World Applied Sciences Journal 26 (1): 28-33, 2013 ISSN 1818-4952 © IDOSI Publications, 2013 DOI: 10.5829/idosi.wasj.2013.26.01.288

The Effect of Marketing Strategy on Sales Performance: The Moderating Effects of Internal and External Environment 1

1

Amirhosein Pourhosseini and 2Zohre Dehdashti Shahrokh

Department of Marketing and Market Research, Institute for Trade Studies and Research, Tehran, Iran 2 Department of Business Management, Faculty of Management and Accounting, Allame Tabataba’i University, Tehran, Iran Submitted: Sep 6, 2013;

Accepted: Nov 6, 2013;

Published: Nov 10, 2013

Abstract: How does marketing strategy affect sales performance as for internal and external environment? The aim of this study is to identify performance implications of marketing strategy and moderating effects of transformational leadership, demand uncertainty and competitive intensity on sales performance. This study is a mixed research that combines qualitative and quantitative methods. The population entails sales and marketing managers of companies in food industries that are members of Tehran stock exchange. The sample size in qualitative and quantitative study was 23 and 66 respectively. Analyses of survey and secondary data provide evidence that marketing strategy has a positive and meaningful relationship on sales performance while transformational leadership and competitive intensity were found to exert moderating effects on this relationship. Key words: Marketing Strategy Sales Performance Competitive Intensity INTRODUCTION

Transformational Leadership

Demand Uncertainty

of what marketing strategy is and how it influences sales performance should make an important contribution to the marketing literature [3], [4]. Thus; the key objective of this study is twofold. First, improve marketing literature and enhance researchers and academics understanding of marketing strategy (MS thereafter) and its key elements through developing a comprehensive conceptualization. Second, we attempt to demonstrate the relationship between marketing strategy and sales performance (SP thereafter) by developing and testing a conceptual model that links marketing strategy to sales performance data; moreover, our model investigates theoretically based variables that may exert a moderating effect on the marketing strategy sales performance relationship. The originalities of this research are: (1) in this study, both financial and nonfinancial aspects of sales performance have been studied comprehensively. In fact sales performance has been measured via objective and subjective criteria. (2) The relationship between marketing strategy and sales performance with regard to the internal and external environment of the organization is also studied.

Strategies are classified into three hierarchical levels: corporate, business and functional level strategies. Strategic marketing authors have assumed that the different strategy levels might be influenced by different contingency factors. This research investigated the relationships between marketing strategy and sales performance as well as the moderating effects of external and internal factors on this relationship. For several years, marketing authors have made considerable efforts to understand the nature of strategy formulation at the marketing levels [1]. Especially with regard to the marketing level, theoretical and empirical advances have enhanced our understanding of the nature of marketing strategy [2]. Still; there is modest agreement as to how marketing strategy affects on sales performance. However, the fragmented literature on marketing strategy substantiates the fundamental proposition that marketing strategy affects performance, or the conditions that might moderate this relationship. Against this background, it should be clear that efforts directed at enhancing researchers’ understanding

Corresponding Author: Amirhosein Pourhosseini, Number 23, Gholam ali Sharghi Alley, Nabard Street, Piroozi Street, Tehran, Iran. Tel: +982161062176.

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World Appl. Sci. J., 26 (1): 28-33, 2013

Theoretical Framework and Research Hypotheses Marketing Strategy: Walker, Boyd, Mullins and Larreche [5] argue that the main focus of marketing strategy (MS thereafter) is appropriate allocating and coordinating marketing resources and activities in order to meet the objectives of the company in a particular market/ product. Thus the main issue relates to the domain of marketing strategy is to determine specific target markets for a specific product or product category. Then firms are seeking to gain competitive advantage and synergy through the development and implementation of appropriate marketing mix that is based on the potential customers' needs in that target market [5]. A well-crafted strategy encompasses five components such as the scope of the strategy, goals and objectives, resource allocation, identifying competitive advantage and synergy; marketing strategy has a major effect on performance. Hence the first hypothesis is:

can provide suitable conditions for successful implementation of marketing strategy [8] and align a company's objectives with those of the salespeople, by that means improving salespeople and firm performance [9]. Hence the second hypothesis is: H2: Transformational leadership has a positive moderating effect on the association between sales strategy and sales performance. Demand Uncertainty: According to some authors' works, demand uncertainty (DU thereafter) is an important feature of the environment that may interact with marketing strategy. This assumption is consistent with the view that the marketing department is primarily responsible for creating demand [10]. Demand uncertainty can be a direct result of continuous changes in customer preferences that require marketing managers to regularly monitor these changes. Moreover, high demand unpredictability may induce marketing managers to collect customers' information to reduce the level of uncertainty [11]. Therefore; organizations with rational behavior identify changes in customer preferences in highly uncertain markets and adapt their marketing strategies with these changes in order to improve their performance. Hence the third hypothesis is:

H1: Marketing strategy is positively and significantly associated with sales performance. Transformational Leadership: Effective implementation of the strategy requires the integration and alignment of the internal operations, which in turn imply activities to deliver improved leadership capabilities [4], [6]. By fostering a climate of open and free communication, transformational leaders can create higher levels of follower commitment to the firm's goals and strategies [7], this commitment is much more important in the implementation of marketing strategy, because salespeople are the key implementers of a company's marketing strategy at the customer-facing level [8]. Transformational Leadership (TL thereafter) capabilities

H3: Demand uncertainty has a negative moderating effect on the association between marketing strategy and sales performance. Competitive Intensity: When the competition is intense, the results of firm behaviors are not definite and remain unknown and the case itself is random and accidental.

Transformational le adership

Marketing Strategy

H2

H1

Sales Pe rformance

H3, 4 Exte rnal environment: Demand uncertainty Competitive intensity

Fig. 1: Conceptual framework 29

World Appl. Sci. J., 26 (1): 28-33, 2013

Because the behaviors are strongly influenced by the competitor's actions and contingencies. When competition is low, companies can continue to operate with its existing systems and almost many of the events and factors are predictable and obvious. But when the competition becomes intense, companies have to adapt themselves with conditions and act venturesome, which requires learning and identification to break the competitor's price and advertising wars. Strategies are strongly influenced by the environment, therefore competitive intensity (CI thereafter) as an environmental factor can influence on the successful implementation of strategies and organizational performance [12], [13]. Hence the fourth hypothesis is:

were measured with three and four items, respectively, all drawn from the works of Gatignon and Xuereb [16]; Jaworski and Kohli [17]. And finally outcome (financial) and behavior (nonfinancial) performance were measured using five and seven items drawn from the works of Babakus, Cravens, Grant, Ingram and LaForge [18] and Hunter and Perreault [19]. It is worth pointing out that in addition to method of management questioning, financial performance is measured using companies' financial statements.

MATERIALS AND METHODS

Analysis and Results: Validity of the measurement scale was established through face validity and Average Variance Extracted (AVE). For face validity, an initial questionnaire was given to 8 industry experts and the necessary corrections were applied in the questionnaire. Reliability of the measurement scale was established through Composite Construct Reliability (CCR) and Cronbach’s alpha analysis. AVE values for all variables are greater than 0.5, CCR value of the factors are greater than 0.7 and Cronbach’s alpha coefficients of all factors were greater than 0.7. Table 1 shows AVE, CCR and Cronbach’s alpha values for each factor.

This study is an exploratory and descriptive research. In other words, this study is a mixed research (combination of quantitative and qualitative methods) [14]. The population consisted of sales and marketing managers of companies in the food industries that are members of the Tehran Stock Exchange. In qualitative study, data were collected from 23 respondents using snowball sampling method and in quantitative study, 66 respondents were selected using simple random sampling method. In-depth interviews were continued until the researcher reached theoretical saturation.

Qualitative Research: Content analysis was used for qualitative analysis. Using deductive content analysis, variables classification was performed with 15 companies, in total 23 people were interviewed. Approximately from seventeenth to twenty first interviews, researcher reached theoretical saturation; but for sure, two more interviews were also conducted to obtain more comprehensive results. Finally 92 criterions for the categories and concepts were obtained. The results of qualitative study were used in the formulation of the final conceptual model and obtaining indexes and questionnaire preparation.

Instrument Development and Construct Measurement: The questionnaire includes 64 questions based on Likert five-point scale. Categories and indexes are based on literature review and authors' qualitative studies. Marketing strategy was measured with seventeen items drawn from the work of Walker, Boyd, Mullins and Larreche [5] and from comments made by participants during the in-depth interview/ pretesting process. Transformational leadership was measured with twenty five items drawn from the works of Podsakoff, MacKenzie, Moorman and Fetter [15] and from comments made by participants during the in-depth interview/ pretesting process. Demand uncertainty and competitive intensity

Quantitative Analysis: Structural equation techniques have been used for quantitative analysis and to test the hypotheses. For data analysis, due to the low sample size and lack of normal distribution of the response variable, the method of Partial Least Square (PLS) was used. According to Figure 2, we can say: totally; marketing strategy variable explain 75.5% of the variance in sales performance. According to Figure 3 and calculated t-statistics, we can say: Transformational leadership has a significant influence on the relationship between marketing strategy and sales performance at the 90% confidence level. Demand uncertainty has not a significant influence on the relationship between

H4: Competitive intensity has a negative moderating effect on the association between marketing strategy and sales performance. Based on an extensive review of marketing literature that its summary was presented, the research model is presented in Figure 1.

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World Appl. Sci. J., 26 (1): 28-33, 2013 Table 2: Construct Correlations Variables

1

2

3

4

5

6

7

8

1. Marketing strategy 2. MS*CI 3. MS *TL 4. MS *DU 5. Competitive intensity 6. Transformational leadership 7. Sales performance 8. Demand uncertainty

1.000 0.795** 0.862** 0.638** 0.125 0.625** 0.892** -0.325*

1.000 0.924** 0.781** 0.369** 0.708** 0.891** -0.368**

1.000 0.730** 0.324* 0.891** 0.897** -0.458*

1.000 0.305* 0.560** 0.634** 0.025

1.000 0.361** 0.328* -0.182

1.000 0.754** -0.458**

1.000 -0.469 **

1.000

**

significant at the 99% confidence level; *significant at the 95% confidence level

Table 3: The results of CFA (factors loading) Marketing strategy

Observed variables Scope of the strategy Goals & objectives Resource allocation Competitive advantage Synergy Outcome performance Behavior performance Intellectual stimulation Providing an appropriate model High performance expectations Supportive leader behaviors Articulating a vision Facilitating the acceptance of group goals Assessing customer tastes Forecasting demand volume Prediction customer preference evolution Intensity of competitive rivalry Promotion wars Competitors' imitation from each other's products New competitive moves **

Sales performance

Transformational leadership

Demand uncertainty

Competitive intensity

0.956** 0.785** 0.625** 0.857** 0.694** 0.965** 0.931** 0.402** 0.879** 0.256** 0.836** 0.721** 0.840** 0.625** 0.458* 0.096 0.469** 0.768** 0.036 0.182

significant at the 99% confidence level; *significant at the 95% confidence level

Table 4: Summary of the hypotheses testing results Research Hypotheses

Standardized coefficients ( )

T-statistics

Result

Marketing strategy"sales performance (H1) Transformational leadership * marketing strategy"sales performance (H2) Demand uncertainty * marketing strategy"sales performance (H3) Competitive intensity * marketing strategy"sales performance (H4)

0.389 0.374 -0.026 -0.160

3.264*** 1.745 * -0.042 -2.598 ***

Confirmed Confirmed Not Confirmed Confirmed

***

significant at the 99% confidence level; **significant at the 95% confidence level; *significant at the 90% confidence level Goals & objectives Resource allocation

0.786 0.634 0.923

Scope of the strategy

Competitive advantage Synergy

0.000

0.365

0.968 0.755 Sales performance

Marketing strategy

Behavior performance

0.984

0.836

0.692

Fig. 2: The research model without mediator variables, in standard coefficients estimation mode 31

Output performance

World Appl. Sci. J., 26 (1): 28-33, 2013 Intellectual stim ulation 8.952

96.225

TL

4.455

High performance expectations

52.375

Supportive leader behaviors

36.128

Resource allocation Scope of the strategy

82.115

42.862

1.548

2.242

38.574 251.234

MS

14.528

SP

DU 1.052

Competitive advantage

1.965 0.254

82.425

MS *DU

0.069

Synergy

39.451 362.028

1.898

452.325

0.853

Behavior performance Outcome performance

Articulating a vision

MS*TL

3.452

Goals & objectives

Providing an appropriate m odel

2.851

Facilitating the acceptance of group goals

Assessing customer tastes/ needs Forecasting demand volume P rediction customer preference evolution Intensity of competitive rivalry P romotion wars

CI 0.164 2.769

MS *CI 0.482

Com petitors' imitation from each other's products

New competitive moves

Fig. 3: The research model with all variables, in significant coefficients mode (| t-value |) performance at the 99% confidence level ( = -0.160, t=-2.598). Summary of the hypotheses testing results are shown in Table 4.

marketing strategy and sales performance at the 95% confidence level and competitive intensity has a significant influence on the relationship between marketing strategy and sales performance at the 99% confidence level. Also the correlation coefficients results are summarized in Table 2; and the results of factor analysis of the error levels of 5% and 1% are summarized in Table 3.

DISCUSSION AND IMPLICATIONS The most important implications of this research for managers include: We suggest during marketing strategy formulation stage, the proposed model and five dimensions of the marketing strategy should be considered. Marketing Managers should monitor customers' needs and preferences, the competition and technological developments continually. This leads to be one step ahead of their competitors. Successful execution of marketing strategies in the context of transformational leadership is possible. Thus it is highly recommended that the companies develop leaders' capabilities through training and implement transformational leadership style. Proposed solutions include: (1) Establish mechanisms that will attract and retain talented executives; (2) Training leadership capabilities continuously.

Hypotheses Testing: According to the path coefficients and t-statistics shown in Table 4. These results were obtained: (1) Marketing strategy has a significant and positive influence on sales performance at the 99% confidence level ( =0.389, t=3.264). (2) Transformational leadership has not a significant influence on the association between marketing strategy and sales performance at the 95% confidence level; but it has a significant and positive influence on the association between marketing strategy and sales performance at the 90% confidence level ( =0.374, t=1.745). (3) Demand uncertainty has not a significant influence on the association between marketing strategy and sales performance ( = -0.026, t= -0.042). (4) Competitive intensity has a significant and negative influence on the association between marketing strategy and sales 32

World Appl. Sci. J., 26 (1): 28-33, 2013

So far, performance implications of marketing strategy have not received much attention in the marketing literature. As such, the contributions of this research to the marketing literature include:

7.

8.

This study provides a comprehensive understanding of the marketing strategy key elements. In this study, the researchers clarify the content of a marketing strategy by providing an empirical approach and describe this construct in terms of five key dimensions. In the marketing literature; studies that have demonstrated the positive effects of marketing strategy on sales performance are very limited. Present study is the first study in Iran that validates this claim. In this study, marketing strategy as an important factor in shaping and influencing the sales performance has been identified. The results showed that marketing strategy has major influence on sales performance. This study examines how transformational leadership and two main characteristics of external environment (demand uncertainty and competitive intensity) modify the marketing strategy sales performance relationship.

9.

10.

11. 12. 13.

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