The impact of marketing capability, operations capability and diversification strategy on performance: A resource-based view

a r t i c l e i n f o Using resource-based view (RBV) of the firm as a theoretical backdrop; we aim to find out the relative impact of a firm's functional capabilities (namely, marketing and operations) and diversification strategies (product/ service and international diversification) on financial performance. We hypothesize that this linkage depends on the firm's relative efficiency to integrate its resource–capabilities–performance triad. Using archival data of 102 UK based logistics companies, we find marketing capability is the key determinant for superior financial performance. This study highlights that a market-driven firm is likely to have better business performance than a firm focusing solely on operational capabilities. Also, firms are better off when they focus on a narrow portfolio of products/services for the clients and concentrate on a diverse geographical market. Our findings provide a new perspective to model a firm's functional capabilities and diversification strategy on its financial performance and offer a benchmarking tool to improve resource allocation decisions. Traditionally, marketing and operations functions have been studied separately in management literature (Karmakar, 1996). Marketing focused on creation of customer demand and how to offer customers a unique value proposition. On the other hand, operations focused on management of supply to fulfill customer demand. Porter (1985) argued that all functional areas of business contribute towards delivery of goods and services but marketing and operations are the two key functional areas that add and create value to customers. There is a growing body of management science literature which stresses the integration of marketing and operations functions as key Mismatch between these two functions lead to production inefficiency and customer dissatisfaction, whereas a proper fit lead to superior competitive advantage and sustainable profits (Ho & Tang, 2004). It is widely accepted even among business leaders that ability to integrate such cross-functional expertise is essential for continued growth and profitability (Wind, 2005). Diversification strategy, in terms of entering into a related or unrelated business and/or entering into a new geographic market is considered to be of crucial importance to an organization's long term leadership position in its own industry management literature has studied extensively the costs and the benefits of diversification strategy and its effect on competitive Researchers have particularly focused on the effect of product/service diversification which is defined as the synergy in different lines of argued that the ability of an organization to manage such diversification depends on their …