Abstract:
Which goal orientation results in better performance? A profit orientation or a customer
orientation? To date, researchers have presented opposing arguments with respect to this
important issue, stating that both orientations lead to above average returns. Therefore this
papers seeks to address this issue. This paper aims to contribute to quantitative research
conducted in the Strategic Management field because the results have significant implications
for decision making procedures of firm strategies.
To address this debate, the researcher empirically tests the reported financial results of firms
characterised under each strategic orientation. Coding of CEO letters and letters to
shareholders provided the two groups of companies tested and literature provided the
categorisations. The results show that a customer orientation leads to better financial
performance than a profit orientation over a 15 year timeframe in terms of two measure of
profitability, the internal accounting measure of Return on Equity (ROE) and market related
measure of Share Price Appreciation. The results have significant implication for decision
makers and strategy theory as empirical tests over the 15 year period clearly demonstrate the
superiority of a customer orientation over a profit orientation in attaining superior financial
performance.
