European Journal of Scientific Research ISSN 1450-216X Vol.42 No.2 (2010), pp.268-289 EuroJournals Publishing, Inc. 2010 http://www.eurojournals.com/ejsr.

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Strategic Marketing Orientation and Performance: A Case for Synergistic Merger Effects of Nigerian Banks
Olalekan Asikhia Lecturer, Department of Business Studies, College of Business and Social Sciences Covenant University, Ota, Canaan land, Ota, Ogun state, Nigeria - West Africa Abstract The purpose of this paper is to examine the strategic marketing orientation performance relationship among Nigerian banks and the synergistic effects of probable merger is also included. The paper presents primary data collected by self-administered questionnaires involving a sample of 835 corporate customers from the two commercial cities in Nigeria to classify the banks based on performance, out of which 500 were usable resulting in 59.9% response rate and a total of 375 questionnaire were also distributed to top and middle level management of the banks, 257 were returned, out of which 213 were usable (valid and complete), thus producing a response rate of 56.8 percent, The data set was subjected to regression analysis and structural equation modeling to measure the various effects of variables. It was discovered that strategic marketing orientation positively relates with banks performance with the major banks having the lowest SMOPerformance, the combination of the banks in merger scenario revealed different implicating results. It was also revealed that marketing competence and all environmental factors moderate the SMO-Performance relationship except demand uncertainty. For successful mergers between banks in this era of bank failures to occur, consideration should be given to the strategic marketing orientation performance relationships for synergy. The paper reports findings from the first nationwide study carried out in the area of strategic marketing orientation-performance relationship as a basis for synergic merger in Nigerian banks.

Keywords: Strategic marketing orientation, Banks performance, Synergic effects, Marketing competence, Environmental factors, Nigerian Banks

Introduction
Banking has ceased to be an entirely arm-chair profession, because it is only those banks that can effectively monitor the environment and adequately satisfy the customers with their operational module that can survive. The primary forces that had significantly changed the environment of banking are political and economic power as well as the dynamic impact that technology has had on the banking industry. And now that the Central Bank of Nigeria (CBN) had requested for better performance from banks, the forces driving towards merger that will produce results are evident. It is becoming obvious that re-capitalization is not just the solution as eleven of the twenty five banks that had just recapitalized are presently showing signs of failures (CBN Report, 2009) Studies (Ologun, 1994; KPMG, 1999) already indicate that few viable banks will operate in Nigerias sector in the first decade of the 21st century. Less than half a dozen of them will control 80

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percent of the market by volume of business. It becomes pertinent that banks that desire to succeed must remain dynamic, make deft moves, respond to new customer demands faster and work with staff who have big hearts to make powerful decision as situations demand, such banks must be able to take risks within the limits of corporate definitions, size and new market opportunities immediately and innovate continuously (Ogunbanjo, 2002). In the country, 25 banks currently exist. But not more than 9 of them may have attained a good performance mark (CBN Report, 2010). It follows then that 16 banks may be asked to merge in different ways to raise performance and erase the effects of the toxic loans by generating enough deposits and putting them to effective use. Approximately N30trillion may need to be raised from the economy, averaging N250billion per bank if merger is to be avoided. For many financial experts, this will be extremely difficult, if not impossible to attain. What CBN is asking for looks more like a decreed merger, whereas a merger by companies is a process that should not be forced. It involves compatibility, consensus, asset and liability, due diligence, and not in the least, the human relations of those involved in the merger. The Central Bank of Nigeria (CBN) has dangerously dismissed the problem in the banking system as the lack of huge capital base. They seem not to have asked if the present crop of managers in the banking system can manage such huge capital base. It is believed that the distress of major banks in the past and the problems plaguing the system currently were not created by lack of huge resources but the technologies of managing them (Olakanpo, 2010). Even more, it is very unlikely that the remaining 16 banks will maintain high level of performance as the CBN had wished. Also, it is doubtful whether the capital market facilities and the absorptive capacity of the economy can accommodate the raising of about N30trillion within a short period. Others also fear that there might be excess mop up of the needed funds in the business environment, resulting in an economy shock (Olakanpo, 2010). So, the banking industry has become very competitive once again, having left the distress waters which submerged it in the 1990s. A significant phenomena has since emerged, where banks that swiftly react to situations and take decisions promptly to continually take over the environmental variables are separated from those that slowly react to situation and this have been said to have predominant impact on their performances (Hugh, 1995; Kolade, 1996; Collier and Cunning, 1997; Desphande and Farley, 1998; Onah, 2000; Asikhia, 2010). From the foregoing therefore, this study examines the impact of strategic marketing orientation of different banks on their performances. Specifically, this work focuses on the extent to which strategic marketing orientation of banks has contributed to high quality performance of the banks, through establishing the relationship between the innovative, proactive risk taking, aggressive, defensive, futurity, market sensitivity and analytical tendencies; and the growth, profitability, customer service, sustainable competitive advantage dimensions and Exogenic performance variables of the banks, as well as the moderating effects of marketing competence and environmental factors, and how these findings could facilitate a better understanding of the merging patterns of the banks so as to reinforce their performance by the synergistic effects of merger.

Literature Review
Strategic Marketing Orientation and Performance Strategic marketing orientation derives its framework from strategic orientation as seen by Miles and Snow (1978). They proposed that organizations develop relatively enduring patterns of strategic behavior that actively co-align the organization with its environment. They identified the adaptive cycle characterizing this process as involving three imperatives strategic problem solution sets: (1) an entrepreneurial problem set: centering on the definition of an organizations product-market domain; (2) an engineering problem set: based on the choice of technologies and processes to be used for

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production and distribution; (3) an administrative problem set: involving the selective, rationalization and development of organizational structure and policy processes. In the observation of Ogunbanjo (2002) there are two major bank categories in Nigeria; the old economy banks and the new economy banks. The new economy banks are swifter and more agile; they respond faster to business opportunities and do not operate the traditional commercial lending while the old economy banks do all these which have considerably affected their performance. Soludo (2008) consigned the general attitudes and characteristics of these old economy banks to obsolescence. He further asserts that any bank that intends to survive and prosper must assess its innovation capabilities and take strategic action to improve its innovation skills. Hurley and Hult (1998) further assert that a bank must differentiate itself from its competitors and/or possess relatively low cost position or some acceptable level of both. Hugh (1995) establishes the fact that the winning strategies for banks will be the one woven around the innovative and proactive management. Ologun (1994) in his survey of causes of banks failure in Nigeria reports that in spite of the large number of academically qualified people, most of them lack the practical strategic orientation of the modern banking system. The result of this is the enthronement of an inexperienced top and middle personnel cadre that are taking vital strategic decisions, the effects of which is dwindling performance of such banks. Ogunbanjo (2002) corroborates this by stating that banks with management that can articulate and consistently conceptualize the variables in the environment of operations have been found to be successful in encapsulating the customers desires for accelerated market leadership. This leads to the first hypothesis: Hypothesis 1: Strategic Marketing Orientation of banks will positively influence their performance. Merger and Synergistic Effects of Mergers Mergers and acquisitions occur because corporate managers believe that they can make more together than separately. This belief is founded on the concept of synergy. Synergy occurs when two operating units can be run more efficiently (i.e. with lower cost) and/or more effectively together than separately (Rue and Holland, 1986). Growth by merger in the advanced western nations dates as far back as 1889. This form of corporate marriage attracted a great deal of public attention on the pages of western financial newspapers. On the Nigerian corporate scene, growth by merger is a recent phenomenon. Following the economic recession since the 1980s and the resultant corporate liquidations, bank failures in 1994, and re-capitalization in 2005, many outfits resorted to mergers as a means of keeping afloat. Synergy is a vital consideration for success in the case of merger or acquisition of banks as it is being considered in this study. Synergy denotes that the performance of a combined enterprise will exceed that of its previously separate parts. It has been empirically observed in several studies that megers do positively affect the performance of the merging firms. Langetieg (1980) and Asquith (1983) find positive Cumulative Average Daily Residuals (CARs) for merged firms. Also, Cole, Fatemi and Vu (2006) assert that mergers create value by creating operating synergies, typically in the form of economies of scope which is realized when firms that engage in the same line of business combine operations .i.e., in horizontal mergers or when firms in the same chain of supply combine operations, i.e. vertical mergers. However, when firms in unrelated business combine operations, i.e. as in conglomerate mergers, there is less theoretical reason for value creation. The synergistic view of mergers thus suggests that horizontal and vertical mergers create shareholder value, but conglomerates may not. They also find that merger proposal and transaction affect the value of the firm. However, this does not mean that the issue of negative merger results does not exist. For instance Davidson, Dutia and Cheng (1989) examine 163 failed mergers during the 1976-86 periods and find results similar to Dodds (1980) study about negative excess returns for bidders and positive excess returns for targets initiating the terminations. Denis and Serrano (1996) analyze unsuccessful takeovers during the 1983-89 periods and find high management turnover following termination of the takeover attempt. Chang and Suk (1998) investigate 279 failed mergers from 1982-90 around merger

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terminations, and note that excess returns for bidders offering stock and negative excess returns are positive when the bidder initiates the termination and insignificant when the target initiates the termination. Then, Ravenscraft and Scherer (1989) investigate firm profitability by line of business and find that targets decline in profitability post-merger, thus they conclude that mergers destroy firm value. It is obvious from the above that the effect of mergers differ from context to context, and the varying resultant effects may be due to the nature of the merging firms, so it is hypothesized that: Hypothesis 2a: There is a significant difference in individual SMO-performance relationship of banks and during merger between Super banks and Major banks. Hypothesis 2b: There is a significant difference in individual SMO-Performance relationship of banks and during merger between Super banks and Focused banks. Hypothesis 2c: There is a significant difference in individual SMO-Performance relationship of banks and during merger between Super banks and Small specialty banks Hypothesis 2d: There is a significant difference in individual SMO-Performance relationship of banks and during merger between Major banks and Focused banks Hypothesis 2e: There is a significant difference in individual SMO-Performance relationship of banks and during merger between Major banks and Small Specialty banks Hypothesis 2f: There is a significant difference in individual SMO-Performance relationship of banks and during merger between Focused banks and Small Specialty banks Marketing Competence Distinctive marketing competencies become the thirst of an organization relative to both the target market and the competition. Recent studies show that enterprises can increase their market competitiveness only by coordinating functional area competencies (Porter, 1990; Evans and Lindsay, 1996; Hill and Jones, 2006). In line with this, Capon, Farly, and Hoenig (1990) argue that corporate profitability is closely correlated to market development competence. Thus, Leonidas, Katsikeas, and Saeed (2002) propose a direct relationship between the determinants of market strategy and enterprise export competence. Also, transaction process and after-sale service that meet customers requirements have been found to increase sales volume and to improve financial performance.(Conant, Mokwa and Varadarajan, 1990; Hill, 1994). The literature relevant to marketing and production also show that the critical factor in corporate competence development is to understand the customers needs and provide products superior to other competitors (Hill and Jones, 1989; Conant et al. 1990). So, it is expected that Marketing competence moderates the relationship between Strategic Marketing Orientation (SMO) and the performance of the banks, apart from positively influencing performance. This leads to the next two hypotheses: Hypothesis 3: Marketing competence positively moderates the SMO-Performance relationship of the banks. Hypothesis 4: There is positive and significant relationship between marketing competence and the performance of the banks Environmental Factors The components of the environment under study encompass competitive intensity, technological turbulence and demand uncertainty and it has been suggested that they have varying impacts on a firms performance (Okoroafor, 1993; Grewal and Tansuj, 2001; Kangis and O Reilly, 2003; Waldersee, Griffiths and Lai,2003; Andersen, 2004; Yadong, 2004; Brown and Blackmon, 2005, Asikhia,2010).

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Competitive Intensity Competitive intensity refers to the degree of competition that a firm faces and has generally been supposed to moderate the influence of market orientation on a firms performance (Slater and Narver, 1994; Hitt, Keats and Demarie, 1998; Grewal and Tansuj, 2001; Brown and Blackmon, 2005; ZunigaVicente and Vincente-Lorente, 2006). A highly competitive environment places a requirement on firms to take a flexible approach so that they can adapt and improvise to put their best foot forward (McKee, Varadarajan and Pride, 1989; Johnson, Lee, Saini and Gronhmann, 2003; Russo and Harrison, 2005; Zuniga-Vicente and VincenteLorente, 2006). The above studies suggest that firms that possess the capability to respond to new competitive behaviours are at a definite advantage; they can easily deploy critical resources and use the diversity of strategic options available to them to compete effectively. The following hypothesis is therefore formulated: Hypothesis 5a: The greater the competitive intensity, the stronger will be the positive relationship between SMO and the performance of the banks. Demand Uncertainty Demand uncertainty captures the variability in customer population and preferences that have direct effects on performance; what makes organizations adapt their product offerings, plans, and strategies to the changing demand conditions. A strategic marketing orientation helps firms track these changes in the consumer environment and should assist in managing this uncertainty. As the demand uncertainty increases, so does a firms need to be strategic marketing-oriented. Past researchers also posit that the positive relationship between market orientation and a firms performance should become stronger as such uncertainty increases (Jaworski and Kohli, 1993; Slater and Narver, 1994; Pelham, 1997; Grewal and Tansuhaj, 2001; Kangis and O Reilly, 2003; Pfeffer and Salancik, 2004 and Russo and Harrison, 2005). Strategic marketing orientation emphasizes answers to the unique needs of consumers, business partners and institutional constituents. Because firms are more likely to face challenging and unique situations in uncertain markets than in stable markets, strategic marketing orientation should be more useful in these uncertain markets. In view of this, the following hypothesis is formulated: Hypothesis 5b: The greater the demand uncertainty, the stronger will be the positive relationship between strategic marketing orientation and the performance of the banks Technological Uncertainty Technological change or uncertainty can be defined as an exogenous technical innovation that modifies the components, systems, techniques, or methods required for producing organizational outputs. Considering technological change as an exogenous event is a conventional assumption found in much research into technological discontinuities and in some capability-centred studies. Technological change can potentially affect a firms capabilities because it introduces new scientific knowledge and generates new alternatives for configuring capabilities; it alters the intensity of competition; the level of environmental uncertainty; structural conditions such as barriers to entry and mobility; economies of scale and scope; demand conditions and customer preferences (Grewal and Tansuj, 2001; Judge and Elekov, 2005; Smith, Collins and Clark, 2005). Moreover, because technologically uncertain markets are likely to offer a greater number and range of threats and opportunities for firms to adapt and improvise, it is expected that Strategic marketing orientation will be of greater importance to create better performance in Nigerian banks that are presently characterized by high levels of technological uncertainty. It is thus hypothesized that: Hypothesis 5c: The greater the technological uncertainty, the stronger will be the positive relationship between Strategic marketing orientation and the performance of the banks.

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Research Methodology
Banks Classification The sampling size of the study is comprised of all the twenty five banks and initial classification into different strategic groups was done during a pilot survey in which 500 randomly selected corporate customers (twenty from each bank and ten each from the two major cities; Abuja and Lagos were asked to categorize their banks based on level of skills displayed by workers, reputation and image of the bank, information technological support, capital base relative to size, global support, comprehensiveness of the services, market coverage, credit leverage, leadership, management efficiency and mass market presence. This classification was made based on the knowledge of strategic orientation and market orientation of Nigerian banks. The following thus emerged: a) Super Banks (4): Banks perceived to be working with high skills, strong reputation and image, good information technology support, strong capital base with global support: Standard Chartered Bank, Sterling Bank, Guaranty Trust Bank, Stanbic Bank. b) Major Banks (4): Banks that operate with large branch networks and have advantage of size. They operate full comprehensive banking services, total market coverage, large credit leverage for other businesses and they are strong in mass market but with no particular niche. The selected banks for this category are Union Bank, United Bank for Africa (UBA), AfriBank and First Bank. c) Focused Banks (9): They target the middle/top end of the market and reap significantly from off-balance sheet activities. They have strong leadership, good functional technology, strong and appealing image as well as enhanced capabilities. The banks selected here are Zenith International Bank, Diamond Bank, Ecobank, First City Monument Bank, Equatorial Trust Bank, Intercontinental Bank, Bank PHB, Spring Bank, and Oceanic Bank. d) Small Specialty Banks (8): are niche players. They are focused but have small size. They are characterized with medium network spread, with formidable presence in middle/mass market. Banks selected are IBTC Chartered Bank, Skye Bank, Fidelity Bank, First Inland Bank, Access Bank, Nigeria International Bank, Unity Bank and Wema Bank. The strategic marketing orientation was measured using dimensional approach developed by Venkatraman (1989) with inclusion of innovativeness and market sensitivity variables. Specifically, the survey questions probed the responses related to firms on: (i) Proactiveness: a measure of how quickly the banks respond to signals of opportunities in the environments. (ii) Innovativeness: a measure of the degree to which the bank introduces new brands to encapsulate the customers desire as to keep them sold and satisfied. (iii) Risk-taking: is a measure of the extent of riskiness reflected in various resource allocations as well as choice of markets and products viewed at organization-level construct, similar to the one adopted by Miller and Friesen (1984). (iv) Aggressiveness: is a measure of the posture adopted by the bank for allocation of resources to improve the market positions at a relatively faster rate than the competitors. (v) Analysis: is the measure of overall problems solving capability as noted by Miller and Friesen (1984) different from the analyzer behavior of Milles and Snow(1978). (vi) Defensiveness: is a measure of cost reduction and efficiency seeking methods, it reflects Thompsons (1967) view of organizations seeking to defend their core technology as well as Miles and Camerons (1982) concept of domain defence. (vii) Futurity: is a measure of relative emphasis of effectiveness (Long term) considerations and efficiency (Shorter time) considerations. (viii) Market sensitivity: is a measure of the market changes effected by the banks.

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Instrument The data were collected by self-administered questionnaires distributed to respondents at different branches of the twenty five banks in Lagos and Abuja - the two major cities in Nigeria that housed most of the headquarters of the banks. There are two main reasons for choosing Lagos and Abuja offices of the banks as the sample. First, Lagos and Abuja being the nerve centres of businesses in Nigeria housed the headquarters of these banks where some major transactions are undertaken and so most businesses prefer relating directly with the headquarters of the banks since banking services like international fund transfer, exports issues, etc. are carried out at the headquarters of these banks. Second, with the nature of the research there is need to contact top management who are noted to be involved in strategic direction of the banks and they are mostly present at the headquarters of their respective banks. The questionnaire contains five sections: The first section was designed to gather information about strategic marketing orientation of the banks, and respondents were asked to indicate, on a fivepoint Likert-type scale, ranging from not important at all to very important, most of the factors were adapted from Venkatraman (1989), however two of the factors were developed by the researcher; these are Innovativeness and market sensitivity dimensions. Section B comprised of marketing competence variables adapted from Conant et al., (1990) and Prasad et al., (2001) measured on fivepoint Likert-type scale of very low to very high. Section C comprised of environmental factors of competitive intensity, demand uncertainty and technological turbulence adapted from (Grewal and Tansuhaj, 2001, Kangis and OReilly, 2003; Brown and Blackmon, 2005; and Zuniga Vicente and Vicente Lorente, 2006) and they were measured on 5-point Likert scale of very low to very high. The fourth section, Section D measured the banks performance with measurement variables as growth, profitability, customer service, sustainable competitive advantage and exogenic factors. The four earlier variables in this section were adapted from Venkatramen (1989), and Guenzi and Troilo (2007) and the Exogenic factors were put together by the researcher based on the peculiarity of the research context. Initially, a list of 85 scale items was gathered. Before the final questionnaire was sent out, a pilot study was conducted to determine the appropriateness and relevance of these factors in the instrument. The instrument was distributed to 50 executives of the banks; two from each bank participated in the trial run. Based on the respondents feedback, the list of the selection criteria was reduced to 75 factors due to their unfamiliarity with the four of the chosen factors. Table 1 shows the number of initial items and the number of the final items.
Table 1:
S/N 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Item Purification
No of initial numbers 45 7 5 5 3 4 5 4 2 5 No of final items 40 6 4 5 3 3 5 2 2 4

Construct Strategic marketing orientation Marketing competence Competitive initiative Demand uncertainty Technological Turbulence Growth Profitability Customer Service Sustainable competitive advantage Exogenic factors

Strategic marketing orientation with sub variables as Aggressiveness, Analysis, Defensiveness, Futurity, Proactiveness, Riskiness, Innovativeness and market sensitivity, has a total of 45 selections criteria. After the pilot survey based on respondent feedback this was reduced to 40. Four question items were removed from innovativeness whose response tend to be similar to marketing competences, these items border on product quality, customer service, technology, and product variety, and one scale

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item was removed from market sensitivity, the question item is Reducing market constraints by reducing the effect of economic variables. Marketing competence has a total of 7 scale items from which only one was removed after pilot survey (i.e. demand analysis), same for competitive intensity, which has 5 reduced 4 (i.e. competition above average was removed), for growth, one scale item was removed (progressive increase in sales turnover relative to competitors). Two scale items were removed from customer service; these are Effectiveness in handling customers complaint and Degree of monitoring of customers needs relative to competitors. Exogenic factors i.e. factors that border on issues other than the operational efficiency of the banks such as age, past records, public confidence, branch network, and level of government participations; one of the scale items was removed based on respondents feedback and this is government participation. Data Collection Top and middle level management involved in decision making and strategic direction of the banks were randomly approached based on the list of top management supplied by the management and they were given the questionnaire to fill. About 10 to 15 respondents were approached at each bank and the purpose of the study was explained. Then they were asked if they would be prepared to fill in the questionnaire. Once they had agreed to participate, designated questionnaire was given to the participation respondents who were left to fill the questionnaire to reduce any potential bias that could be caused by the researchers presence. Once completed, the respondent either returned the questionnaire to the researcher or designated persons that the researchers spoke to, to help in retrieving the questionnaire. Sample From a total of 375 copies of the questionnaire distributed, 257 were returned, out of which 213 were usable (valid and complete), thus producing a response rate of 56.8 percent, a response rate considered sufficiently large for statistical reliability and generalizability (Gerrad and Cunningham, 1997; and Abbas et. al., 2003). All responses were returned within four weeks and investigation did not reveal any late respondent bias. An analysis of the respondents demographic characteristics is presented in table II.

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Table II: Distribution of respondents (n=231)

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Gender

Age Group

Experience (in Years)

Marital Status

Educational Status

Position

Male Female Below 30 31 40 41 50 Above 50 1 10 years 11 20 years 21 30 years 31 and above Single Married Below Bachelor + professional qualification Bachelor Bachelor + professional qualification Bachelor + postgraduate Bachelor + postgraduate + professional qualification Professional qualifications and others. Top Management Middle Management

Valid Percent (%) 69 31 1 18 39 42 9.39 28.17 42.25 20.19 10.80 89.20 1.8 2.8 56.34 9.39 28.47 1.4 70.42 29.58

Table II gives a summary of the basic statistics on gender, age, marital status, educational qualification and position of respondents. The respondents are mostly male, consisting 69 percent of the respondents. About 81 percent of the executives fall in the range of 41 and above 50 years of age. This is a reflection of the fact that these categories of management must have spent a considerable number of years before getting to their respective positions. This is also reflected in the years of experience as over 60 percent of the executive have acquired over 20 years as working experience. Over 89 percent of the respondents are married and only 10.80 percent are single. Over 84 percent of the respondents have bachelor, postgraduate and

Strategic Marketing Orientation and Performance: A Case for Synergistic Merger Effects of Nigerian Banks
Table III: Factor Loadings and Measurement Properties of Constructs
Construct/Item STRATEGIC MARKETING ORIENTATION (SMO) Aggressiveness Dimension 8. Sacrificing profitability to gain market share 9. Cutting process to increase market share 10. Setting prices below competition 11. Seeking market share position a the expense of cash flow and profitability Analysis Dimension 12. Emphasize effective coordination among different functional areas 13. Information system provide support for decision making 14. When confronted with a major decision, we usually try to develop thorough analysis 15. Use of planning techniques 16. Use of the outputs of management information and control system 17. Manpower planning and performance Defensiveness Dimension 1. Significant modification to the manufacturing technology 2. Use of cost control system for monitoring performance 3. Use of production management techniques 4. Emphasis on product quality through the use of quality circles Futurity Dimension 1. Our criteria for resource allocation generally reflect short-term considerations 2. We emphasis basic research to provide us with future competitive edge 3. Forecasting key indicators of operations 4. Formal tracking of significant general trends 5. What-if analysis of criteria issues Proactiveness Dimension 1. Constantly seeking new opportunities related to the present operation 2. Usually the first ones to introduce new brands or products in the market 3. Constantly on the look out for businesses that can be acquired 4. Competitors generally preempt us by expanding capacity ahead of them 5. Operations in the larger stages of the life cycle are strategically eliminated Riskiness Dimension Loading t-Value Average Variable Extracted

277

Reliability

0.72 0.71 0.70 0.72

10.26 10.58 11.22 10.36

0.72

0.81

0.75 0.70 0.69 .70 .72 .72

11.22 15.36 9.16 11.39 12.11 12.92

0.71

0.82

0.71 0.70 0.75 0.68

14.40

0.78

0.76

0.70 0.71 0.75 0.72 0.67

9.11 9.32 8.79 10.72 10.99

0.73

0.80

.76 .71 .77 .78 .72

10.10 9.41 10.56 8.94 9.28

0.72

0.79

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1. 2. 3. 4. 5. Our operations can be generally characterized as high-risk We seem to adopt a rather conservative view when making major decisions New projects are approved on a stage-by-stage basis rather than with blanket approval A tendency to support projects where the expected returns are certain Operations have generally followed the tried and true paths .72 .71 .70 .70 .73 11.56 11.21 10.29 9.11 9.98 0.52

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0.82

Innovativeness Dimension 1. Brand value relative to competitors 2. Embedded incentives relative to competitors 3. Ambient banking environment and convenience relative to competitors 4. Meeting customers needs relative to competitors 5. Speed of Loan processing and approval relative to competitors Market sensitivity Dimension Creation of new customer preferences Reverse of existing customer preferences Creation of new competitors preferences Reverse of new competitors preferences Removal of customer obstacles Reducing market constraints by reducing the effect of regulations by Government or competitors or stakeholders. Marketing Competence 1. Prices relative to industry average 2. Quality of our services and products relative to industry average 3. Product varieties capabilities relative to competitors 4. Effectiveness of our marketing support programmes 5. Service delivery relative to competitors. 6. Technological sophistication relative to industry leaders ENVIRONMENTAL FACTORS Competitive Intensity 1. Competition in our industry is cut-throat 2. There are many promotion wars in our industry 3. Competitive moves evolve everyday 4. Price competition is prevalent Demand uncertainty 1. Extent of uncertainty created by variability in consumer demand 2. Extent of variability in product/brand features 3. Extent of variability in price demanded 4. Extent of variability in quality demanded

.74 .76 .78 .70 .71

10.16 8.54 8.99 9.26 9.82

.73

.82

.72 .70 .74 .73 .68 .71

13.21 10.96 11.92 10.82 9.68 9.77

.72

.78

.72 .78 .82 .74 .85 .82

1.29 10.48 9.47 8.49 9.11 10.56

.70

.85

0.81 0.70 0.81 0.76

11.64 10.26 11.58 11.22

.65

.82

0.79 0.72 0.79 0.82

12.29 12.01 11.38 12.92

.71

0.80

Strategic Marketing Orientation and Performance: A Case for Synergistic Merger Effects of Nigerian Banks
5. Extent of competitive moves in the industry Technological turbulence 1. Extent of change in technology (that is in the production process, product design, and product offering) 2. Opportunities created by technology (that is in the production process, product design, and product offering) 3. Manufacturing of a new product as a result of technology BANKS PERFORMANCE Growth Dimension 1. Deposits growth position relative to competition 2. Satisfaction with deposits growth rate 3. Market share gains relative to competition Profitability Dimension 1. Satisfaction with return on corporate investment 2. Net profit position relative to competition 3. ROI position relative to competition 4. Satisfaction with return on sales 5. Financial liquidity position relative to competition Customer Service Dimension 1. The speed of delivery to our customers compared to competitors 2. The degree of responsiveness to customers enquiries and requests compared to competitors. Sustainable Competitive Advantage Dimension 1. Our competitive advantage is difficult for competitors to copy because it uses resources only we have access to. 2. It took time to build our competitive advantage and competitors would find it time consuming to follow a similar route. Exogenic factors 1. The age of the bank is an advantage compared to competitors. 2. The past records of the bank is an advantage compared to competitors 3. The bank has built public confidence over time compared to competitors 4. The banks branch network is an advantage over competitors. 0.80 13.02

279

0.78 0.79 0.78

11.28 10.52 9.29

.64

.81

.81 .78 .76

12.10 11.92 12.90

.77

.85

.78 .81 .79 .82 .70

12.16 11.10 10.90 11.66 9.66

.61

.79

0.72 .71

10.24 10.29

.67

.75

.73 .74

8.11 8.82

.60

.74

.71 .78 .82 .79

9.91 8.22 8.19 7.72

.74

.78

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Table IV: Pearson Correlations of Constructs
S/N 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Variable SMO Marketing Competence Competitive Intensity Demand Uncertainty Technological Turbulence Growth Profitability Customer Service Sustainable Competitive Advantage Exogenic Factors Mean Standard Deviation SMO 1.00 0.64* 0.56* 0.62 0.75* 0.52 0.61* 0.73* 0.81* 0.61 4.30 1.05 Marketing Competence Competitive Intensity Demand Uncertainty Technological Turbulence Growth Profitability Customer Service SCA

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Exogenic Factors

0.54* 0.59* 0.72* 0.71* 0.60* 0.82* 0.87* 0.41 3.58 0.72

0.35 0.55* 0.55* 0.64* 0.76* 0.88* 0.32* 3.72 0.52 0.17 0.17 0.32* 0.62* 0.31* 0.57* 3.11 0.75 0.48* 0.73* 0.80* 0.87* 0.40 4.07 1.09 0.42* 0.25* 0.53* 0.56* 4.10 1.31

0.34* 0.50* 0.44* 4.05 1.32 0.57* 0.22 4.42 0.86 0.67 3.57 0.71 3.07 0.52

Notes: N=213,*p<0.05(one-tailed test)

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Figure 1: Confirmatory Factor Analysis Model for Strategic Marketing Orientation, Marketing Competence, Environmental Factors and Banks Performance. = 154.77 with 57 degrees of freedom, p < 0.01; Normed fit index (NFI) = 0.92; Non normed fit Index (NNFI) = 0.96; Comparative fit index (CFI) = 0.97; Standardized root mean square residual (SRMR) = 0.08 and Root mean square error of approximation (RSMEA) (90% CI (confidence interval) = 0.061
q4 .71 q7 q6 .70 .69 q50 .81 .76 q51 q53 q13 q12 .75 .68 q14 q16 q17 .75 .72 q18 .67 q19 q222 .78 .77 .71 Proactiveness q21 .76 q20 .78 .73 q75 .79 q72 .71 Exogenic Factors q40 q27 q28 q26 q32 q25 q30 .70 .73 Riskiness .70 .70 .70 q34 q33 .70 .71 q35 .76 .82 q74
Market Sensitivity

q3 .70

q2 q1 .71 .72 q48 Environmental Factors .81 .81 q47

q46
.85 .82 .74

q45 .82 q44

.78
Marketing Competence q43

q8

Aggressiveness

q49

.70 .70

.82 q52 .80

q57

.78

.78

q59

.72
q42

q9

.72 Analysis .72

q5 .75

Competitive intensity

.79 Demand Uncertainty .79 .80 .82 q55 q56

Technologica l turbulence .79 q58 .75 q60 .81

q10

q61 .78 q62 .76

.72

q11 .70 .71

.76 .74 q54 .71

Growth .68
.75

Defensiveness

.75

.42

.85 q65

q61
.81 .78

q63

q15 .71 .70 .73

Strategic Marketing Orientation (SMO) .69

Banks Performance

.79 q66

.79 Profitability .82 q67

Futurity

.70 .72 q68

.75

Customer Service q69

q23 .72
q24

.73

.77

q41 .71

.71 .78 q73 SCA .74 q71 .73 q70

q31 .72 .74 .78

.70 Innovativeness .74 q37 q36

.68

.73

q39

q38

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Olalekan Asikhia

professional qualifications. This is believed to have helped them in their task of directing the affairs of the banks. Malhotra (2000) has equated the quality of knowledge acquired to the task intensity of workers. And this is found to be positively correlated. This finding helps to substantiate the demographic outlay of this research.

Analysis
Measurement Model Following the two-stage analytic technique of structural equation modeling (SEM), a confirmatory factor analysis measurement model based on item correlations was investigated. To assess validity of the measures, the 75 indicators of the ten constructs of interest are fitted to a disaggregated model. The = 100.46 with 66 degrees of freedom, p < 0.01; fit indices of this null measurement model are Normed fit index (NFI) = 0.93; Non normed fit Index (NNFI) = 0.97; Comparative fit index (CFI) = 0.98; Standardized root mean square residual (SRMR) = 0.076 and Root mean square error of approximation (RSMEA) (90% CI (confidence interval) = 0.058. All the fit indices indicate that the measurement model is a reasonable representation of the covariance variance matrix. All of the items load significantly on their respective factors (t > 2.00). The convergent and discriminant validity of the constructs further helped in laying credence to the credibility of the model. Internal consistency of the constructs indicated the Crobachs alpha in table 3, suggests convergent validity. Convergence is further supported by the reliability (using maximum likelihood estimation) of each construct being greater than 0.70 and the average variance extracted (AVE) being close to or greater than 0.50 as presented in table III. Using the heuristic of Fornell and Larcker (1981), the AVE is compared to the squared variance, thus indicating discriminant validity. All indications suggest the reasonableness of the indicators and their proposed constructs. Structural Equation Model The hypothesis model is presented in figure 1 was estimated using Amos 18.0, using the covariance matrix of the remaining 75 indicators. Under the 10 constructs: strategic marketing orientation, marketing competence, competitive intensity, demand uncertainty, technological turbulence, growth, profitability, customer service, sustainable competitive advantage, and exogenic factors. Fit indices indicate a reasonable fit with = 154.77 and 57 degrees of freedom, p < 0.01; Normed fit index (NFI) = 0.92; Non normed fit Index (NNFI) = 0.96; Comparative fit index (CFI) = 0.97; Standardized root mean square residual (SRMR) = 0.08 and Root mean square error of approximation (RSMEA) (90% CI (confidence interval) = 0.061. The fit indices closely match the suggested cut off criteria of Hu and Bentler (1999) for models using maximum likelihood estimation. Examination of the standardized residuals as well as inspection of the plotted residuals indicates that the assumption of multivariate normality is met.

283
Table V:
S/N 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Olalekan Asikhia
Performance relationship of Banks
Banks Super Banks Major Banks Focused Banks Small Specialty Banks Super + Major Banks Super + Small Specialty Banks Major + Focused Banks Major + Small Specialty Banks Focused + Small Specialty Banks Super + Focused Banks Standardized Beta Coefficient (t-value) .30 (7.91) .15 (6.05) .22 (4.15) .20 (5.75) .62 (4.25) .40 (9.02) .57 (5.59) .60 (7.11) .31 (1.29) .65 (6.62) F-value 24.40 22.90 22.56 26.07 15.58 18.26 14.52 21.32 1.21 17.22 Sig. 0.001 0.008 0.004 0.001 0.005 0.002 0.001 0.003 0.112 0.008 Hypothesis Support Supported Supported H2a Supported H2c Supported H2d Supported H2e supported H2f Not supported H2b Supported Synergistic Effect NA NA NA NA Yes No Yes Yes No Yes

The path analysis result as seen in figure 1 and Table IV Pearson Correlation results show that Hypothesis 1 and 4 are supported, meaning positive and significant relationship exist between strategic marketing orientation and Banks performance variables of banks. Also, marketing competence positively relate with banks performance except for the exogenic factors (A sub-variables of banks performance) r = 0.41 and r=0.61 for SMO not significant at p < 0.05. Table V shows the relationship between SMO and banks performance for the individual banks as well as suggested mergers. Hypothesis 2a to 2e are supported only hypothesis 2f is not supported; that is, no significant difference exist in the SMO-relationship of the banks before and during merger between focused and small specialty banks.
Table V: The moderating effects of marketing competence and the environmental factors on the SMO Banks performance relationship
R 0.68 0.71 0.42 0.75 Rp 0.43 0.49 0.15 0.51 F 12.19 11.92 2.16 10.67 Sig. 0.0005 0.004 0.101 0.0001 Hypothesis Support H3 supported H5a supported H5b not supported H5c supported

Variable Marketing Competence Competitive Intensity Demand Uncertainty Technological Turbulence

Table V shows the moderating effects of marketing competence and environmental factors on the SMO-banks performance relationship. Marketing Competence, Competitive intensity and technological turbulence all moderate the SMO-Banks performance relationship, only demand uncertainty does not, though there is a moderating effect this is not statistically significant .i.e. (P > 0.05).

Discussion
Strategic marketing orientation builds the capabilities in firms to facilitate a business acumen, which drives the organization to perform as established in this study. A positive and significant relationship exist between strategic marketing orientation and banks performance variables, this result concurs with the findings of Galbraith and Schendel (1983), Doty, Glick and Huber (1993), as well as the fact that winning strategies for banks revolve around its degree of aggressiveness, defensiveness, futurity, proactiveness, riskiness, innovativeness, market sensitivity and analysis, all these would not only bring about growth but they also create sustainable competitive advantage, greater profitability and better customer service. The exogenic factors though relate positively with SMO but it is not statistically

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significant, this implies that a bank age, past records, its public confidence and branch network record may not stem from its strategic orientation rather other factors may have necessitated these. It is noted that the individual performance of focused banks is better than their combined performance when merged with small specialty banks. This may be due to misalignment in strategic direction and operational mechanism, and also though a statistically significant difference exists in the performance of pre-merger and merger situation of super banks and small specialty banks, this does not produce synergistic effect as the contribution of small specialty banks to the performance of super banks is less than the separate performance of small specialty banks; this shows that a new strategic orientation, which change the level, stability and cyclical nature of the banks profitability negatively has ensued (Haugen and Langetieg, 1975), and if such merger takes place it might affect the outlook of growth for both banks and thus affect volatility of the market value of their common stock as well as the risk position of the equality and result in a significant change in the risk attributes of the distribution of rates of return (Cole, Fatemi and Vu, 2006). There are substantial findings in the literature to support both the positive and the negative direction of the supposed merger situations envisaged between the banks in this study. For example, the positive merger situation between the super and major banks, major and focused banks, major and small specialty banks and super and focused banks are supported by the findings of Langetieg (1980) and Asquith (1983). It is believed that the merger in these instances would be positive because there would be operating synergies (Cole, Fatemi and Vu, 2006). So the constrain being imposed by some regulatory instruments of the Central Bank of Nigeria on these banks is creating value through synergy. This is corroborated by Bulmash and Mehrez (1986) and Delong (2001). The merger between the super and small specialty banks and focused and small specialty banks that could not create synergistic effect have support in the findings of the works of Ravenscraft and Scheer (1989) and Dennis and Serrano (1996). It is surprising that the merger between the major and small specialty banks produces synergistic effect and this is the only merger of the small specialty bank that will do so. The marketing competence of the banks helps in consolidating their technologies across functional units into a coherent whole that facilitate performance in product formulation and service delivery (Hill and Jones, 2006). The positive relationship between marketing competence and the banks performance observed in this study aligns with the findings of Capon, Farly and Hoenig (1990), Leonidas, Katsikeas and Saeed (2002). Conant, Mokwa and Varadarajan (1990) as well as Hill (1994) believe that marketing competence is a critical factor in corporate competence development and this underscores its relevance in moderating the SMO banks performance relationship. The Nigerian banks operate in a very unpredictable business environment with high level of competitive and technological advancement (Soludo, 2008 and Kolawole, 2009). This assertion is substantiated by the findings of this research; competitive intensity and technological turbulence are found to moderate the SMO performance relationship of the banks, while demand uncertainty though found to moderate the relationship but was not statistically significant; this may be due to increase in the banking culture of the 150 million Nigerians(NPC,2006), which means an average bank has customers but not enough to give competitive advantage unless adequate strategic direction is pursued to keep profitable customers.

Theoretical Implications
Previous research on the marketing orientation in creation of superior customer value or performance has not taken into explicit consideration the issue of strategic orientation variables as a major thrust in the formation of strategic marketing orientation. No major work has been carried out to specifically see how strategic marketing orientation variables could be formed by looking at the strategic orientation variables suggested by (Venkatraman, 1989) and organizational marketing framework. The present study thus presents a model exploring the joint contribution of these variables in determining performance in banks in a developing country like Nigeria.

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Many studies have claimed conceptually that a firms marketing orientation relates positively with performance (Gonzales, Vijance and Casiettes , 2002; Van Fleet, Peterson, and Van Fleet ,2005) others say there is a negative impact (Jaworski and Kohli,1993; Narver and Slater ,1990), however, the present study is the first to empirically show that a banks strategic marketing orientation affects its performance because it is greatly beneficial to its capacity to create superior customer value. Another contribution of the study comes from its focus on the capacity of the marketing competence of the banks to moderate the SMO performance relationship and to relate directly with banks performance measures. By investigating the moderating effect of marketing competence and environmental factors the present paper underlines that marketing competence play a critical role in affecting the creation of strategic marketing orientation of banks meaning organization wide skills and technological thrust will lead managers to design and institute strategic directive that will help to deliver superior customer value and sustain competitive advantage. A major relevant contribution is the consequences of SMO banks performance relationship in creating synergistic mergers amongst banks in the face of stringent policy regulation and other uncontrollable environmental factors. The classification scale used for the banks has helped in developing a model that investigates a supposed merger between the different banks. This further brought to bear the importance of the consideration of relevant organizational capability and framework to create a fit that will engender superior performance. Finally, the present study also contributes to knowledge development by building new scales (for Banks Classification and Strategic Marketing Orientation) that researchers may use in future empirical research.

Managerial Implications
Besides theoretical implications, the study has several managerial implications. The general implication is that managers should be aware that creating superior performance requires considerations of major strategic variable and behaviours. Putting the valuable organizational culture and managerial systems that will support the evolvement of SMO variables and practical demonstration of them all through the organization is a major responsibility of the managers. More specifically, the long term strategic marketing orientation of the banks can play a critical role in sustaining competitive advantage. This means that setting long-term goals giving emphasis to long-term results and devoting time and efforts to long-term decision processes and activities allow other functional units of the bank to align their vision, decision processes and activities, giving rise to a coherent holistic strategic thrust. This makes the banks more effective and efficient, yielding better performance. Third, top management whose function is to set the strategic direction of the banks should help information flows and collaboration between the functional units of the bank. A regular quantification and monitoring of the strategic marketing orientation variables will help to deliver the required superior performance. Fourth, the findings suggest that for strategic marketing orientation to deliver a better value particularly with regards to the major banks there is need for a change from the arm-chair banking (seating down in the banks and expecting the customers to come) to a strategic marketing-driven banking operations. As a consequence, the design and management of recruitment training and compensation should aim at this. Another managerial implication of the study regards the synergistic merger in event of outright purchase or deliberate coming together of a bank with another. It is obvious from the result that some mergers may not create the desired performance, so top management should be mindful of the banks to merge with or buy over. The inherent strategic marketing orientation of different banks differs, so also is the SMO bank performance relationship. The degree of strategic marketing orientation practice in each bank has been shown to be vital ingredients in estimating the synergistic effect of supposed

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merger amongst banks. A comprehensive framework of the strategic framework of any merging bank should be considered to avoid mis-alignment that may produce negative post-merger results or non synergistic effects.

Limitation of the Study

The study presented in this paper is to a large extent explanatory and the research design is crosssectional, and even though the respondents were randomly selected generalizing the research findings may need to be done with caution, this is partly because of the peculiarity of the research context and the attendant banking environment. The use of a single country data further diminishes the generalizability and extinguishes the opportunity of making comparison with other parts of the world. To better interpret the model proposed in this study and to provide managers with clear guidelines, researchers should analyze the drivers of effective relationship between SMO and banks performance as well as other antecedents of SMO, and the explanatory power of the model would also improve with the addition of other moderators such as organizational culture, firm structure, integration mechanism as well as progress characteristics.

Conclusion
It is the main objective of this study to determine the relationship between SMO and banks performance as well as find out profitable mergers between banks, that is, those mergers that produce synergistic effects. The most important fact revealed by this study is that SMO relates positively and significantly with banks performance variables except the exogenic factors, which implies that the exogenic factors performance of the banks in Nigeria was not primarily determined by SMO. It is also established that marketing competence moderate the SMO performance relationship apart from having a significant and positive relationship with banks performance. Environmental factors were found to also moderate the SMO performance relationship except Demand uncertainty, making it to look as if the demand for the bank services is always there, but attracting profitable customer may take more than arm-chair banking, which further explains the reasons for the SMO performance relationship. The SMO performance relationship is also used in determining synergistic merger amongst banks after the initial classification of the banks into super, major, focused and small specialty bank bearing in mind the peculiarity of the research context. It is found that merger between the super and small specialty banks, as well as focused and small specialty bank will not produce synergistic effect, this may be due to peculiarity of these banks as well as strategic misalignment. The result of this study has interesting theoretical and managerial implication being the first of its kind in the developing world with definite contribution to knowledge.

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