment to innovation and
development. There is an emphasis on being on the cutting edge
4. The marketing organization is a very entrepreneurial place. People are risk takers
5. The marketing organization defines success on the basis of having the most unique or newest
products. It is a product leader and innovator
a
6. The management style in the marketing organization is characterized by individual risk taking,
innovation, freedom, and uniqueness
a
Market (CR=0.88)
1. The management style in the marketing organization is characterized by hard-driving competitiveness,
high demands, and achievement
2. The marketing organization is very results-oriented. A major concern is with getting the job done.
People are very competitive and achievement-oriented
3. The marketing organization defines success on the basis of winning in the marketplace and outpacing
the competition. Competitive market leadership is key
4. The glue that holds the marketing organization together is the emphasis on achievement and goal
accomplishment. Aggressiveness and winning are common themes
5. The leadership in the marketing organization is generally considered to exemplify a no-nonsense,
aggressive, results-oriented focus
6. The marketing organization emphasizes competitive actions and achievement. Hitting stretch targets
and winning in the marketplace are dominant
Mark Lett (2011) 22:227242 235 235
Hierarchy (CR=0.77)
1. The glue that holds the marketing organization together is formal rules and policies
2. The marketing organization defines success on the basis of efficiency
a
3. The leadership in the marketing organization is generally considered to exemplify coordinating,
organizing, or smooth-running efficiency
a
4. The management style in the marketing organization is characterized by security of employment,
conformity, predictability, and stability in relationships
5. The marketing organization emphasizes permanence and stability. Efficiency, control, and smooth
operations are important
6. The marketing organization is a very formal and structured place
Clan (CR=0.87)
1. The marketing organization is a very personal place. It is like an extended family
2. The management style in the marketing organization is characterized by teamwork, consensus, and
participation
3. The marketing organization defines success on the basis of the development of human resources,
teamwork, employee commitment, and concern for people
4. The glue that holds the marketing organization together is loyalty, trust, and organizational
commitment
a
5. The leadership in the marketing organization is generally considered to exemplify mentoring,
facilitating, or nurturing
6. The marketing organization emphasizes trust, openness, and participation
Overall performance (CR=0.86)
1. The overall performance of the business was below expectations last year (R)
2. The overall performance of the business last year exceeded that of our major competitors
3. Top management was satisfied with the overall performance of the business last year
Strategy Type
Please indicate which ONE of the following profiles best describes your business units overall strategy
1. ____: These businesses are frequently the first-to-market with new products or services. They do not
hesitate to enter new market segments where there appears to be an opportunity. These
businesses concentrate on offering products that push performance boundaries. Their proposition
is an offer of the most innovative product, whether based on substantial performance
improvement or cost reduction
2. ____: These businesses are seldom first-in with new products or services or to enter emerging market
segments. However, by monitoring market activity, they can be early followers with a better
targeting strategy, increased customer benefits, or lower total costs
3. ____: These businesses attempt to maintain a relatively stable domain by aggressively protecting their
productmarket position. They rarely are at the forefront of product or service development.
Instead, they focus on producing goods or services as efficiently as possible. These businesses
generally focus on increasing share in existing markets by providing products or services at the
best prices
4. ____: These businesses attempt to maintain a relatively stable domain by aggressively protecting their
productmarket position. They rarely are at the forefront of product or service development.
Instead, they focus on providing superior service and/or product quality. Their prices are typically
higher than the industry average
5. ____: These businesses do not seem to have a consistent productmarket strategy. They primarily act in
response to competitive or other market pressures in the short-term
a
This item was deleted in the measurement purification process.
Table 1 (continued)
236 Mark Lett (2011) 22:227242
businesses. We replicated their analysis and, based on the standardized canonical
discriminant function coefficients, found an Adhocracy (0.797) > Market (0.527) >
Hierarchy (0.426) > Clan (0.067) ordering (p<0.01). Thus, we find that the general
relationships between the culture dimensions and performance largely conform to
those found in previous studies. Next, we examined the moderating influence of
strategy type.
We tested our hypotheses using OLS regression analysis within subgroups
(strategy type). Cohen and Cohen (1983) suggested that using only independent
variables that are relevant to the analysis increases statistical test validity, power, and
clarity in the meaning of the results. Thus, we included only the three control
variables that were most clearly associated with performance for each strategy type
as described in Section 4.2. The rationale for inclusion of these variables can be
found in the Hypotheses section. We entered three control variables in step 1 and the
culture variables in step 2. This approach shows the contribution of cultural
orientation to the explanation of performance above and beyond the contribution of
the theoretically related variables for each strategy type. The results of the regression
analysis can be found in Table 2. One-tailed tests were used to test the hypotheses
because directional predictions were offered.
While the relatively low ratio of observations to independent variables might
cause some concern, the situation is most likely to lead to a type II error (i.e.,
there is a greater likelihood that we will fail to reject the null hypothesis when
the alternate hypothesis is true). This provides for a more conservative test of the
alternative hypothesis. Moreover, an effect of even a very small size will almost
certainly be statistically significant with a large sample, but a relatively large
effect may not be judged statistically significant with the small sample (Sawyer
and Ball 1981, p. 281). Each subjective scale was composed as a summated index
of the items that constitute the scale; equal weights were given to each item.
Multicollinearity was not a problem in any of the models (maximum variance
inflation factor <6.2).
5.1 Analysis of the Prospector model
In the analysis of the Prospector model, we found positive effects of product
innovativeness (=0.35, p0.01) and emphasis on values in the Adhocracy culture
(=0.32, p0.01) on performance. The relationship between the values in the
Market culture and performance was not significant. Thus, we find support for HP1
but not for HP2. Inclusion of the culture variable substantially and significantly
( adjusted R
2
=0.14; p0.01) increased the explanatory power of the model.
5.2 Analysis of the Analyzer model
In the analysis of the Analyzer model, we found positive effects of product quality
(=0.53, p0.001), price advantage (p0.05), emphasis on values in the Market
culture (=0.26, p0.05), and emphasis on values in the Hierarchy culture (=0.23,
p0.05) on performance. Thus, we find support for HA1 and for HA2. Inclusion of
the culture variables substantially and significantly ( adjusted R
2
=0.07; p0.01)
increased the explanatory power of the model.
Mark Lett (2011) 22:227242 237 237
5.3 Analysis of the Low-Cost Defender model
In the analysis of the Low-Cost Defender model, we found positive effects for
operational excellence (=0.61, p0.001), product quality (=0.28, p0.05), and
price advantage (=0.27, p0.05), but no results for any dimension of cultural
orientation. Thus, we reject both HLC1 and HLC2.
5.4 Analysis of the Differentiated Defender model
In the analysis of the Differentiated Defender model, we found positive effects of
relationship marketing (=0.39, p0.001), operational excellence (=0.19, p
0.05), and emphasis on values in the Clan culture (=0.51, p0.001) on
Table 2 Regression analysis standardized regression coefficients (n=201)
Predictor variables Productmarket strategies
Prospectors
(n=65)
Analyzers
(n=46)
Low-Cost
Defenders (n=40)
Differentiated
Defenders (n=50)
Step 1
Product quality NA 0.53*** 0.32* NA
Relationship marketing 0.06 NA NA 0.41***
Price advantage 0.05 0.23* 0.10 NA
Operational excellence NA NA 0.32* 0.21*
Product innovativeness 0.58*** 0.03 NA 0.28**
R
2
0.41 0.48 0.35 0.43
Adjusted R
2
0.38 0.45 0.30 0.39
F value 14.11*** 13.1*** 6.53*** 11.34***
Step 2
Product quality NA 0.53*** 0.28* NA
Relationship marketing 0.02 NA NA 0.39***
Price advantage 0.07 0.17 0.27* NA
Operational excellence NA NA 0.61*** 0.19*
Product innovativeness 0.35** 0.13 NA 0.26**
Adhocracy 0.32** 0.05 0.35 0.16
Market 0.04 0.26* 0.25 0.15
Hierarchy 0.10 0.23* 0.17 0.01
Clan 0.14 0.03 0.01 0.51***
R
2
0.55 0.60 0.61 0.66
Adjusted R
2
0.50 0.52 0.52 0.60
Adjusted R
2
(steps 1 to 2) 0.14 0.07 0.22 0.21
F change 4.38** 2.66** 4.80*** 5.09***
The six Reactors are not included in this analysis. One-tailed tests
NA excluded variable
* p0.05; **p0.01; ***p0.001
238 Mark Lett (2011) 22:227242
performance. We found no relationship between values in the Adhocracy culture and
performance. Thus, we find support for HDD1 but not for HDD2. Inclusion of the
culture variables substantially and significantly ( adjusted R
2
=0.21; p0.001)
increased the explanatory power of the model.
5.5 Limitations
The study utilized a cross-sectional design; thus, inferences about causality should
be made cautiously. For the performance analysis, we use a single respondent from
each organization although we validated that respondent's assessment against that of
an independent assessor. We utilized a one-tailed test instead of the more
conservative two-tailed test. Also, the Analyzer and Low-Cost Defender samples
are relatively small. This increases the probability of a type II error. Finally, having
collected data only from companies with at least 500 or more employees, the ability
to generalize the reported results to smaller companies is restricted.
6 Discussion
We must try to understand why we rejected four hypotheses. As we noted before,
Walker and Ruekert (1987) argued that Prospectors, Low-Cost Defenders, and
Differentiated Defenders have an overriding focus. Thus, it seems that a strong,
focused culture is most appropriate for these strategy types. However, this does not
explain why no marketing organization culture type influences performance for the
Low-Cost Defender. While Slater and Olson (2001) found that Low-Cost Defenders
were most effective when they had a specific marketing strategy, that strategy was
relatively unsophisticated (i.e., little marketing research, mass market orientation,
low price, intensive distribution, and little promotion). Also, both Miles and Snow
(1978) and Walker and Ruekert (1987) argued that marketing was not part of the
dominant coalition for Low-Cost Defenders. In support of this, Homburg et al.
(1999) found that marketing has little influence in firms pursuing a low-cost strategy.
Thus, the culture of the marketing organization is subservient to that of operations
and of finance.
Given that only four of our eight hypotheses were supported, our results may be
characterized as exploratory or preliminary and, thus, worthy of further study.
However, we believe that even these preliminary results provide useful insights for
both scholars and managers. Specifically, our results contradict those from the
Deshpande and Farley studies which consistently show that firms whose dominant
culture types are either the Adhocracy or Market consistently outperform firms
whose dominant cultures are either the Clan or Hierarchy. Our results, consistent
with configuration theory, suggest that different culture types provide the norms for
behavior that are essential to the successful execution of different strategy types.
Specifically, the values implicit in the Adhocracy culture encourage the external
focus, flexibility, and risk-taking behavior that are necessary for Prospectors. The
Analyzer, with its dual emphasis on change and stability, requires a more complex
culture reflected by maintaining an equilibrium between the external focus of the
Market culture and the internal focus of the Hierarchy culture. The emphasis on
Mark Lett (2011) 22:227242 239 239
control shared by both of these culture types is necessary to accommodate both
stable and dynamic areas of operation (Miles and Snow 1978, p. 79). The
Differentiated Defender's most valuable assets are its customer relationships that are
created through its competences in customer service and product/service innovation
(Slater and Olson 2001). The Clan culture, with its emphases on relationships and
flexibility, encourages the behaviors required by Differentiated Defender. Thus,
depending on the business's strategy, each of the cultural orientations is associated
with performance.
From a practical perspective, the results of this study beg the question of what should
executives in a business that has a misalignment between strategy and culture do?
Recognizing that changing either will prove challenging, managers must understand that
they may have to tackle both simultaneously in order to cope with evolving markets. In
2006, Fords executive team saw that it must develop a new strategy to remain
competitive. But they also realized that the firms entrenched culture posed a barrier to
this. To bring home the point that strategic changes cannot succeed without the proper
organizational culture, the executive team hung a banner saying that Culture eats
strategy for breakfast (McCracken 2006, B1). Fords new strategy was developed in a
rational, analytical fashion as was the change process for the culture.
Beer et al. (1990) identified the following characteristics of successful change
programs: (1) set demanding performance goals; (2) mobilize commitment to change
through joint diagnosis of problems that stand in the way of achieving those goals;
(3) develop a shared vision for how to achieve those goals; (4) foster commitment to
the new vision by providing adequate resources; (5) institutionalize change through
formal policies, systems, and structures; and (6) monitor and adjust as problems arise
in the change process. By utilizing such a process, the executive team can effectively
assess where change needs to take place and take the necessary steps to effect the
change.
7 Concluding thoughts
While previous research has shown that businesses with an externally oriented
culture outperform those with an internally oriented culture, the results of this study
show that a match between the culture of the marketing organization and the firms
business strategy is associated with superior performance. Our results also show that,
depending on the businesss strategy, the values associated with any of the four
culture types may be associated with superior performance. This is because each
strategy type requires different types of organizational and individual behavior for its
successful execution, and culture provides the norms for those behaviors. The results
from our study should provide valuable guidance to executives as they assess
reasons for underperformance and help to pinpoint areas for a change program.
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