Market orientation of small ethnic minority-owned hospitality firms

International Journal of Hospitality Management 29 (2010) 148–156

Contents lists available at ScienceDirect

International Journal of Hospitality Management journal homepage: www.elsevier.com/locate/ijhosman

Market orientation of small ethnic minority-owned hospitality firms Levent Altinay * The Business School, Oxford Brookes University, Gipsy Lane Campus, Headington, Oxford OX3 0BP, United Kingdom

A R T I C L E I N F O

A B S T R A C T

Keywords: Market orientation Ethnicity Break out Turkish United Kingdom

This paper seeks to evaluate the influence of changing co-ethnic consumer habits and the nature of competition on the market orientation of ethnic minority-owned hospitality firms in the UK. The paper reports and analyses the findings of 40 face-to-face interviews with Turkish small business owners. The findings of the study indicate that ethnic minority owned small firms operate within a strong sociocultural environment. Not only co-ethnic customers and competitors but also both mainstream customers and competitors have a bearing on the market orientation of firms. Their market orientation is the result of the interplay between the changes in ethnic and mainstream business environments. ß 2009 Elsevier Ltd. All rights reserved.

1. Introduction Ethnic enterprises are normally small businesses with 2–50 employees, owned and managed by members of a single ethnic family living in a host country (Iyer and Shapiro, 1999; Waldinger et al., 1990). These ethnic businesses are surrounded by the cultural environment of their own community but elements such as the economic, political and socio-cultural aspects of the host country affect them (Barrett et al., 2002). Recent studies have shown that staying within the community, not being able to attract mainstream customers from outside the ethnic market or respond to changing market conditions hinder the growth of ethnic businesses (Altinay and Altinay, 2008; Jamal, 2005). Therefore, to sustain growth and survive in a competitive environment, a strategic ‘breakout’ into mainstream markets is needed. This, however, requires innovation—‘the notion of openness to new ideas as an aspect of a firm’s culture’ (Hurley and Hult, 1998, p. 44) and more specifically the adoption of a strong market orientation (Altinay and Altinay, 2008). Considered to be a form of strategic marketing, ‘market orientation sets the tone and determines the basic approach for making marketing strategies’ (Guo, 2002, p. 1158). It focuses on meeting customer needs and understanding the competitive environment by collecting and exploiting market intelligence (Kohli and Jaworski, 1990; Narver and Slater, 1990). Market orientation can lead to better performance attained through strong internal coordination and the better understanding of, and clarity of focus towards customers and competitors (Cano et al., 2004; Egeren and O’Connor, 1998).

* Tel.: +44 1865 483832; fax: +44 1865 483878. E-mail address: [email protected]. 0278-4319/$ – see front matter ß 2009 Elsevier Ltd. All rights reserved. doi:10.1016/j.ijhm.2009.07.004

The market orientation of a firm is dependent upon the customer market, the competitive environment and inter-functional coordination. However, the literature is lacking in empirical insights into the relationships between market orientation and these three dimensions. In particular, it is as yet unknown how ethnic small firms respond to the dynamics of the competitive market, as the protection of ‘ethnic enclaves’ is decreased by the changing consuming habits of co-ethnic customers and by competition from mainstream competitors. The well-known ethnic enclave theory postulates that the ethnic population within which ethnic minority owned businesses operate provides ethnic firms with a competitive advantage as they are able to serve the unique needs of their co-ethnic clients (Ram and Hillin, 1994; Waldinger et al., 1990). However, in today’s world, they must also compete with mainstream businesses which sell ethnic products and also continuously seek ways to attract ‘second generation immigrant’ customers from ethnic minority owned businesses (Altinay and Altinay, 2006). Indeed, the ethnic identities of consumers co-evolve and change within the host community (Burton, 2000). This paper therefore seeks to add to the existing literature by presenting empirical evidence about the marketing practices of Turkish ethnic entrepreneurs in the UK hospitality industry and by evaluating to what extent their market orientation is sensitive to these two dimensions, namely changes in co-ethnic consumer behaviours and intensifying competition in the ethnic minority business context. The hospitality industry, including restaurants, take-aways and cafes has always been popular with ethnic minority businesses in the UK (Atkinson and Hurstfield, 2003). There is a high concentration of self-employed immigrants in the hotel and restaurant industry; some estimates suggest that 36% of all immigrants end up in this sector (Dustmann et al., 2003). This can be explained by the relatively low entry barriers, such as the low

L. Altinay / International Journal of Hospitality Management 29 (2010) 148–156

149

Table 1 Market orientation and its key components. Concept/term

Explanation

Customer orientation

Involves the active encouragement of customer comments and complaints, an after-sales service emphasis, regular evaluation of ways to create superior product/service value and the regular measurement of customer satisfaction levels. Consists of the regular monitoring of competitor activity, the collection and use of market information about competitors to develop marketing plans and using the sales force to monitor and report competitor activity. Relates to how well marketing information is shared between departments, the involvement of all departments in the preparation of business plans and strategies, the integration of activities between the departments and regular inter-departmental meetings to discuss market trends, developments and customers’ needs.

Competitor orientation Inter-functional coordination

Adopted from Gray et al. (1998), pp. 900–901; Deng and Dart (1994), p. 727.

financial start-up capital required compared to other sectors (Basu and Altinay, 2002), low skill requirements (Basu and Goswami, 1999) and the cultural business traditions of ethnic groups (Basu and Altinay, 2002). To date, the research into the marketing practices of small firms has concentrated almost exclusively on practices of small businesses operating in different sectors in general (see Jamal, 2005; Altinay and Altinay, 2008). However, there is only a limited extant literature concerning the market orientation of ethnic minority small businesses in the hospitality industry, and little is known regarding how ethnic hospitality businesses survive given the continuously changing consumer behaviours and growing competition in the market. 2. Market orientation and ethnic firms The link between the market orientation of a firm and its business performance has been subject to investigation in previous studies (Cano et al., 2004; Gray et al., 1998; Pelham, 2000; Verhees and Meulenberg, 2004; Kara et al., 2005; Kirca et al., 2005). Although some studies suggest a negative or non-significant relationship and argue that performance depends on environmental aspects such as competitive intensity, industry and customer characteristics (Jaworski and Kohli, 1993; Kara et al., 2005), most studies indicate a positive relationship between market orientation and business performance (Matsuno et al., 2005; Slater and Narver, 1994). The importance of a market orientation for a firm’s performance is reflected in the presumption that a market oriented firm is better coordinated internally and superior in its market-sensing and customer linking capabilities (Agarwal et al., 2003). A strong market orientation provides a unifying focus for the efforts of employees, teams and departments within an organisation, creating a synergy which leads to a more competitive and superior performance (Agarwal et al., 2003; Sin et al., 2005). Narver and Slater (1990) define market orientation in terms of culture and argue that market orientation reflects itself in the vision and the strategic direction and orientation of a firm. Market

orientation is comprised of three key components namely customer orientation, competitor orientation and inter-functional coordination (Narver and Slater, 1990). The key components of market orientation are outlined in Table 1 below. Customer orientation involves ‘advocating a continuous, proactive disposition toward meeting customers’ exigencies’ (Han et al., 1998, p. 33). These behaviours will include collecting and acting upon customer feedback to create superior value (Gray et al., 1998). Competitor orientation, on the other hand, involves understanding ‘the short-term strengths and weaknesses and long-term capabilities and strategies of both the key current and potential competitors’ (Narver and Slater, 1990, p. 22) in order to enhance the proactiveness of an organisation (Agarwal et al., 2003; Egeren and O’Connor, 1998). Inter-functional coordination involves sharing of information between departments and development and implementation of business plans and strategies (Deng and Dart, 1994). Acquiring and sharing knowledge and thus enhancing organisational learning are the key aspects of customer and competitor orientations and inter-functional coordination. The firm must be committed to generating market intelligence, in a systematic and anticipatory manner in order to identify and understand customer needs and understand its competitors’ plans and capabilities (Guo, 2002; Slater and Narver, 1994; QuintanaDe´niz et al., 2007). Jaworski and Kohli (1993) propose a model of market orientation that identifies the antecedents and consequences of market orientation within a firm (please see Fig. 1). With regards to antecedents, Jaworski and Kohli suggest that management plays a significant role in shaping the market orientation of a firm. Management takes an active role in influencing the employees about the significance of market orientation. The mindsets of the management such as the tendency to take risks and tolerance to ambiguity also influence the market orientation of a firm. Interdepartmental dynamics also play an important role, with interdepartmental coordination and connectedness creating a supportive environment nurturing market orientation.

Fig. 1. Market orientation: antecedents and consequences. Source: Jaworski and Kohli (1993: 55).

150

L. Altinay / International Journal of Hospitality Management 29 (2010) 148–156

A centralised as opposed to decentralised system appears to have a negative relationship with market orientation systems since centralised structures inhibit innovative thinking and proactive behaviours. It is also proposed that adopting a market orientation leads to employee commitment and thus better performance (Jaworski and Kohli, 1993). Furthermore, it is suggested that the greater the turbulence within the market and the greater the intensity of competition, the stronger the link will be between market orientation and business performance. In comparison to large firms, small firms have greater flexibility, closeness to customers and markets and can implement decisions more quickly (McCartan-Quinn and Carson, 2003). Through this flexibility and lack of complexity, small firms can develop more personal relationships with their customers, creating a competitive advantage (Tzokas et al., 2001; Hogarth-Scott et al., 1996). Those small firms that have a stronger market orientation are in a better position to exploit their flexible organisational structure and closeness to customers in responding to changes in the market (Pelham, 2000). However, their unique characteristics, including limited financial, human, material and informational resources (Carson and Cromie, 1990) render a ‘market orientation’ difficult to adopt. Furthermore, a small firm’s simplistic, internally oriented random orientation to planning with a centralised structure can result in shorter-term vision (Coviello et al., 2006; Pelham, 2000). This is explained by the perceived inappropriateness of market research and planning by the owners/managers of small firms who are ‘in charge’ (Blankson and Stokes, 2002). As a result, an ad hoc approach to management, an unclear view of the customer, lack of competitive orientation, and short-term attitudes hinder the small firm’s ability to become market oriented (Harris and Watkins, 1998). Ethnic minority owned small businesses display all the characteristics of small firms mentioned above such as having a centralised structure with almost no empowerment of or consultation with the employees (Basu and Altinay, 2002) and limited financial, human, and informational resources (Altinay and Altinay, 2008). However, in this case, what also needs to be considered is the influence of ethnicity on both consumers and product/service providers. Ethnicity, which is defined as a characteristic of racial group membership on the basis of some commonly shared features including a sense of common customs, language, religion and etiquette (Jamal, 2003), can affect business transactions between ethnic businesses and the co-ethnic and mainstream customers. For example, in terms of customer profile, ethnic minority businesses rely heavily on selling ethnic products to co-ethnics (Ram and Hillin, 1994; Waldinger et al., 1990). Werbner (1990) states that they find it easier to deal with co-ethnic customers as it is easier to transact business in a language with which the business owner is familiar with. While exploring the distinct marketing strategies of ethnic entrepreneurs of Chinese, Korean, South Asian and Jewish origin, Iyer and Shapiro (1999) also found that ethnic minority entrepreneurs exploit their close ties with their co-ethnic communities and that informal networking shapes their marketing practices. The social networking dimension of marketing practices followed by ethnic entrepreneurs was also revealed in Jamal’s (2005) and Altinay and Altinay’s (2008) studies of the marketing strategies of ethnic entrepreneurs in the UK. These studies emphasise the importance of ethnic and cultural affinity in marketing transactions between ethnic business owners and co-ethnic consumers. In particular, customers’ direct service experiences in their native cultures appear to be the major determinants of trust in business transactions. These studies also found that ethnic businesses constitute a platform for cultural exchange between the ethnic entrepreneurs and mainstream customers. Ethnic entrepreneurs act as bicultural brokers and intermediaries whose function is to facilitate self-identification and re-identifications (Jamal, 2005, p. 4) through adopting the market orientations of their firms and identifying and responding to

both ethnic and mainstream consumers’ needs and competitors’ offerings (Jamal, 2005). Indeed, while exploring the marketing practices of small ethnic retail entrepreneurs, Jamal (2005) discovered that ethnic entrepreneurs engaged in a number of marketing practices that were not founded on relationship development but innovation. They developed strategies to identify niche markets and also facilitate the consumption of ethnic products among mainstream consumers through offering ethnic products at competitive prices and by educating and informing mainstream consumers (e.g. by the provision of advice on how to use ethnic products through in-store communications). If we were to relate these arguments to the market orientation of ethnic firms, we can argue that the centralised structure of ethnic firms, managed and run by the owners has implications for different dimensions of market orientation. In the case of customer orientation, ethnic firms benefit from the advantage of having ‘close and informal contact’ with the customers through the owners’ involvement with the business transactions. An owner led structure and management style helps them to gather customer intelligence both about their customers and competitors and improve their offerings. However, the lack of consultation with and involvement of employees in the process and limited coordination might hinder ethnic firms’ ability to gather intelligence and respond. In addition, the educational backgrounds (usually not highly educated and low skilled) of small hospitality business owners may lead to a simplistic, short-term internally oriented approach to marketing planning (Altinay and Altinay, 2006). On the other hand, in the last decade, globalisation has also affected small ethnic firms. The environment in which they operate has been changing swiftly. In the past, ethnic minority businesses competed only against their ethnic counterparts for survival. In today’s world, they must also compete with mainstream businesses who sell ethnic products and in addition continuously find ways to attract ‘second generation immigrants’ whose needs and wants are more aligned with those of the host country (Altinay and Altinay, 2006). Therefore, there is a growing pressure on ethnic firms to identify the changing needs and wants of both co-ethnic and mainstream consumers and monitor and respond to the moves of both co-ethnic and mainstream competitors in order to survive in this dynamic competitive market (Altinay and Altinay, 2008). Consequently, this paper adopts the following framework for the study and seeks answers to four main research questions (Fig. 2):

Fig. 2. Market orientation of ethnic firms.

L. Altinay / International Journal of Hospitality Management 29 (2010) 148–156

 What are the impacts of changing customer profiles and the competitive environment on the market orientation of ethnic firms?  How do ethnic minority owned firms respond to the changing customer needs and wants (customer orientation)?  How do they coordinate activities internally to discuss market trends and developments and develop response plans (interfunctional co-ordination)?  How do they coordinate activities internally to discuss market trends and developments and develop response plans? 3. Research design This study investigated the interface between the ethnic identity and market orientation of Turkish speaking small businesses in London by conducting 40 semi-structured interviews with entrepreneurs working in restaurants, take-away shops, cafes and travel agencies. This phenomenological research approach was thought to be appropriate because as Siu et al. (2003) and Siu and Kirby (1998) suggest, this can be a powerful way of determining and describing how environmental and cultural factors influence the marketing practices of owner-managers. This research philosophy involves utilising exploratory research by talking to experts in the subject area and exploring issues without becoming too structured within the prior definitions and/or forcing the data into a rigid pre-determined framework (Easterby-Smith et al., 1999). The overall goal of this study has not been to generalize the findings to other Turkish ethnic minority businesses or to other ethnic community groups. It rather aimed to develop an understanding of the context in which phenomena and behaviours occur. It focused mainly on individual experiences and emotions, allowing the researchers to explain the reasoning behind the behaviours of the informants (O’Donnell and Cummins, 1999; Ruyter and Scholl, 1998). Turkish entrepreneurs were chosen as the focus of the study because the growing phenomenon of Turkish entrepreneurship remains insufficiently studied. It is worth noting that developing personal relationships and being part of the informal ties in the ethnic community is highly influential in facilitating and maintaining access to ethnic minority informants (Blackburn et al., 2005). In the case of this research project, the fact that the researchers shared the same language and ethnic background as the Turkish entrepreneurs helped to gain and maintain access to this ethnic group. In particular, those personal contacts known as

151

‘warm contacts’ or ‘gatekeepers’ (e.g. ethnic accountants, Turkish origin councilors, board members of Turkish Cypriot Chamber of Commerce and ethnic minority community centers) helped the researchers to gain access to the entrepreneurs. Most of the interviews were conducted in English (the business language used/preferred by Turkish entrepreneurs) and lasted about 1 h, on the basis of a detailed interview schedule. Informants were asked closed as well as open-ended questions on a wide range of issues relating to their relationship marketing practices, their understanding of trust and relationships and how they managed their relationships with different customer groups. Conducting interviews on a one-to-one basis ensured that the response rate was high and also enabled the researchers to provide explanations in Turkish if needed whilst at the same time providing an opportunity for social interaction. The sample was drawn from a database of 1200 Turkish speaking entrepreneurs who own micro (minimum 2, maximum 9 employees) and small businesses (minimum 10, maximum 49 employees) in different boroughs of London. The database was constructed by the researchers through ethnic minority business directories and unpublished lists of names obtained from Turkish high commissions. The researchers also managed to identify other businessmen via ethnic newspapers including Kibris Gazette, Toplum Postasi and Olay Gazetesi and also from the Turkish Cypriot Chamber of Commerce in London. Turkish Business Guides (2003, 2004, 2005, 2006) were also used to locate boroughs with a high concentration of Turkish speaking businesses for the study. Stratified random sampling was adopted and an effort was made to include entrepreneurs operating not only in restaurants but also in cafes, takeaway shops and travel agencies. In addition, the number of potential interviewees grew as each informant was asked to provide names, addresses and telephone numbers of other Turkish speaking entrepreneurs in London. This proved to be very useful in gaining access to potential Turkish speaking entrepreneurs. In some cases, the interviewees themselves telephoned other Turkish businessmen and convinced them to participate in the research project. This type of sampling is often described in the literature as purposive sampling or snowball sampling (Hemmington, 1999; Robson, 2002). Purposive sampling enabled the researchers to use their judgement in selecting people with the appropriate experience and expertise that would best enable them to answer their research questions and hence meet their objectives. Snowball sampling acted as a chain referral method to identify potential participants based on the recommendations of the other business

Fig. 3. A coding scheme derived from the literature for the analysis.

152

L. Altinay / International Journal of Hospitality Management 29 (2010) 148–156

owners. This study reports on findings deriving from forty interviews. Qualitative data were analysed using ‘coding analysis’ which allows for constant examination of conceptual interactions and relationships, and the conditions under which they occur (Strauss and Corbin, 1990). A coding scheme was derived from the literature which reflected the research framework, highlighting key elements that emerged (Please see Fig. 3). The coding scheme comprised a three-by-three matrix encompassing the market orientation dimensions (customer and competitor intelligence gathering and inter-functional coordination) as one axis and the other components of the theoretical framework as the other axis (changing needs of co-ethnic and mainstream customers and coethnic and mainstream competition and ethnic firms). Much of the data analysis consisted of breaking down the answers to openended questions manually into manageable blocks in order to classify them under each code/grouping. This approach helped to cross-classify the variables logically and illustrate interrelationships. 4. Findings and discussion It was stated by the informants that in the past, they competed only against their ethnic counterparts for survival. In today’s world, they also face fierce competition from mainstream businesses which target ethnic consumer groups with a wide range of ethnic products in their product portfolio. In particular, it was stated that the hospitality industry has reached saturation point with lots of competition amongst ethnic counterparts and also aggressive competition from larger organisations. For example, informants raised concerns about the large supermarkets incorporating retailing and catering as well as dry cleaning whilst providing convenience in terms of parking. In addition, there was a widely shared view that the protection of ‘their ethnic enclave shield’ was diminishing with the changing consuming habits of co-ethnic customers, in particular the second and third generation immigrants. Therefore, there was a common perception that they had to break into mainstream markets and adopt a more professional approach to marketing and strategic development. Previous small business literature suggests that marketing is not taken seriously by small firms (Coviello et al., 2006; Pelham, 2000) due to the perceived inappropriateness of market research and planning by the owners/managers (Blankson and Stokes, 2002). The findings of this study, however, suggest that marketing is being taken more seriously by ethnic minority enterprises than indicated in the previous literature. The growing pressure of the market on the ethnic hospitality firms has made them realise that their businesses are at risk of being left behind in an increasingly competitive market place. Therefore, they have some strategic marketing decisions to take such as which customer groups to target and how to tackle competition given the dynamic interaction between host and migrant cultures. Having acknowledged the importance of targeting the ethnic market because it offers what they called a ‘safe business environment’, ethnic business owners emphasised the need to reflect on changing consumer trends in order to minimize the risk of wrong market positioning. One of them illustrated: ‘‘When we first started we started with Turkish Hallal products. Seventy percent of our products were Turkish. However, we have now realised that this would not be sustainable. Even the Turkish customers go to supermarkets and shop from there. For example, there are many customers who do not care about the Hallal food and the idea of just shopping from a shop which sells only ‘Hallal’ food. Now we got stuck, we cannot change much because this is how we are known among the existing customers. If we change, we might lose them and no one can guarantee us that we will replace them with the other customer

groups’’. A large majority of the informants stated that the decision to target the mainstream market is non-negotiable anymore and for long-term success, it was essential to look beyond ethnic boundaries. One of the English breakfast cafe owners illustrated the importance of targeting the mainstream market very well: ‘‘One day our council member asked me: ‘How many Turkish do you have in this area? 20000 Turkish I replied’. He then said there are 800000 people from other origins. Why don’t you target that potential and sell products and services to the mainstream market? This was when I decided to open this English Breakfast cafe´. I can now see that this was the most reasonable thing to do’’. A restaurant owner emphasised the changing consuming habits of second and third generation immigrants: ‘‘Our children do not have the same food culture as we do. Some of them do not even know what certain Turkish food products are. Do they cook Turkish food at home? I am not sure’’. The previous literature acknowledges that ethnic consumers go through a process of acculturation and change over time (Burton, 2000). This is indeed the case with the Turkish ethnic customers in the UK. More importantly, the change of culture and identity has implications for marketing strategies and in particular the market orientation of small ethnic firms which are known as the traditional providers of products and services to ethnic customers (Jamal, 2005). Ethnicity does not appear to be an important marketing advantage for ethnic firms anymore as the eating and drinking habits of co-ethnic consumers are changing and they will have to integrate with the wider community. These changes have forced ethnic minority owned hospitality firms to offer a wide range of products and services which would appeal both to coethnic and mainstream consumers. In doing so, they monitor both customer needs and wants. One of the restaurant owners stated that there is a growing demand for healthy options in the market from both co-ethnic and mainstream consumers. Therefore, they are redesigning their menus, modifying their systems accordingly: ‘‘Peoples’ taste has changed. Now people prefer ‘grilled fish’. They prefer healthier options. This is future and we know this, therefore, we are adapting’’. Another restaurant owner stated that given the changes in the market, he ended up expanding his product portfolio: ‘‘I used to sell Kebaps, Turkish Food only, now I sell burgers and chips, chicken fillet, jacket potatoes, sandwiches in order to respond to the changing consumer behaviours and be able to compete in the market’’. Having emphasised the changing co-ethnic consumer attitudes, a cafe´ owner highlighted the importance of targeting different customer groups with a wide range of products: ‘‘Having seen the changes in our society’s consuming behaviours, you can see we do not have many Turkish products on our shelves anymore. There are many Black African as well as Polish Drinks and Chinese food’’. In addition, competition from co-ethnic counterparts and mainstream competitors including fast food chains and restaurants with international brands and supermarkets which offer both fast food and incorporate restaurants and coffee shops, have forced them to think differently about their market positioning. With regard to the competition with ethnic counterparts, there was a widespread view that they should minimize direct competition with each other by not starting up new businesses in the same line (in the same sector with the same products and services) within close geographical proximity. It was stated that ethnic entrepreneurs in the hospitality industry should also be creative and innovative with their ideas when it comes to business start ups and seek for differentiation even before the start up. When it came to the competition with mainstream businesses, it was stated that the survival of their businesses strongly depended on watching competitors’ moves and expanding their product and service portfolios. One of the cafe´ shop owners highlighted the importance of monitoring competitors’ moves: ‘You have to know your

L. Altinay / International Journal of Hospitality Management 29 (2010) 148–156

competition well. What they have got and what they have not got. My competitors bring a new product, I immediately find that product and offer it to the customers as well’. Another one illustrated the same point further: ‘‘My competitors are Pizza Hut, Domino Pizza, Kebap shops and they are all doing delivery. We used to do take away only however later on we realised that today’s customers are looking for more convenience and this is how we moved to delivery. In addition we are specialized in fish and chips but now thinking about the market conditions I think it is important to sell wide range of products including kebaps, Mexican, Pizza and even apple pie’’. The literature suggests that context, including customer groups and the competitive environment influences the market orientation of a firm (Guo, 2002; Slater and Narver, 1994). The findings of this study revealed that this is indeed the case. However, in the case of ethnic hospitality firms, the context involves both the ethnic environment, which is embedded in close ethnic ties and informal networking, and the mainstream environment, which now acts as a platform of exchange between different identities and cultures. Given these market conditions, ethnic minority businesses are forced to re-position themselves in the market. Their growth and survival depend most crucially on their ability to create a strong market orientation by systematically engaging in customer feedback gathering and also evaluating their competitors’ moves. The findings revealed that there are clear signs of practices encouraging customer feedback and of discovering ways to create superior value, as well as attempts to monitor the capabilities and strategies of competitors. One of the restaurant owners highlighted the changing customer characteristics in his restaurant’s territory: ‘A month ago we changed our lunch menu only for students to attract university students. We realized recently during the last couple of years that the customer profile has changed. University students demanded mainstream ‘Mexican’ food therefore we changed our menu’. A takeaway kebap shop owner stated that market analysis helps him to modify his products on regular basis: ‘‘We respond to the customers’ needs, they demanded a ‘marinaded product’ and now we sell marinaded chicken and meat. We are also responding to healthy eating habits – which is now a trend. I told everyone long time ago that McDonald’s would lose its popularity because of the Obesity and Salt issues. I was able to do that because I could read the trends’’. After highlighting the impact of intense competition on the business, a restaurant owner also stated how he responded to the high level of competition: ‘‘Now we have uncertain periods or slow periods but my business does not allow too much uncertainty because we offer a wide range of products, diversified products including different products in different seasons; salads during summer and meat/lamb during winter’’. The previous literature suggests that adopting a strong market orientation and developing proactive market behaviour require collecting market intelligence about current and potential customer needs as well as monitoring and understanding the strengths and weaknesses and capabilities of both the key current and potential competitors (Agarwal et al., 2003; Egeren and O’Connor, 1998; Narver and Slater, 1990). The findings of this study revealed that the market orientation of small ethnic firms is geared more towards collecting market intelligence about their current and potential customers rather than monitoring the actions of competitors in order to be able to respond. What was interesting in the views of the informants was that they would be happy to take competition as a benchmark for their activities without concerning themselves about being market followers rather than leaders. Only two business owners in the research sample thought that competition helped them to improve their business practices, stating that they believed that competition makes an entrepreneur adapt to the changing environment, introduce good quality products and services to the market and pay more attention to

153

the customers’ needs and wants. More significantly, however, unlike the practices of large businesses as identified by Guo (2002) and Agarwal et al. (2003), the majority of the business owners of ethnic hospitality firms stated that their firms do not undertake systematic market research to identify the changing trends in the market. When informants were asked how they undertake market research, it was found that most of them preferred to take an informal approach to market research by actively engaging with the customers. One of the restaurant owners stated: ‘‘I always take a proactive approach, I am on the floor asking customers what they want, their needs. I have informal discussions with the customers. This is how I do my research’’. A group of business owners emphasised the importance of a trial and error method based on the informal feedback which they receive from the customers. They stated that it is important to act upon feedback from the customers promptly and let them try the modified service and/or product in order to understand if they are able to respond to customers’ demands. As a cafe´ owner put it: ‘‘I do not do market research. It is customers who inform us about the changing trends and we make our input by acting upon their ideas. I buy different things and get my customers try. If they like I add them on my menu’’. They stated that their accumulated experience over the years equipped them with certain skills and gave them the courage to take certain decisions about the customers’ needs and competitors’ moves intuitively. One of the owners of a well established retail shop illustrated: ‘‘I used to do market research but I am not doing it anymore. I know the expectations of the people from my experience. If you tell me how we know we try and find out. For example, ‘Desert with Cream and almond’’ was an innovation for us. We introduced it to the market without any market research and our customers who are mainly Greek and Turkish liked them and now it is one of the most popular desserts in the shop. We have customers even from Scotland’’. Whilst acknowledging the importance of experience, a group of informants also stressed that if they had studied management and/or hospitality, their educational attainment would have helped them identify the trends, synthesize these and develop action plans. Compared to those advocating the importance of experience in identifying trends, this group of informants highlighted the facilitating role of education in synthesizing information and taking action. A take-away kebap shop owner who is a primary school graduate stated that he always lacked the skills and confidence that educational attainment would have equipped him with and this led to him taking wrong strategic decisions about the market: ‘‘We had done market research before we bought this place, however we interpreted trends wrongly. We thought we would succeed by solely depending on Turkish market without targeting mainstream market but we are suffering now’’. The above findings are in line with previous studies (HogarthScott et al., 1996; McCartan-Quinn and Carson, 2003; Tzokas et al., 2001) which state that in comparison to large firms, small firms are closer to customers and more flexible. Therefore, they can develop more personal relationships, collect feedback and act upon it swiftly. In addition to the size of the firm, the customer focused characteristics of the hospitality industry lead to close firm– customer interaction. On the other hand, the findings of the study to some extent contradict Carson and Cromie (1990), who argue that the unique characteristics of small firms including human and financial resources render a market orientation difficult to adopt. Accumulated experience, which constitutes important human capital and the unique competence of most hospitality managers and/or business owners, contributes to market intelligence gathering. However, whilst experience equips them with the skills and confidence to gather market intelligence, it is educational attainment that would enable them to synthesize the

154

L. Altinay / International Journal of Hospitality Management 29 (2010) 148–156

information and take strategic decisions. In line with the arguments of Carson and Cromie (1990), it was found that the knowledge and vision developed through educational attainment is something missing in the management of ethnic hospitality firms and this renders a long-term market orientation difficult to adopt. In spite of all these constraints, most of the ethnic minority business owners still appear to be reluctant to adopt a more strategic posture to management by delegating power to nonfamily members who have strong language skills and experience and possess higher educational attainment. The autocratic leadership and top down management style do not leave room for any coordination internally, hindering organisational connectedness and learning and thus resulting in ineffective customer and competitor orientation. In addition, since most of the ethnic firm owners pursue low-cost leadership strategies by shaving costs off the labour element of the value chain, they are not prepared to reward their employees for their efforts to contribute to the market orientation of their firms in addition to paying their salaries. Added to all this, is the problem of succession of the ethnic hospitality businesses to the children of the owners who prefer to work in other industries such as professional services (e.g. accountancy, chemistry, and law) after obtaining their degrees in relevant subject areas. 5. Conclusions and managerial implications The proactiveness and long-term survival of an organisation is dependent upon its ability to adopt a strong market orientation. Previous studies acknowledge that the market orientation of organisations is influenced by dynamic market conditions including changes in consumer needs and wants and competitors’ moves. In spite of their pivotal role in shaping the market orientation of a firm (Guo, 2002; Kohli and Jaworski, 1990; Narver and Slater, 1990), literature about the interface between these two contextual factors and market orientation continues to be vague and incomplete. In particular, although previous literature (Altinay and Altinay, 2008; Jamal, 2005) acknowledges the need for ethnic firms to consider the changing nature of ethnic marketing and also break out of their ethnic enclaves and into the mainstream market, it is yet not known how the market orientations of these firms are adapting to changing market conditions. This paper enables a deeper understanding of the influence of the target market and the competitive environment on the market orientation of small ethnic minority owned hospitality businesses. Firstly, it is important to acknowledge the serious linkage between the strategic context of ethnic minority owned firms and market orientation. This paper clearly demonstrates that ethnic minority owned small firms operate within a strong socio-cultural environment. Not only co-ethnic customers and competitors, but also both mainstream customers and competitors have a bearing on the market orientation of firms. Therefore, market orientation is the result of the interplay between the changes in ethnic and mainstream business environments. Ethnic minority hospitality firms operate comfortably within their ethnic environments by targeting co-ethnic customers and competing against their coethnic counterparts. However, since the behaviours of the coethnic customers ‘modernize’ and change over time and also mainstream competitors pose direct competition by targeting ethnic consumers by selling ethnic products, ethnic hospitality firms have to break out of their ethnic enclaves and adopt a more competitive market orientation. Secondly, this study offers insights about the interface between ethnicity and market orientation. Ethnicity is an important marketing concept in multicultural societies but it has not attracted enough attention either in marketing or in

hospitality theory or practice. To some extent this situation is changing, albeit slowly (Burton, 2000). This is surprising given the economic and socio-cultural contribution of the ethnic minorities to the hospitality industry. This study’s findings revealed that ethnicity and ethnic affinity which create an environment of personal connection and constitute emotional ties and implicit culturally bound trust between ethnic business owners and coethnic customers cannot be exploited for sustainable, long-term advantage. Ethnicity and ethnic identification are not static phenomena. The consumption habits of co-ethnic consumers change and co-evolve as they interact with the host culture and this certainly requires ethnic firms to adopt a market orientation. This does not mean that they should eschew culturalist approaches to the operation of their businesses, but suggests rather that they need to develop a universal market orientation which should arise out of the interplay between their cultural embeddedness and the social and economic realities of the host country in which they operate. Thirdly, previous studies compare and contrast the market orientations of large and small firms and identify the differences and similarities in their approaches to adopting a market orientation (see Coviello et al., 2006; Pelham, 2000; Harris and Watkins, 1998). However, there appears to be limited research which evaluates the market orientation of small firms in a particular industry. This study investigated the market orientation of small firms in the hospitality industry. It became apparent that the unique characteristics and traditions of the industry influence the market orientation of firms. Those in the hospitality industry who run restaurants, cafes, and takeaways face competition both from domestic and international catering firms, with an increasing number of outlets within the same geographical proximity and also from supermarkets selling fast food (Bowie and Buttle, 2004). Given the extent of competition in the hospitality industry, ethnic minority entrepreneurs need to take market intelligence gathering more seriously than ever before. Moreover, the hospitality industry is very customer focused. It therefore did not come as a surprise that such firms place an emphasis on customer related intelligence gathering. In addition, given that the hospitality industry has traditionally accommodated business owners and managers with experience but limited educational attainment (Basu and Goswami, 1999), one would expect that these two owner specific factors would have a bearing on the market orientation of a small firm in the hospitality industry. It became apparent that accumulated experience contributes positively to the market orientation, whereas the lack of educational attainment affects it negatively. The findings of the paper provide not only empirical insights into the influence of different contextual factors on market orientation but also managerial ‘take-away’. The competition in the hospitality industry has intensified with lots of rivalry between ethnic counterparts and aggressive competition from large organisations. It is therefore advisable to evaluate the extent of competition in the sector of the business even before start up. Ethnic minority businesses should minimize direct competition with their ethnic counterparts by not starting up new businesses in the same line (in the same sector with the same products and services) within close geographical proximity. They should be creative and innovative with their ideas when it comes to business start ups and seek for differentiation even before the start up. It is not recommended that ethnic minority business owners open a business without answering the question ‘How different is my business going to be from the others on the same street in terms of the products and services and the likely target market group?’. If they are not in a position to answer this question, they should seek for advice from ‘enterprise councils’ or other business support bodies.

L. Altinay / International Journal of Hospitality Management 29 (2010) 148–156

Those who are already operating in the market should embrace a ‘new way of’ doing things as they are at risk of being left behind in an increasingly competitive market place. We recommend that they break into mainstream markets and adopt a more professional approach to marketing and strategic development. This will involve following changing market trends and identifying current and changing consumer needs and wants; watching competitors’ moves (both ethnic and mainstream competition); constantly modifying their pricing, marketing and product/service development tactics; developing innovative products and services; and introducing new systems of operations and production in order to differentiate themselves from their competitors and their offerings. Embracing a new way of thinking and operating will certainly need an assessment of how different socio-cultural characteristics of business owners/managers contribute to the market orientation of their firms. Such an assessment could help them to diagnose their learning and training needs and attend relevant courses offered by business support units and community centers. If they are reluctant to learn and improve because of their age and/or time constraints, they should be prepared to move away from the traditional centralised management style and empower those individuals who have the appropriate experience and educational background. Finally, government, community groups and business advisers can offer training and short courses in order to help small business owners capitalize on their socio-cultural strengths in order to enhance the competitiveness of their firms and overcome those socio-cultural attributes that hinder their firm’s market orientation.

Acknowledgements This paper is based on data collected as part of a joint ESRC funded project (Project Reference: RES-061-23-0051) conducted by the author and Dr Catherine L Wang, School of Management, Royal Holloway, University of London. We would like to acknowledge the support of the ESRC for the project ‘Socio-Cultural factors, ethnic minority entrepreneurial orientation and a firm’s growth: a comparative study of Turkish and Chinese small firms in the UK’ (Project Reference: RES-061-23-0051).

References Agarwal, S., Erramilli, M.K., Dev, C., 2003. Market orientation and performance in service firms: role of innovation. Journal of Services Marketing 17 (1), 68–82. Altinay, L., Altinay, E., 2006. Determinants of ethnic minority entrepreneurial growth in the catering sector. The Service Industries Journal 26 (2), 203–221. Altinay, L., Altinay, E., 2008. Marketing strategies of ethnic minority businesses in the UK. The Service Industries Journal 28, 1–14. Atkinson, J., Hurstfield, J., 2003. Annual small business survey. In: Executive Summary, . Barrett, G., Jones, T., McEvoy, D., McGoldrick, C., 2002. The economic embeddedness of immigrant enterprise in Britain. International Journal of Entrepreneurial Behaviour and Research 8 (1/2), 11–31. Basu, A., Altinay, E., 2002. The interaction between culture and entrepreneurship in London’s immigrant business. International Small Business Journal 20 (4), 371– 394. Basu, A., Goswami, A., 1999. Determinants of South Asian entrepreneurial growth in Britain: a multivariate analysis. Small Business Economics 13, 57–70. Blackburn, R., Bannon, K., Odamtten, T., 2005. Reaching businesses through community based organisations: evidence from the business advice beneficiaries. In: Reflex Project, ESF Community Initiative (EQUAL 2001) Action. p. 3. Blankson, C., Stokes, D., 2002. Marketing practices in the UK small business sector. Marketing Intelligence and Planning 20 (1), 49–61. Bowie, D., Buttle, F., 2004. Hospitality Marketing. Butterworth Heinemann, Oxford. Burton, D., 2000. Ethnicity, identity and marketing: a critical review. Journal of Marketing Management 16, 853–877. Cano, R.C., Carrillat, A.F., Jaramillo, F., 2004. A meta-analysis of the relationship between market orientation and business performance: evidence from five continents. International Journal of Research in Marketing 21, 179–200. Carson, D., Cromie, S., 1990. Market planning in small enterprises: a model and some empirical evidence. The Journal of Consumer Marketing 7 (3), 5–17.

155

Coviello, N., Winklhofer, H., Hamilton, K., 2006. Marketing practices and performance of small service firms: an examination in the tourism accommodation sector. Journal of Service Research 9 (38), 38–58. Deng, S., Dart, J., 1994. Measuring market orientation: a multi-factor, multi-item approach. Journal of Marketing Management 10 (8), 725–742. Dustmann, C., Fabbri, F., Preston, I., Wadsworth, J., 2003. Labour market performance of immigrants in the UK labour market. In: Home Office Online Report, . Easterby-Smith, M., Thorpe, R., Lowe, A., 1999. Management Research: An Introduction. Sage, London. Egeren, M.V., O’Connor, S., 1998. Drivers of market orientation and performance in small firms. Journal of Services Marketing 12 (1), 39–58. Gray, B., Matear, S., Boshoff, C., Matheson, P., 1998. Developing a better measure of market orientation. European Journal of Marketing 32 (9–10), 884–903. Guo, C., 2002. Market orientation and business performance. European Journal of Marketing 36 (9–10), 1154–1163. Han, J.K., Kim, N., Srivastava, R.K., 1998. Marketing orientation performance: is innovation a missing link? Journal of Marketing 62, 30–45. Harris, L.C., Watkins, P., 1998. The impediments to developing a market orientation: an exploratory study of small UK hotels. International Journal of Contemporary Hospitality Management 10 (6), 221–226. Hemmington, N., 1999. Sampling. In: Brotherton, B. (Ed.), The Handbook of Contemporary Hospitality Management Research. Wiley, New York, pp. 244–245. Hogarth-Scott, S., Watson, K., Wilson, N., 1996. Do small businesses have to practice marketing to survive and grow? Marketing Intelligence and Planning 14 (1), 6– 18. Hurley, R.F., Hult, M.T., 1998. Innovation, market orientation, and organisational learning: an integration and empirical examination. Journal of Marketing 62 (3), 42–54. Iyer, G.R., Shapiro, J.M., 1999. Ethnic entrepreneurial and marketing systems: implications for the global economy. Journal of International Marketing 7 (4), 83–110. Jamal, A., 2003. Marketing in a multicultural world: the interplay of marketing, ethnicity, and consumption. European Journal of Marketing 37 (11/12), 1599– 1620. Jamal, A., 2005. Playing to win: an explorative study of marketing strategies of small ethnic retail entrepreneurs in the UK. Journal of Retailing and Consumer Services 12, 1–13. Jaworski, B.J., Kohli, A., 1993. Market orientation: antecedents and consequences. Journal of Marketing 57, 53–70. Kara, A., Spillan, J.E., DeShields, O.W., 2005. The effect of a market orientation on business performance: a study of small-sized service retailers using MARKOR scale. Journal of Small Business Management 43 (2), 105–118. Kirca, A.H., Jayachandran, S., Bearden, W.O., 2005. Market orientation: a metaanalytic review and assessment of its antecedents and impact on performance. Journal of Marketing 69, 24–41. Kohli, A.K., Jaworski, B.J., 1990. Market orientation: the construct, research propositions, and managerial implications. Journal of Marketing 54, 1–18. Matsuno, K., Mentzer, J.T., Rentz, J.O., 2005. A conceptual and empirical comparison of the three market orientation scales. Journal of Business Research 58, 1–8. McCartan-Quinn, D., Carson, D., 2003. Issues which impact upon marketing in small firms. Small Business Economics 21 (2), 201–213. Narver, J.C., Slater, S.F., 1990. The effect of a market orientation on business. Profitability. Journal of Marketing 54, 20–35. O’Donnell, A., Cummins, D., 1999. The use of qualitative methods to research networking in SMEs. Qualitative Market Research: An International Journal 2 (2), 82–91. Pelham, A.M., 2000. Market Orientation and other potential influences on performance in small and medium-sized manufacturing firms. Journal of Small Business Management 38, 48–67. Quintana-De´niz, A., Beerli-Palacio, A., Martı´n-Santana, D.J., 2007. Human resource systems as antecedents of hotel industry market orientation: an empirical study in the Canary Islands, Spain. International Journal of Hospitality Management 26 (4), 854–870. Ram, M., Hillin, G., 1994. Achieving ‘break-out’: developing mainstream ethnic minority businesses. Small Business and Enterprise Development 1 (2), 15–21. Robson, C., 2002. Real World Research, 2nd ed. Blackwell, Oxford. Ruyter, K., Scholl, N., 1998. Positioning qualitative market research: reflections from theory and practice. Qualitative Market Research: An International Journal 1 (1), 7–14. Sin, Y.M.L., Tse, B.C.A., Heung, S.C.V., Yim, K.H.F., 2005. An analysis of the relationship between market orientation and business performance in the hotel industry. International Journal of Hospitality Management 24 (4), 555– 577. Siu, W.S., Kirby, D.A., 1998. Approaches to small firm marketing: a critique. European Journal of Marketing 32 (1–2), 40–60. Siu, W.S., Zhu, Y., Kirby, D.A., 2003. The interplay of environment and culture in small firm marketing: a comparative study of the marketing practices of Chinese small firms in Hong Kong and the UK. Journal of Small Business and Enterprise Development 10 (1), 25–39. Slater, S.F., Narver, J.C., 1994. Does competitive environment moderate the market orientation–performance relationship? Journal of Marketing 58, 46–55. Strauss, A.L., Corbin, J., 1990. The Basics of Qualitative Research: Grounded Theory Procedures and Techniques. Sage, Newbury Park. Turkish Business Guide, 2003. Turkish Business Guide. Londra Gazete, London. Turkish Business Guide, 2004. Turkish Business Guide. Londra Gazete, London.

156

L. Altinay / International Journal of Hospitality Management 29 (2010) 148–156

Turkish Business Guide, 2005. Turkish Business Guide. Londra Gazete, London. Turkish Business Guide, 2006. Turkish Business Guide. Londra Gazete, London. Tzokas, T., Carter, S., Kyriazopoulous, P., 2001. Marketing and entrepreneurial orientation in small firms. Enterprise and Innovation Management Studies 2 (1), 19–33. Verhees, J., Meulenberg, M., 2004. Market orientation, innovativeness, product innovation, and performance in small firms. Journal of Small Business Management 42 (2), 134–154.

Waldinger, R., Aldrich, H., Ward, R., 1990. Ethnic Entrepreneurs: Immigrant Business in Industrial Societies. Sage, London. Werbner, P., 1990. Renewing an industrial past: British Pakistani entrepreneurship in Manchester. Migration 8, 7–41. Dr Levent Altinay is a reader in Strategic Management at the Oxford Brookes University Business School. His research interests include entrepreneurship, internationalization and international franchising of firms.