European Journal of Business and Management www.iiste.org ISSN 22221905 (Paper) ISSN 22222839 (Online) Vol 4, No.10, 2012 20 Lagat Charles 1 , Chepkwony Joel 2 , Kotut Cheruiyot Samwel 3* 1. School of Business and Economics, Department of Marketing & Management Science, Moi University, P.o Box 390030100 Eldoret, Email: lagatck@yahoo.com 2. School of Business and Economics, Department of Marketing & Management Science, Moi University, P.o Box 390030100 Eldoret, Email: Kemboi_joel@yahoo.com 3. School of Business and Economics, Department of Economics, Moi University, P.o Box 390030100 Eldoret, Tel +254722462522 or +254722775422 *Email: kotutmogo@yahoo.com The concept of market orientation has been a subject of research since it was introduced in the 1990s and it has been identified as an important theoretical construct. Previous studies have assessed the impact of market orientation, market positioning and innovation on firm performance. The objective of this study was on the process of market orientation and to empirically test the effect of the business environment on the relationship between market orientation and performance. The study used the resource based view approach and developed a framework for testing the theoretical relationships between the constructs. The study adopted a causal research design and it involved the use of a questionnairebased survey of a random sample of 220 managers of Manufacturing Companies in Kenya. Descriptive statistics of the demographic characteristics of 147 respondents together with firm characteristics are presented. Exploratory factor analysis, scale reliabilities and confirmatory factor analysis are presented. Regression analysis was used to test the relationships between the constructs. The study confirms previous studies on the positive relationship between market orientation and performance (β 1 = 0.180, ρ= 0.029). The business environment significantly (β 2 = 0.250, p = 0.003) affects firm performance in presence of market orientation. The findings of the study add new understanding to the literature on market orientation, business environment and firm performance in influencing the success of firms in a developing country context. Market orientation, customer, competitor, business environment, performance. Organizational success largely depends on determining the needs and wants of target markets and delivering satisfactions to those markets/consumers more effectively and efficiently than competitors do. Market orientation is a central tenet of marketing, its activities and behaviors are related to; a proactive search for marketplace opportunities; problem solving, and future positioning (Morgan & Strong, 1997). For several decades until now, market orientation has been the central idea of many published works in the marketing and strategic management literature. Market orientation has been identified as an important theoretical construct in marketing and it has stimulated much conceptual, empirical and executive attention. Market orientation has been regarded as a source of competitive advantage and can be an important determinant of firm performance. Superior organizational performance can be achieved as a market oriented firm is able to satisfy customers through tracking and responding to customer needs and preferences (Jaworski & Kohli, 1993). Further, a market oriented organization performs better in the market since the firm develops an organizational culture in delivering superior value to customers (Narver & Slater, 1990; Slater & Narver, 1994b). Jaworski and Kohli (1993) suggest that the relationship between a market orientation and performance appears to hold across a variety of contexts, and that it may support performance regardless of the firm’s external circumstances. In their study Slater and Narver (1994) also found little support for the effect of competitive environment and suggest that a market oriented firm should be prepared to achieve and sustain competitive