www.ccsenet.org/ibr International Business Research Vol. 3, No. 3; July 2010 ISSN 1913-9004 E-ISSN 1913-9012 154 How Will Market Orientation and External Environment Influence the Performance among SMEs in the Agro-Food Sector in Malaysia? Norzalita Abd. Aziz (Corresponding author) & Norjaya Mohd Yassin Graduate School of Business, Universiti Kebangsaan Malaysia 43650 Bangi, Malaysia Tel: 60-3-8921-3798 E-mail:eita@ukm.com Abstract Many researchers have explored the relationship between market orientation and firm performance in manufacturing and services industries but such studies in agro-food SMEs are scarce. Previous research conducted has conceptually and empirically supported the notion that market orientation independently or collectively have positive correlations with the business performance of organization (such as Narver and Slater, 1990; Jaworski and Kohli, 1993; Lee and Peterson, 2000). The aim of this paper is to examine the marketing practices and the marketing orientation-business performance relationship among SMEs in agri-food sector in Malaysia. This study also investigated the role of the external environment in the market orientation-performance linkage. From an analysis of a survey data of 102 agri- food organizations, three dimensions namely customer-competitor orientation, inter-functional coordination and information dissemination extracted from factor analysis result of market orientation. The study revealed that customer-competitor orientation and information dissemination were positively related to business performance. In terms of the role of external environment, two dimensions produced by factor analysis, market-technology turbulence and competitive intensity did not moderate the relationship between market orientation and business performance. Findings are discussed and implications are highlighted. Keywords: Market Orientation, External Environment, Business Performance 1. Introduction Market orientation is a popular term used by marketers as indicator of the extent to which organisation implements its marketing concept. A market-oriented organisation has a superior capability in achieving higher profits compared to non-market oriented organisation (Agarwal et al., 2003). A great deal of attention has been focused on the concept of market orientation in the literature since the topic was re-ignited by Kohli and Jaworski (1990) and Narver and Slater (1990). The link between market orientation and company performance is widely highlighted and contended that market orientation is important to firms because of its positive association with performance. Some studies find that market orientation associate positively with business performance (Pelham, 1997; Pelham & Wilson, 1996; Pitt et al., 1996; Pulendran et al., 2000; Ruekert, 1992; Kara et al., 2005; Kirca et al., 2005; Sin et al. 2005; Kaynak and Kara 2004; Verhees and Meulenberg 2004; Langerak 2003; Shergill and Nargundkar, 2005. On the other hand, several studies do not find significant direct effect or weak relationships between market orientation and business performance (Diamantopoulos & Hart, 1993; Greenley, 1995; Han et al., 1998; Siguaw et al., 1998, Nwokah, 2008, Appiah-Adu, 1998, Bhuian (1997) and Sargeant and Mohamad, 1999). Based on the findings there is a need to assess the hypothesized relationship between market orientation and business performance in other business environment. Moreover, the majority of studies results from samples of heterogeneous firms across several industrial sectors but are not industry specific. According to Kimery and Rinehart (1998), marketing concept may be better implemented through a new conceptualization, where the focus will be on customers, competitors, suppliers and determining of the roles play in influencing business performance within industries. In addition to the lack of industry specific focus, there has been limited research outside of Western cultures (such as Narver and Slater, 1990; Jaworski and Kohli, 1993; Greenley, 1995) which the findings may not apply or suitable to the Asia context. There are very few attempts to address this limitation in the Asian perspective (e.g Aziz and Yasin, 2004; Kwon and Hu, 2000; Chan and Ellis, 1998). Matsuno and Mentzer (2000) and Han et al. (1998) explain that the positive performance impact by applying market orientation has accumulated but there is the need to investigate more closely the potential moderators of the market orientation-performance relationship. Diamantopoulos and Hart (1993) conclude that the market orientation-business performance relationship is situation specific and subject to several moderating influences. While market orientation and their antecedents and consequences have been investigated within, industrialized western business environments and their applicability and generalizability in a non-western context have not been well researched. Unfortunately, only few studies have investigated the potential moderating effects of external