The Contingency Approach- Its Foundations and Relevance to Theory Building and Research in Marketing

8/3/2019 The Contingency Approach- Its Foundations and Relevance to Theory Building and Research in Marketing

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TThe Contingency Approach: ^ ,Y . Y^ -a . . ' ^ 1 i^-^ .g Contingen

Its lôundat ions and R e l e v a n c e Approacto Theory Building and Researchin Marketing

by

Valarie A. ZeithamlDuke University, Durham, North Carolina,

P. "Rajan" VaradarajanTexas A&M University, and

Carl P. ZeithamlUniversity of North Carolina, Chapel Hill

Introduction

During the 1960s, management theory and research began to adopt a

new orientation, one that embodied a remarkably simple concept and

enabled significant advancements in the study of management and

organisations. This orientation, now referred to as the contingency

approach, emphasises the importance of situational influences on the

management of organisations and questions the existence of a single,

best way to manage or organise. Today, the contingency approach

dominates theory and research in the management literature.

Contingency approaches are positioned within management as mid-range the oriesbetween the two extreme views which state ei±er that universal principles of

organisation and management exist or that e ach organisation is unique and eachsituation must be analysed separately. The contingency approach entails identifying

commonly recurring settings and observing how different structures, strategiesand behavioural proc esse s fare in each settin g[l]. Prominent contingency th eorie shave been proposed and tested relating to organisational environments,characteristics and structures [2,3,4,5,6], com petitive conditions and organisationalstrategies[1,7,8,9], and organisat ional character is t ics and behaviouralprocesses[10,ll,12]. In addition to explicit use by many authors, the contingencyapproach has be en an underlying them e for theory buildhig and resea rch throughoutthe management literature [9].

The contingency approach to theory building and research can be useful to

marketing scholars in at least two im portant ways. First, the management literature



8

offers a variety of established contingency frameworks which may con tribute directlyto the development and con tent of marketing theory . At least th ree sub-disciplineswithin management — organisation theory, strategic management and organisationalbehaviour — provide contingency theories with potential value for marketers. In

addition, several existing contingency theories have extensive research traditionswhich may represent an empirical foundation for research in related marketingareas [13].

Second, consistent with recent appeals in the marketing literature[14,15], thecontingency approach offers an alternative technique for generating marketingtheo ry. A lthough situational factors (e.g. t he stage of the p roduct life cycle) havebee n recognised in certain area s of marketing theo ry and practice, they have notgenerally bee n included as primary co ncepts in theoretical frameworks. Throughthe contingency perspective, marketing concepts and variables may besystematically related both in theo ry and res ear ch. Th e perspe ctive should providemarketers with another avenue to pursue problems and issues that are uniqueto the marketing discipline.

Th e purpo ses of this article, therefore, are to describe t he contingency approachand to demonstrate its value for marketing. Specific objectives are:

(1) to delineate the contingency approach to theory development;

(2) to outline several established contingency the orie s within the ma nagem entdiscipline and highlight the rese arc h th ey have stimulated on rela ted topicsin marketing;

(3) to provide an assess m en t of the current state of the contingency approach

in marketing literature, and

(4) to review the major issues associated with use of the contingency approach.

The Contingency Approach to Theory DevelopmentTh e contingency approach to managem ent ha s its roots in general systems theoryand th e open system s perspective[16,17,18,19], a s well as in the Simon-March-Cyertstream of theory and research[20,21,22]. Thompson[5] recognised th e intersectionof these traditions and extended them in a landmark work that represents acornersto ne of the contingency approach. Th ese foundation concepts a re describedbriefly in the next section, and are followed by a discussion of current perspectiveson the contingency approach.

Theoretical FoundationsThe open systems perspective views the complex organisation as a set ofinterdependent parts that, together, constitute a whole which, in tum, isinterdependent with some larger environment. The interactive nature of theele m ent s within the organisation — and betw een th e oi:ganisation and th eenvironment — result in at least two open system charac teristics th at are centralto the contingency approach: adaptation and equifinality. First, the principle ofadaptation asserts that the elements within the system adapt to one another topreserve the basic character of the system. Second, the principle of equifinality



holds that a system can reach the sam e final state from differing initial conditions T

and by a variety of paths. ContingenTh e Simon-March-Cyert stream of work adds to the open systems perspective Appro

the view tha t organisations are problem-facing and problem-solving en tities. Theorganisation develops processes for searching, learning and deciding — processesthat attempt to achieve a satisfactory level of performance under norms of boundedrationality. O rganisational decision-makers under take rational decision proc esses ^ ^ ^ ^ ^ ^ ^ ^designed to cope with th e complexity and uncertainty of their situations, all ofwhich result in deliberate decisions by using a satisficing criterion for performance.

In marketing, Alderson[19] highlighted the need to observe and conceptualisemarketing agencies and their relationships as components of a system. Buildingon the work of Alderson, Nicosia[23] addressed th e merits of viewing marketingas a system of structural and dynamic relationships. In his view, systemsconceptualisations of phenomena constitute attempts to identify the properties

stemming from the modes by which entities mutually relate, making them preferableto conceptualisations that deal only with individual entities. Nicosia[23] providesan extensive trea tise on Alderson's conceptualisation of marketing as a complexecological system engaged in economic operations. H e also presen ts a set of majorpostu lates of the functionalist approach pertaining to the formation and pers istenceof systems and the system's major structures.

Although contingency approaches began to emerge almost simultaneously froma variety of sources[19,24,25,2,10,3,6], Thompson[5] forged much of the theoreticalsuperstructure of the contingency perspective. Integrating and extending previouswork, Thompson conceived of complex organisations as open systems faced withuncertainty tliat are, at the same time, subject to a rationality criterion . H e arguedthat differences in technological and environmental dimensions result in differencesin structures, strategies and decision processes. Thompson operationalised thesedimensions through the use of a technological typology and simple, yet powerful,2x2 matrices, techniques that have become standard in contingency theorydevelopment. Contingent on the situational factors within these frameworks,Thompson proposed a se t of organisation and decision strategies which providethe organisation a degree of self-control despite interdependence with theenvironment.

Current Perspectives on the Contingency Approach

As derived from these conceptual antecedents, th e essential premise of thecontingency approach is that effectiveness, broadly defined as organisationaladaptation and survival[26], can be achieved in more than one way. For example,management theorists and researchers have recognised more than one way toorganise effectively, more than one strategy that maximises profitability and marketposition, and more than one leadership style that achieves organisational goals.Each way is not equally effective under all conditions; certain organisational actionsor responses are more appropriate than others, depending on the situation[27].

The contingency approach suggests, therefore, that we can observe widevariations in effectiveness, but that th ese variations are not random. Effectiveness



0

depends on the appropriate matching of contingency factors with internalorganisational designs that can allow appropriate responses to the environment.Theoretical and practical contributions are achieved through:

(1) identifying imp ortant c ontingency va riables that distinguish bet we encontexts;

(2) grouping similar contexts based on these contingency variables, and

(3) determ ining the mo st effective internal organisational design s or resp on sesin each major group.

These contingency theory-building steps involve three types of variables;contingency variables, response variables and performance variables. Contingencyvariables represent situational characteristics usually exogenous to the focalorganisation o r manager. In m ost in stance s, th e opportimity to contix)l or m anipulate

these variables is, at best, limited and indirect. In contrast, response variablesare the organisational or managerial actions taken in response to current oranticipated contingency factors. Performance variables are the dependent m easuresand represent specific aspects of effectiveness that are appropriate to evaluatethe fit betw een contingency variables and respo nse variables for the situation u nderconsideration.

These steps typically result in contingency theories that focus primarily onoutcome or content issues, rather than on proc esses. T hey attempt to determinethe organisation structure, strategy or leadership style to be used in a particularsituation, but do not emphasise the dynamics of the process by which an

organisation adapts or a leader becomes effective [28]. This point will receive furtherelaboration later in this article.

Specific contingency frameworks have been conceptually derived[29,2,11,4,5]and empirically derived[24,l,6]. Considerable effort in many of these works hasbeen directed towards the identification of important contingency variables withinthe major sub-disciplines of management. Many contingency frameworks,particulariy in the early ph ases of developmen t, employ a single dimension (e.g.level of environmental uncertainty, type of technology, organisational size, stageof the product life cycle), or construct 2x2 matrices that dichotomise two criticalcontingencies (e.g. envirorunental complexity and stability, growth rate and marketposition). The current trend, however, is to expand these frameworks through

the development of contingency theories that employ multiple dimensions orcontingency variables[l,9]. Although the added complexity of these recentformulations may lessen the straightforward appeal of simpler fameworks, theyallow grea ter precision in the determ ination of high-performance resp on se variables.

Table I summarises the previous discussion through examples of selectedcontingency ap proache s and the ir chara cteristics. Although this table is far froman exhaustive list of contingency approaches, it provides a general overview ofrepresentative frameworks. The next section is designed to expand on thistheme by outlining several contingency theories relevant to marketing in moredetail.



Author

Burns and Stalker[24]

Chandler[25]

Woodward

[6]

Lawrence and

Lorsch

[3]Perrow[4]

Hofer

[8]

Porter

[9]

Hambrick

[17]

Fiedler[10]

House[11]

Vroom and Yetton[12]

Source

Organisationtheory

Organisationtheory and

strategicmanagement

Organisationtheory

Organisationtheory

Organisationtheory

Strategicmanagement

Strategicmanagement

Strategic

management

OrganisationalBehaviour

OrganisationalBehaviour

Organisationalbehaviour

ContingencyVariablesis)

Markets and

technology:stable vs. changing

Growth strategy;internal growthdiversification

Technological type:custommass productioncontinuous process

Task environment:uncertainty

Technological type:craftroutinenon-routineengineering

Stage of the

product life cycle

Industry competitiveforces

Environmentaldimensions

Task structureleader-memberrelationsleader positionpower

Subordinate needstask characteristics

Decision situationcharacteristics

ResponseVariables

Management Style:Organic styleMechanistic style

Structure:centralised,functional vs.

decentralisedmultidivisional

Structure:tall vs. flatdesign

Structure:differentiation

and integration

Structure:bureaucracyflexibility

Business strategy:

Business strategy:differentiationfocuscost leadership

Business strategy:

differentiationasset parsimonycost-efficiencyscale/scope

Leadership style:consideratetask-orientated

Leader behaviour:

directivesupportiveachievement-

participativeDecision style:autocraticconsultativegroup

T

Continge

Appro

TabSelected Conting

Framew

Contingency Streams in Management and their Parallels in Marketing

Contingency approaches to theory building and research prevail in three majormanagement sub-disciplines:



(1) organisation theory, which focuses on th e relationship betw een the external

of environment, organisation design, and the organising process;

(2) strategic management, which concentrates on the formulation and

of organisational goals, strategies and plans; and(3) organisational behaviour, which is concerned with the role of individuals

2 and groups within the organisation.

Several existing theories have contributed to theory buDding and research withinrelated areas of marketing. This section briefly discusses contingency perspectivesin each of these sub-disciplines and their parallels in marketing.

Contingency Approaches in Organisational Theory and Marketing OrganisationDesign

In organisation theory, the organisation and its units are conceptualised as sub-systems of individuals performing tasks designed to achieve a variety oforganisational, group and individual goals. The major emphasis within this disciplinehas been to identify th e organisational designs or structures (i.e. the patternsof interactions among individuals) that promote organisational adaptation toenvironmental, technological and information-processing contingencies.Environmental contingencies were highlighted in the landmark research of B um sand Stalker[24], Lawrence and Lorsch[3] and Duncan[29], while technology andorganisation were examined by Woodward [6], Thompson [5], and Fry andSlocum[30]. The primary proponent of the relationship between informationprocessing requirements and organisational design has been Galbraith[31,27].

Contingency perspectives from organisational theory have been used in marketingorganisation contexts [32,33,34,35]. Many contingency approaches withinorganisation theory emphasise moderating effects of environmental characteristicson the relationship between organisation structure an d effectiveness[24,36,29,27,3,37,5]. In a synthesis of this work, Weitz and Anderson[32] developeda model for th e design of the marketing function. This model was based on thecontingency perspective that th e structure of the marketing function depends onthe environmental situation. Consistent with th e organisational theo ry literature,their approach matches environmental characteristics (i.e. complexity,unpredictability, interconnectedness) with organisational characteristics (i.e.differentiation and integration) to suggest when functional, decentralised, brandmanagement and matrix organisations are appropriate. Figure 1 reproduces th eWeitz and Anderson Structure-Environment Match Model, illustrating theiradaptation of the 2x2 contingency matrix commonly used in organisation theory.The environmental dimensions (contingency variables) are expressed from lowto high along th e horizontal and vertical axes. The proposed organisation designcharacteristics (i.e. high vs. low differentiation, conventional vs. unconventionalintegration methods) are ones that theory and research suggest are consistentwith the different environments. The authors then prescribe for each cell (differentenvironments) the response variables (appropriate ways to design the marketingfunction) appropriate to each combination of design characteristics.



High

Complexity ofenvironment

Low

Decentralised 1organisation

High differentiation

Conventionalintegration methods

Functional IIIorganisation

Low differentiation

Conventionalintegration methods

Matrix IIorganisation

High differentiation

Unconventionalintegration methods

Brand IVmanagement

Low differentiation

Unconventionalintegration methods

Lo w • H i g hUnpredic tab il ity , in te rconnectedness o^ nv i r on m en t

Source: W eitz and An de rso n[3 2]. i-^,

TContingen

Approa

F i g u rWeitz and Ander

Structure-EnvironMatch M

In another study, Nonaka and Nicosia[33] focus on optimal marketing m anagem entorganisational structures for processing information generated by the marketenvironment. They view the marketing department as a processor of market

information and propose that the best organisation for processing environmentalinformation is one that m atches the variety of the env ironment. A simple cen tralisedmarketing department organisation is posited to be sufficient to processhomogenous and certain environmental information. A complex, decentralisedmarketing department is viewed as appropriate to process heterogeneous anduncertain environmental information.

Ruekert, Walker and Roering[34] propose a contingency framework of marketingtask struc ture and performance, in which the performance outcome of marketingactivities is viewed as dependent on the nature of the task, the way in which thetask is organised and th e nature of its environment. The authors outline contingencytheory propositions pertaining to organisation and efficiency, formalisation and

efficiency, centralisation and effectiveness, and specialisation and adaptiveness.The authors also identify four archetypal structures that emerge from thesepropositions and discuss their implications to marketing management.

Contingency Approaches in Strategic M anagement and Strategic M arketingTh e manag ement sub-discipline of strategic m anagem ent, a field closely relatedto marketing strategy, employs the contingency approach as the primary theory-building technique for its study of business strategy. This sub-discipline focuseson strategies that specific b usine sses formulate and implement to com pete in anindustry or product/market segment. Hambrick[l] argues that contingency



4

approaches are particularly useful for business strategy because past researchhas either:

(1) viewed strateg y as an art and conducted in-depth case stud ies of individual

firms, an approach which lacked generality, or

(2) sought universal laws of strategy and investigated them through databaseresearch such as PIMS (Profit Impact of Market Strategies), an approachthat originally de-emphasised key contextual differences'

Contingency approaches to theory and research in strategy represent a middleground between these extremes, improving the generalisability of the former, whileobtaining richer characterisations than the latter[38].

Th e contingency approach in strategy literature holds that the approp riatenessof different strategies are contingent on competitive settings of businesses. The

competitive setting is typically defined in terms of environmental and/ororganisational contingencies, as evidenced by the following research thrusts:

(1) The appropriateness of pursuing alternative strategies under variousenvironmental contingencies — for exam ple, stra tegie s for comp eting instagnan t industries[39 ]; declining industries[40]; hostile environments[41];fragmented, mature and declining industries[9]; different stages of theproduct's life cycle[42,43].

(2) The appropriateness of pursuing alternative strategies under variousorganisational contingencies — for example, strategies for high market sharebusinesses [44]; low market share businesse s [45]; effective low market share

businesses[46,47,48]; market leaders, challengers, followers and nichers[43].

(3) The a ppropriateness of pursuit^ alternative strategies under variousenvironmental and organisational contingencies — for example, strategiesfor leaders and followers in low and high-growth markets [49, pp. 175-8];generic strategy options for varying levels of market attractiveness andrelative competitive position[49, pp. 204-5].

Many recent contingency approaches to business unit strategy formulation viewboth environmental and organisational variables as relevant contextual variables.This tendency is apparent in the contingency models adapted for practitioner use:BCG growth-share matrix, GE/McKinsey Business Screen, and the ShellD irectional Policy Matrix (see W ind and M ahajan[50] for a critical review ). Similarly,in the strateg y m atrix (contingency framework) outlined by Day[49], the appropriategeneric strategy fijom he standpoint of a firm is contingent on m arket attractiveness(high, medium or low) and relative com petitive position of the firm (strong , mediumor weak). D ay cautions that generic strategy options matrices are suggestive, ratherthan su bst itut es for careful analysis of feasible strategic option s for each bus ine sssegment. However, he also emphasises that, because choice of strategy mustbe grounded in the realities of the situation facing each b usin ess, the compatibilityof the chosen strategy with the normative generic strateg y option should be teste d(pp. 204-5).



Recent work by Hambrick[l,7] illustrates a contingency approach to business T hstrategy that employs multiple environmental and organisational dimensions or Contingencontingency variables. Analysing a sample of mature industrial-product businesses Approa

fi:x)m the PIMS database, Hambrick[l] empirically identified eight different settingsbased on a se t of ten contingency factors. In a companion article, Hambrick[7]focused on two of tbe eight settings and empirically identified high and low-performing clusters of business strategies. Hambrick's contingency approaches ^ ^ _ _ _ _ ^ ^ âre complex, and highlight the value of greater precision and detail in theidentification of contingency settings. Without th e empirically derived taxonomyof the first Hambrick article [1], the two types of businesses emphasised in th esecond[7] would have been pooled in a study of mature capital goods. Hambrick's[7]study illustrates how strategies associated with high profitability differ greatly intwo contexts.

The contingency approach in a strategic marketing context is illustrated in a

recent study by Burke [51]^. She hypothesised that four general elements of theenvironment (tiie market, the business unit within the market, the firm and thebusiness unit within the firm) infiuence the strategic choices made by marketingmanagers. Burke collected perceptual data pertaining to seven product/marketand organisational context factors thought to influence strategic choices of marketingmanagers from 86 managers in six firms. The focal decision of interest was thestrategic thrust of the business unit (i.e. significantly and permanently to increasemarket share, to maintain market share or to allow share to fall). Burke foundthat the choice of a build, hold or harvest strategy is related to the manager'sperceptions of five aspects of the product/market environment and organisation

context: market attractiveness, relative competitive strength, entry barriers, controlover resources and the manager's perception of the relative importance of short-run business unit performance to his/her career success and monetary rewards.

Contingency Approaches in Organisational Behaviour and MarketingBehaviourWithin the orînisational behaviour literature, th e contingency approach has madeits most significant contribution in the area of leadership theory and research[52,ll ].Contingency approaches to leadership tie the leader's effectiveness to the natureof the situation and acknowledge that workers' needs and problems vary, requiringthat leadership style match the typ es of individuals involved and the characteristicsof their work situation.

While the situational approach has been used to study leadership since the 1950s,H ouse [11] proposed a theory of leadership that clearly illustrates the contingencyapproach. H e contends that the functions of a leader vary depending on the needsof subordinates and the type of work to be accomplished. According to House'stheory, a leader obtains good performance from his/her work unit by increasingsubordinates' personal rewards firom goal attainment and by making the path tothese rewards easier to follow (e .g. by instructing, reducing roadblocks and pitfalls,and increasing the opportunities for personal satisfaction along the way). To be



European

arketing

2 7

effective, the leader must tailor his/her style and approach to individual subordinatessituations. In ambiguous situations (and with sub ordinates to w hom ambiguity^^ frustrating), effectiveness is achieved when the leadership provides

structu re. In routine situations, on the othe r hand, the additional structure providedmay be viewed as redund ant and insulting by subordinates, who may conseq uentiybecom e dissatisfied. In es sen ce , the th eory holds that the level of leader structuredepe nds on the ambiguity of the task, and tiie level of leader consideration depen dson the intrinsic satisfaction of the task . Th e the ory has bee n elaborated and te stedsince it was proposed [53,54].

The contingency approach to marketing behaviour is evidenced in the worksof W eitz [55] and W illiams and Spiro[56]. W eitz proposed a continge ncy model forinvestigating the effectiveness of sales behaviours across customer interactions.The model postulates that effectiveness of sales behaviours across customerinteractions is contingent on the salesperson's resources, the nature of the

cus tom er's buying task, the customer-salesperson relationship, and the interactionsof thes e t hre e sets of variables. W eitz pres ents contingency propositions for themoderating effects of the salesperson's resources, the customer's buying task,and the cu stomer-salesperson relationship on the effectiveness ofth e salespe rson'sbehaviour (i.e. adaptive sales behaviour, establishment of an influence base, useof closed vs. open influence techniques, and exerting control over the salesinteraction).

An Assessment of the Status of the Contingency Approach in M arketingHow developed is the contingency perspective in the marketing discipline? Onlya few studies, most of them detailed in the previous sections, have expliciUyemployed the contingency approach. Judging from these applications, thecontingency approach has yet to be firmly established in the m arketing discipline.

However, we contend that the implicit notion of contextual relevance ofenvironmental and organisational variables is an underlying theme for theory buildingand research in num erous marketing studies. In the field of channel managem ent,for example, Frazier and Sheth[57] focus on the contextual relevance of boundarypersonnel's attitude-behaviour consistency or inconsistency with respect to theappropriateness of implementing influence processes and of seeking influenceobjectives in distribution channel relationships. In the areas of sales force

management, Futrell and Parasuraman[58] investigate the moderating effect ofsalesperso n performance on the relationship between propensity to leave and jobsatisfaction. Yoon and Lilien[59] examine the contextual relevance of marketsituation variables to the appropriate launch time for new industrial productsand best use of marketing resources. While not formally called contingencyapproaches, these and other marketing studies can be recast in the contingencyperspective.

The foundation for developing an organised body of knowledge centred on thecontingency approach is already in place. Building on this foundation should allowmarketers to study more precisely the relationships among contingency, response



and performance variables. Critical situational variables may be integrated into T hframeworks that advance theory, research and practice. Before reviewing a group C o n t in g enof marketing studies that impUcitly rep resent the contingency approaches, we A p p ro apresen t evidence of the general relevance of the contingency notion for marketing.

Contextual Relevance in MarketingThe emergence of general research streams , such as industrial marketing, servicesmarketing, health care marketing, industrial buying behaviour, internationalmarketing, social marketing, marketing under various states of supply and demand,and marketing during periods of shortage, testify to marketers' realisation of thecontextual relevance of contingency variables to marketing strategy formulation.Better understanding of important differences among these contexts have led tothe formulation of specialised marketing strategies and marketing behaviours.

Specific topics within marketing also reflect this tendency. For example, theliterature on the classification of goods highlights the relevance of productcharacteristics and consumer behaviour variables for marketing strategy[60,61,62,63,64,65]. Although controversy surrounds the concept, the extensivebody of marketing literature on marketing strategies for the product life cyclesuggests that marketers view stage of the product life cycle as a contingencyvariable^. Finally, the emerging body of literature on strategies for high marketshare and low market share companies [44,45,46,47,48], marketing stra tegies formarket leaders, challengers, followers and nichers[43], and strategies for leaderand followers in high and low-growth m arkets[49] indicate m arke ting's recognitionof the contextual relevance of an organisation's competitive position in strategy

formulation.In particular, the marketing strategy literature has emphasised this approach.

Abell[66] summarised the interrelationship between strategic variables, situationvariables, company-specific variables and performance variables quite succinctlyby noting that: "Strategies of Type A, in markets/situations of Type B, pursuedby companies of Type C, will lead to performance of Type D. (p. 2, italicsours)''. A similar line of reasoning is also revealed in a number of empirically testablepropositions pertaining to competitive marketing strategy summarised in Eliashbergand Chatterjee[67]. Illustrative of the contingency thrust of these propositions arethe following (the propositions are rephrased in line with Abell's[66] generalisedstatement):

(1) Entry-de terring product positioning strateg ies pursued in markets wherethe fixed cost of entry is high and product repositioning infeasible by early-entrant firms will be profitable in the long run [68].

(2) Positioning the product to appeal to the larger (and more profitable) segmentspursued by early entran t firms in situations w here it is difficult (prohibitivelyexpensive) for firms to change their product positioning strategies onceimplemented will lead to higher profits [68].

(3) Allocating the budget over all customers is the appropriate strategy for



8

firms with a lai:ger budget to pursue in a duopolistic situation where thecompanies compete for the business of several customers whose (single)vend or choice is bas ed on the relative sales prom otion efforts of th e firms.Concentrating only ?i fraction of customers, effectively ignoring the others,

is the appropriate strategy for the smaller firm to pursue [69].

Along similar lines, the contextual relevance of market-situation variables forstrategic choice has been highlighted by Yoon and Lilien[59]. Summarising theresults of their empirical study on the effects of market characteristics and strategyon the performance of a new industrial product, the authors note:

Ourfindingssuggest that two major sets of variables seem to be at work in determiningthe success of a new industrial product. These are market-situation variables andR&D/marketing-strategy variables. We see varying levels of success for different producttypes in different market situations here . And strategy variables m ust be tuned to the

specific market situation, determining the best use of marketing resources and thebest time to launch the new product (p. 143).

A potential contribution of the contingency approach to the marketing man agem entfield is the integration of basic laws or principles of m arketing m anag em ent withrelevant situational factors. Contingency propositions may be viewed as extensio nsof the basic principles of marketing management, thereby introducing thecontingency approach as a refinement of established marketing tho ught. An exampleof this potential contribution m ay be found in the work s of L eon e and Schultz [70],and Eliashberg and Chatterjee[67]. Leone and Schultz [70], in a study of marketinggeneralisations, state a number of basic laws and principles of marketing. Among

them are the following:

(1) Selective advertising has a direct and positive influence on individual company(brand) sales.

(2) Distribution, defined by a number of outlets has a positive influence oncompany sales (market share).

Eliashberg and Chatterjee[67], in a review of analytical models of competition,present the following propositions in a contingency approach that can be viewedas extensions of the L eone and Schultz generalisations — extend the segeneralisations in a contingency perspective:

(1) A strategy of spending more on advertising by a firm with a cos t advantagewill generally result in a larger market share and higher profits. The beststrategy for the rival firms may be to employ different competitive tools,even when the sales response to different instruments is identical for allfirms [71,72].

(2) A strategy of spending m ore on advertising, particularly during the beginningof the planning period by the firm with the smaller sales decay param eter(a greater long-run effect of a dollar spent on advertising, relative to therival), will result in larger profits as well as a larger terminal market share[73].



(3) Expenditure on distribution and awareness advertising should be decreased Tin response to new entries, unless it is possible, through a pre-emptive Contingendistribution or advertising strategy, to prevent the entry of a new Approabrand[74].

These extensions have both scholarly and practical implications. Theorists andresearchers can easily build on existing streams of literature, allowing for th ecoherent and systematic development in the marketing literature. Incorporatingthe situational variables also allows marketing practitioners to use reso urces moreefficiently for these activities, increasing the likelihood that their firms can competemore effectively.

Explicit and Implicit Contingency Approaches in MarketingTable II summarises selected contingency perspectives evidenced in marketing

literature. The contextual relevance of environmental variables and/or organisationalvariables is the underlying them e common to all 25 s tudie s. As previously noted,explicit reference to a contingency fi:amework s made in only six[33,55,32,51,34,75].A contingency perspective is implied in the additional 19 studies summarised inthe table. These studies are intended to be illustrative rather than exhaustive,for many other marketing studies could also be viewed as contingency approaches.

The examples reveal the use of an implicit contingency perspective in most a reasof marketing. General marketing strategy (studies 7, 8, 9 and 15), market sharestrategies (10 and 11), generic competitive strategies (12), and market segmentationstrategies (13 and 14) are represented. All elements of the marketing mix havebeen treated in the contingency perspective: product (16, 17, 21), pricing (18, 19,20), promotion (18, 20, 21) and distribution (23, 24, 25).

Examination of the table reveals that m ost works cited are normative/conceptualin scope, and very few are empirical in nature. This parallels the early developmentof the contingency perspective in the management literature, suggesting thatempirical research is the next logical step. A detailed review of all relevant literature(both theoretical and empirical) pertaining to the topics covered in Table II wouldalso aid in identifying a more comprehensive and richer set of relevant contingencyvariables.

Major Issues Associated with Use of the Contingency ApproachThe contingency perspective provides an opportunity to build a body of knowledgecentred on appropriate strategic choices for commonly recurring marketing settings.In order for the approach to be used effectively, certain key issues must beaddressed.

(1) Selection and measurement of performance variables — The selection andmeasurement of performance variables in contingency fi^meworks willinfluence th e match between contexts and appropriate response variables.B ecause organisational effectiveness can be measured in many ways (e.g.productivity, return on investment, employee job satisfaction, profit.



0

employee turnover and efficiency), different contingency frameworks haveem erged to achieve the objectives. The refore, the muldpUcity of contingencyframeworks associated with organisational effectiveness is due in part tothe absence of consistent definitions and operationalisations ofeffectiveness[76]. In using contingency approaches, performance measuresshould be clearly defined and widely accepted [77,78]. If possible andappropriate to the subject of interest, they should rely on multiple criteria[76].Tosi and Slocum[26] provide a detailed discussion on the theoretical andpractical implications of:

(a) defining organisational effectiveness eit he r too broadly or too narrowly,and

(b) failing to realise the multi-dimensional nat ure of th e conc ept ofeffectiveness.

Author(s)

1.

2.

3.

4.

Nonaka and

Nicosia

[33]

Weitz and

Anderson

[32]

Ruekert, Walker

and Reoring

[34]

Burke [51]

Focus

Optimal organisat ional

structures for marketing

management for

processing

information generated

by the environment

(ECF; N/C)

Organising the marketing

funct ion

(ECF; N/C)

Organisation of marketing

activities

(ECF; N/C)

Market share

strategy

(ECF; N/C & E)

Con t i ngency

Variable(s)

Certainty-uncertainty

of environmental

information

Homogeneity-heterogenity

of environmental

information

Environmental complexi ty

Environmental uncertainty

Interconnectedness of

elements in theenvironment

Macro environmental

condit ions

Task characteristics

Market attractiveness

Entry barriers

Perceived environmental

uncertainty

Relative competitivestrength

Reward system

Synergy

Exit barriers

Response

Variable(s)

Market ing organisat ion

structure:

Decentralised

Centralised

Market ing organisat ion

structure —

dif ferent iat ion and

integration: Decentralisedorganisat ion

Matrix organisation

Funct ional organisat ion

Brand management

Task organisation:

Internal vs. external

Task structuring:

Centralisation

Formalisation

Specialisation

Market ing Organisat ion

Structure:

Internal-organicInternal-bureaucratic

External-transactional

External-relational

Strategic choice:

build, hold or

harvest share



5.

6.

7.

8.

9.

10.

11.

12.

Weitz [55]

Ferrell and

Gresham

[75]

Kotler [79]

Levitt [80],

Doyle [81],

Weber [82],

Wasson [83] ,

Swan and Rink

[84] ,

and many others

Kotler ]43]

Jacobson and

Aaker [85]

Day [49]

Day [49]

Effectiveness of sales

behaviours across

customer interactions

(ECF; N/Cl

Ethical decision-making

in marketing

organisations

(ECF; N/C)

Marketing strategy

(ICF; N/C)

Marketing strategies

(ICF; N/C)

Marketing strategies

(ICF; N/C)

Market share strategy

(ICF; E)

Market share strategy

(ECF; N/C) +

Generic strategy

options

(ICF; N/C) +

Salesperson's resources

Nature of customer's

buying task

Customer-salespersonrelationship

Ethical issue

Individual's

characteristics

Significant others

Opportunity

Demand state:

Negative demand

No demandLatent demand

Faltering demand

Irregular demand

Full demand

Over-full demand

Unwholesome demand

Stage of product life

cycle

Relative size of firm

Relative competitive

position of firm

Buyer concentration

Purchase frequency

Marketing intensity

Product quality

Firm size

Market growth rate —

high vs. low

Firm's competitive

position — leader

vs . follower

Market attractiveness —

high, medium or low

Relative competitive

posit ion — strong.

medium or weak

Selling behaviours:

Adapting to customers

Establishing influence

basesInfluence techniques

used

Controlling the sales

interaction

Behaviour of marketing

decision maker

Marketing task:

Conversational marketing

Stimulat ional marketingDevelopmental marketing

Re-marketing

Synchromarketing

Maintenance marketing

De-marketing

Counter-marketing

Marketing strategies for

various stages of the

product's life cycle

Marketing strategies for

leaders, challengers.

followers and nichers

Relative emphasis firms

should place on market

share from the standpoint

of profitability

Strategic choice:

Build share

Hold share

Harvest share

Divest business

Strategy choice:

Project position

Invest to build

Build selectively

Manage for earnings

Limit expansion

Harvest

Project and refocus

Divest

TContingen

Approa

Table II (continSelected Conting

PerspectivMarke



2

(continued)

13 . Kotrba [86]

14 . Resnik, Turney

and Mason

[87]

15 . Bishop, Graham

and Jones [88]

16 . Yoon and Lilien

[59]

17 . Urban and

Hauser [89]

Market segmentation and

targeting strategies

(ICF; N/C)

Market segmentation

(ICF; N/C)

Industrial marketing

(ICF; N/C & El

Optimal launch

time for new industrial

products

(ICF; N/C & E)

New product strategies

(ICF; N/C)

Stage of product life

cycle

Variability in customer

needs across segments

(homogenous vs.

heterogeneous markets)

Firm's size

Firm's resource position

Competitors' market

segmentation and targeting

strategies

Customers' wi l l ingness to

accept lower prices in

exchange for products less

tailored to their needs

(great vs. limited)

Potential for production

and marketing economies

by eliminating or fusing

market segments (high

vs. low)

Degree of volatility of

derived demand

Type of new product:

Original new product

(ORNP) vs. reformulated

new product (RFNP)

Firm's choice of product-

market opportunity as

vehicle for growth

Extent of protection for

innovation

Scale of market — marketand associated economies

of scale

Competit ion — barriers to

entry and relative size

of competi tors

Firm's position and power

in the production/distr ibu-

tion system

Strategic Choice:

Undif ferentiated marketing

Differentiated marketing

Concentrated marketing

Strategic choice:

Counter-segmentation

(reverse segmentation)

Further segmentation

Strategic choice:

Appropriate, product/

market, promotion.

distr ibution and pricing

strategies

It pays to launch a RFNP

as early as possible,

whereas success levels

are highest for an

ORNP when launch

is delayed somewhat

Strategic Choice:

Reactive strategies —

defensive, imitative.

second but better, an d

responsive

Proactive strategies —research and develop-

ment, marketing.

entrepreneurial and

acquisit ion.

(The authors note that

each strategy is

appropriate under certain

condit ions and that a

successful organisation

recognises when each is

appropriate and responds

accordingly)



18 . Kotler [43]

19. Day [49]

2 0 . Robinson and

Lakhani [90]

21 . Udell [91]

2 2 . Kotler [43]

2 3 . Stern and Reve

[92]

2 4 . Frazier and

Sheth [57]

Promotion-pr ic ing

strategies for introducing

new products

(ICF; N/C)

Pricing strategies

(ICF; N/C)

Pricing

(ICF; E)

Non-pr ice competi t ive

marketing strategy

(ICF; N/C & E)

Promotion mix strategy

(ICF; N/C)

Market ing channels

(ICF; N/C)

Distr ibut ion channel

management

(ICF; N/C)

Market size

Price elasticity of

demand

Markets' level ofawareness of product

Markets' state of readiness

to buy product

Threat of potential

compet i t ion

Cost dynamics — scale

and experience effects

Price elasticity of demand

Market growth rate/stage

of product l ife cycle

Barriers to entry

Barriers to capacity

expansion

Cost dynamics — scale

and experience effects

Potential for creating and

maintaining superior i ty

over competi tors

Nature of competi t ion

Nature of consumer

demand

Buyer 's knowledge

concerning the product

and its want satisfying

power

Effort expended by buyers

to make a wise purchase

Motives for purchasing

the product

Product complexi ty f rom

the buyer's perspective

Stage of product l ife cycle

Product characteristics

Economic environment

Primary communicat ions

task

Internal polit ical economy

— internal structur ing

and funct ioning of the

distr ibut ion channel

External polit ical economy

— the task environment

of the distribution

channel

Att i tude-behaviour

consistency or inconsist-

ency (of target) organis-

tion's boundary personnel

towards the channel

programme)

Strategic Choice:

Rapid skimming

Slow skimming

Rapid penetrationSlow penetrat ion

Strategic Choice:

Penetration pricing

Skimming pr ic ing

Condit ions under which

a penetration price

substantially below initial

costs is the optimal price

policy

Relative emphases on

product and promotion

facets of marketing

strategy

Optimal allocation of

promotional ef fort

between advert is ing.

personal sell ing, sales

promotion and publ ic i ty

Appropriate inter-

organisat ional manage-

ment strategy (for

maintaining and

expanding channel

operations and for

deal ing with channel

conf l icts)

Appropriate inf luence

processes

Appropriate influence

objectives

ThContingenc

Approac

5

Table I I (continue

Selected ContingenPerspectives

Marketi



EuropeanJournal ofMarketing

22,7

54

Table II (continued)Selected ContingencyPerspectives inMarketing

2 5 . Kotle r [ 43] D ist ri bu t ion s trateg ies

(ICF; N/C)

Strategic Choice:

Intensive distribution

Selective distributionExclusive distribution

Market size

Degree of customer

concentrat ionPurchase frequency

Purchase quantity

Firm's size

Firm's resource position

Firm's product mix

Competitors' distr ibution

strategies

Product characteristics

Economic factors

Political/legal factors

Channel characteristics

Legend: ECF — Explicit contingency framework (1 to 6)

ICF — Implicit contingency framework (7 to 25)

N/C — Normative/Conceptual

N/C & E — Norma tive/Conc eptual and Empirical

E — Empirical

+ The source cited[49] is intended to be illustrative. These two dimensions form the basis for a

number of contingency approaches to business unit strategy formulation such as the BCG Growth-

Share Matrix, the GE-McKinsey Business Screen, and the Shell Directional Policy Matrix. See, Wind

and Mahajan[50] for detailed descriptions and comparisons of several portfolio models.

(2) Identification an d g rouping o f contingency factors — Effectiveness is often

related to numerous contingency variables. The key is to identify thecontingencies which explain the greatest variance in performance. Thisidentification process begins with an examination of the literature for arelevant set of contingency variables based on theoretical grounds and/orprior research findings. A systematic plan of research can then be developedto evaluate the impact of these contingency variables, and to determinewhether other contingency variables should be identified. Contingencyframeworks are compelling because of their simplicity, but this simplicitymay lead researchers to stop short of identifying all relevant factors.Hambrick and Lei [93] offer a method that empirically prioritises contingencyvariables. B ased on an analysis of 636 PIMS businesses, the authors ranked

ten contingency variables widely cited in the strategy literature by theirrelative significance. Significance was defined as the degree to whichbusinesses that differ on that variable also exhibit major differences in howstrategic attributes or actions are associated with performance. Majordifferences indicate the presence of a significant contingency variable[93, pp. 765-6].

Another example of consolidation of contingency variables is illustratedby Achrol, Reve and Stem's[94] discussion of framing the environment.Researchers have expressed concern about the immense inventory ofenvironmental variables and sub-variables that may serve as contingencyvariables. In Achrol, Reve and Stem's view, excessive detail results in



an inventory of situational factors that limits the generalisability across T hsituations. They propose an altemative approach, although still consistent C o n ti n g enwith the contingency perspective, that entails conceptualising the A oD ro acenvironment as a dynamic but amorphous reality (without well-defined

shape, size or elements) that can be characterised in terms of its abstractqualities or dimensions. For example, the following qualitative dimensions -could be used to conceptualise the environment: environmental capacity(rich vs. lean); environmental homogeneity-heterogeneity; environmentalstability-instability; environmental concentration-dispersion, and environ-mental turbulence. The practice of framing the environment in terms ofits abstract qualities or dimensions is prevalent in the contingency researchstream[33,32,34].

Problems associated with multiplicity of contingency variables can alsobe handled by first identif3Tng all relevant factors, grouping the factors into

broad categories, eliminating highly interrelated variables, and empiricallyprioritising the remaining variables. For example, after identifying acomprehensive set of relevant factors, Hofer[8] grouped environmental andorganisational contingency variables of relevance to business strategyformulation into six broad classes—

(a) broader environmental variables;(b) industry structure variables;(c) competitor variables;(d) supplier variables;(e) market and consumer behaviour variables, and(f) organisational characteristics and resource s.

From this point, interrelated variables could be eliminated and empiricalprioritisation could take place.

(3) Independence of contingency factors — The contingency approach has beencriticised in the organisation theory literature for encouraging thedevelopment of different contingency factors to represent the samephenomena[95,76]. This difficulty may stem from conceptual confusion inspecifying the contingency variables [76] or from high correla tions betweenvariables. In the latter case, conceptually different models may representthe same phenomena and yield similar predictions[95]. As a case in point,

Udell[91], in his study of successful marketing strategies, considered a fifthcontingency variable — value of typical purchase — that was found to behighly intercorrelated with the other four variables and was therefore droppedfrom further consideration. To deal with this issu e, clear conceptualisationof variables and measurement of relationships among contingencies arerequired.

(4) Number of levels in the contingency variable — Th e num ber of levels forcontingency variables can be an arbitrary decision. Many of the earlycontingency frameworks used simple dichotomies that were difficult tojustify: stable vs. changing environments[24], centralised vs. decentralised



European

Marketing

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5 6

structure [25], routine vs. non-routine technology[4]. Some critics argue thatsimple dichotomies yield as much variation within contexts as betweencontexts. Contingency variables that are differentiated along commonlyaccepted guidelines are preferable to those that are arbitrarily andsimplistically estab lished. Empirical approaches such as the cluster analysistechnique used by Hambrick[l] may help in dealing with this issue.

(5) Deterministic view of the organisational context — Most contingency theoriassume that the contexts or environments in which organisations operateare fixed and outside the control of the organisation. This deterministicview of th e organisational con text has b ee n ch allenged by the or ists [27,96]who claim that variations in performance may be d ue in part to managerialdiscretion in changing the contexts. The revised view, called environmentalmanagement[27,97] or the strategic choice view[98,99,100], argues thatmanagers have freedom to select and to influence their environments andsituations, and need not merely accept th em as constraints. This view do esnot invalidate the contingency frameworks themselves, but suggests thatan organisation can m ove from context to context and ne ed not m erely acceptits current situation.

(6) Outcome models, not process models — Th e contingency approach has be ecompared to stimulus-response models of the behaviourists in that theyboth largely ignore th e p roc ess es by which a given outcom e is achieved [28].Contingency frameworks view the relationships among variables at one pointin time; they are static, rather than dynamic models. They can, however,incorporate dynamic models as reasons for choosing contingency variables.Current research examining strategic decision processes has begun tointegrate process models and contingency approaches [101].

(7) Post hoc inference — A number of classic and current contingencyframeworks were empirically derived[24,l,7,6]. Inferences base d on empiricalwork or case analysis led to the developm ent of the se frameworks. W hilesome scholars would argue that using data to develop theory is incorrect,Hanrigan[38] enco urage s multiple " hy br id" technologies for developing andtesting contingency approaches.

(8) M echanistic flavour — Child[102] criticised the mechanistic flavour of

contingency approaches th at advocated a single resp on se to a given contex t.The tendency to under-emphasise or ignore the possibility of more thanone feasible organisational response to the same task environmental stimuluscharacterised many early contingency theories[28]. More re cen t frameworksacknowledge that different res po ns es may yield similar performance [1] andspecify more than one organisational response where appropriate.

(9) Issue of strength vs. form — Schoonhoven[103] argues that a central issuefor contingency theorists is " w he the r the environment modifies th e strengthor form of the relationship betwe en strategic variables and perfo rm anc e' ' .If environment modifies only the strength of the relationship, the role of



contingency approaches would be to identify meaningful sub-environments T h

and the relative strength of strategic variables within and across the sub- C o n ti n g e n cenvironme nts. On the othe r hand, if environment modifies the form of the A p p r o a crelationship, the role of contingency theory would be to identify key

interacting variables and establish th eir links to performance [13]. Moderatingeffects of contingency variables have be en investigated in the contingency _ literature by including interaction variables in additive m odels (to examinethe form ofthe relationship), and by estimating parameters of an additivemodel for sub-groups of the total sample (to examine the strength of therelationship)^. The issue of form vs. strength of the relationship appearsto remain unresolved. Based on a review of prior empirical research andanalysis of 1,638 PIMS businesses using moderated regression and sub-group analysis, Prescott[13] repo rts tha t environment m odifies th e streng thbut not the form of the strategy-performance relationship. On the otherhand, the market share-profitability implications ofth e new B CG matrix[104]illustrate contingency variables that moderate the form rather than thestrength of the relationship between strategy and performance*. In thatmatrix, the relationship between market share and profitability is viewedas being moderated by the size of the com petitive advantage and the num berof ways of achieving competitive advantage.

(10) Fine-grained, coarse-grained and hybrid methodologies — In a recent reviewof contingency studies focusing on methodological issues, Harrigan[38]contends that the study of contingency approaches to strategy formulationrequires the use of hybrid designs, incorporating attributes of both fine-and coarse-grained research methodologies. She notes that the salient

characteristics of the proposed hybrid methodology — the use of the multiplesites, multiple data sources and intricate sample designs — compensatefor some of the limitations of the fine- and coarse-grained methodologies.Harrigan points out that while coarse-textured studies (such as early PIMSstudies) foil satisfactorily to incorporate intra-industry competitive nuances,fine-textured single-site stud ies (such a s case-stu dies) lack generalisabilityand statistical rigour.

Directions for Theory and ResearchAlthough a variety of theo ry and resea rch i ssue s have been suggested above, several

general topics appear most appropriate for immediate enquiry. First, theoristsand researchers need to develop and group environmental and organisationalcontingency variables directly relevant to marketing management and strategy.Because the level of analysis often differs between management and marketing(i.e. the organisation vs. a functional unit), marketing contingency variables maybe more specialised. As suggested earlier, the management literature may providea helpful starting po int, but contingency ap proac hes to marke ting m ust be tailoredto the specific issue and level of analysis. Second, the relevance of consumerbehaviour variables in strategy contexts has not been addressed sufficiently. Whilethis omission is understandable, given the primary focus of researchers in the



EuropeanJoumal ofMarketing

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5 8

strategic management area, further research on the contextual relevance ofconsu me r behaviour variables to marketing strateg y formulation holds th e potentialfor a major contribution. A logical starting point for such a research endeavourwould be to review the extensive body of literature on situational influence

paradigms in consu m er behaviour and their relevance to marketing strategy (seeLeigh and Martin[105] for a review). The contextual relevance of consumerbehaviour variables in marketing strateg y studies is illustrated by Udell[91]. Third,the contingency approach can be ex tended to areas of marketing other than strategy.

ConclusionContingency approaches to theory building represent an alternative to searchingfor universal principles, and instead focus on key situational relationships. Theseapproaches reduce the vast array of combinations a researcher must consider byfocusing research on key variables and inter-relationships. They also provideimportant pedagogic usefulness[l] by helping to translate the ory and resea rch topractice. D ay and W ensley[106] emphasise the dividends obtainable through focusingon these mid-range approaches:

Productivity will be further assured by building upon existing conceptual andmethodological strengths within marketing, and focusing these strengths on thedevelopment of mid-range integrative theories (p. 85).

Wind and Robertson[107] urge the development of approaches that change the"isolatory focus of mar keti ng" and call for new linkages betw een marketing andthe other management disciplines. Contingency approaches, such as the onesdiscussed in this article, offer an opportunity to integrate perspectives frommanagement and marketing, thereby acknowledging the interdependency of the

business functions.

Footnotes1. It should, however, be noted that in recent years, the PIMS database has heen extensively

used by strategy researchers for investigating the moderating effects of contextual variableson th e strategy-performance linkage, e.g.ft2,108,93,13]; see also, Ramanujam andVenkataraman[109, pp . 141-5] for a summary of findings of several other studies.

2. More realistically, Burke's[51] contingency framework builds on the contributions ofresearchers in at least three major a reas — marketing, business policy and strategy, andindustrial organisation economics.

3. See Day[49] for a review of studies critical of the PL C concept, as well as an extensive

discussion on the strategic relevance of the PL C concept and its potential shortcomings4. While Abell's[66] generalised statem ent appears to be fairly comprehensive (i.e. its reference

to response (strategy) and performance variahles, and environmental and oi;ganisationalcontingencies), a cursory examination of numerous other contingency statements revealsno explicit reference to performance. Nevertheless, implicit in statements that postulatethat the appropriateness of alternative strategies is contingent on certain environmentaland oi;ganisational variables is the notion that pursuit of appropriate strategies is conduciveto superior performance, as opposed to pursuit of inappropriate strategies.

5. See Prescott[13] for a review of literature. See Sharma, Durand and Gur-Arie[110] for adiscussion of various types of moderator variahles (homologiser, quasi-moderator and puremoderator) and methods for identifying moderator variahles (sub-group analysis andmoderated regression analysis).



6. See Hax and Majluf[lll] for a graphic exposition of the moderating effects of contextualvariables on the form of the relationship between market share and profitability; also, ofrelated interest are the findings reported in a recent study by Jacobson and Aaker[85]. Basedon an analysis of a sample of PIMS business, the authors found that a large proportionof the market share-ROI relationship is spurious in the sense that both market share and

ROI are joint outcomes of some third factors. The direct impact of market share on ROIwas found to be much smaller than previous studies indicated them to be. The authorsreport that the impact of market share on profitability to be greater under certaincontingencies:

(1) th e more fragmented th e buyer concentration;(2) th e less frequent the purchase;(3) th e higher the marketing intensity, or(4) the higher the product quality.

The effect of conditions relating to product life cycle, product importance, vertical integrationand relative price on the relationship between market share and profitability were foundto be insignificant.

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uropean Further Reading

Boston Consulting Group, Perspectives on Experience, Boston Consulting Group, Boston, 1972.

Ginsberg, A. and Venkataraman, A., "Contingency Perspectives of Organisational Strategy: A Criticaln Review of the Empirical Research'', Academy of Management Review, Vol. 10, July 1985, pp. 421-34.

' Hambrick, D .C , "Taxonomic Approaches to Studying Strategy: Some Conceptual and MethodologicalIssues", Journal of Management, Vol. 10, Spring 1984, pp. 27-41.

MacMillan, I., Hambrick, D. and Day, D., "The Product Portfolio and Profitability - A PIMS-~ ^ ~ ^ ^ ^ ^ ^ based Analysis of Industrial Product Businesses", Academy of Management Journal, Vol. 25,

December 1982, pp. 733-55.

Schneider, B. and Bowen, D., "New Services Design, Development and Implementation and theEmployee", paper pre sented at the Symposium on Developing New Serv ices, Philadelphia, 1983.



Documents

The Contingency Approach- Its Foundations and Relevance to Theory Building and Research in Marketing