The Effects of Market Orientation on Product Innovation in Arabic Countries - Essay Example

THE EFFECTS OF MARKET ORIENTATION ON PRODUCT INNOVATION IN ARABIC COUNTRIES (Flexible to change) Introduction Background of the Study Companies makegreat efforts to be more successful in meeting the needs of their consumers than their competitors, consequently to achieve a better position in the market and better business performance. The needs of consumers and threat from competitors often motivate companies to introduce to the market either quite modified or new products. It is by innovation that companies try to improve their business performance and their market share. Market orientation plays an essential rule in improving business performance, and product innovation. There are many studies mentioned that the relationship between product innovation and market orientation is positive. This study investigates the impact of market orientation on product innovation in Arabic countries, particularly, the impact of components of market orientation on product innovation. Market orientation and innovation have been identified as crucial success factors in companies (Day, 1994; Hunt and Morgan, 1995; 1996). Researches have shown the importance of market orientation for the success of product innovations (Cooper, 1975; 1979; Slater and Narver, 1994; Pelham and Wilson, 1996; Atuahene-Gima, 1996; Gatignon and Xuereb, 1997). An increasing number of empirical studies have demonstrated that an improvement in the level of market orientation will lead to superior organizational performance and new product innovation (Narver and Slater, 1990; Oczkowski and Farrell, 1998; Slater and Narver, 2000; Kohli and Jaworsky, 1990; Ruekert, 1992; Deshpandé, Farley and Webster, 1993; Atuahene–Gima, 1996; Gatignon and Xuereb, 1997). On the other hand, a number of authors are questioning the benefits of being market oriented, suggesting that there may be several limitations to a market orientation. Hamel and Prahalad (1991) suggest that market oriented firms may suffer from ignoring or missing markets and competitors. Slater and Narver (1995) argue that market oriented firms may fail to identify and capitalize on the latent needs of customers, due to their excessive focus on expressed needs. Research Question Studies about market orientation and product innovation in European and American counties offer little guidance to understand effect of market orientation on product innovation because the resources and capabilities of Arabic firm countries are different from those of European and American firms counties. Also there is a little attention on the variables that improve the work of market orientation toward product innovation. The following research questions will be addressed in this proposal. 1- What are the characteristics of Arabic Firms, and to what extent do Arabic firms implement market orientation? 2- What is the impact of market orientation factors on product innovation? 3- What are the market orientation factors that have a direct impact on product innovation? 4- Are there any variables improve the work of market orientation toward product innovation? Research Objectives The objective of this research is to gain a deeper understanding of market orientation and product innovation in Arabic firms, particularly to identify the factors that influence market orientation and its impact on product innovation. The research will try to obtain the following objectives: 1- To identify factors that influence market orientation in Arabic Countries as well as identify ways with which Arabic firms implement market orientation. 2- To examine the impact of Market orientation factors, and identify those which have the strongest effects, on product innovation. 3- To identify the variables that can improve the outcomes of market orientation on product innovation. Project Rationale The study will be conducted using a mixed methods approach in order to have a more detailed and extensive view of the relationship between market orientation and product innovation. Integrating both qualitative and quantitative strategies can provide certain advantages on the sample size, methods of collecting data, as well as analyzing such gathered data. As there have been limited number of studies on product innovation and marketing orientation in the Arab region, conducting a study that presents a comprehensive view of such constructs. Based on existing research, there is still unclear picture over the effects of market orientation on product innovation. Many studies have confirmed the importance of market orientation in general and its impact on product innovation, and other studies confirmed the negative impact of market orientation on product innovation. This study will focus on examining the outcomes of market orientation on product innovation and will concentrate on firms in Arabic countries as many of studies similar to the current one have been carried out in European and American regions. The study also will try to identify variables that could support the work of market orientation toward product innovation. In addition to a strong market orientation, a firm must also be able to satisfy higher level of learning processes, the type of learning that enables radical innovation (cf. Baker and Sinkula, 1999). Literature Review Market Orientation: An Overview Market orientation’ differs from the original term which was traditionally a focus on the customer needs only. Marketing orientation views all areas of the firm as important in the marketing process (Day, 1990; Kotler, 2003). Market orientation has been characterized as a culture of the organization that focuses on customer satisfaction and produces superior value for customers (Liu et al, 2002; Day, 1994; Narver and Slater, 1990). Kohli and Jaworski (1990) define market orientation as the generation of market information about customers’ needs and wants, the dissemination of such information among organizational functions, and the development of strategies in response to the information. These elements include continuous information gathering regarding customers and competitors, cross-functional sharing of information and coordination of activities, and responsiveness to changing market needs. Market orientation consist of three parts: customer orientation is the sufficient understanding of target buyers to be able to create superior value to them, competitor orientation which means to identify strengths and weaknesses of direct competitors, and inter-functional Coordination which require the coordination of company resources to creating superior value for target customers. (Narver and Slater, 1990; Kohli and Jaworski,1990). Customers’ needs and wants change continually which is require the introduction of new products and services to market place. It is by innovation that companies try to improve their business performance and their market share (Jaworski and Kohli, 1993; Martin and Grbac, 2003). An innovation is defined as an idea or object that is perceived as new by an individual or an agency (Rogers, 1995; Robertson and Yu, 2001). Innovation is the generation, acceptance, and implementation of new ideas, processes, products or services. Newness has been measured in a variety of ways: for example, it can be derived from the number of new product and service introductions, number of innovations adopted, the number of patents, the amount spent on research and development, the number of new products introduced, organisational innovation. Product innovation focuses on the creation of new products as well as improvements to existing products. New products or services and modifications to products or services are examples of product innovation. Accordingly this study will focus on product innovation. Market Orientation and Product Innovativeness The impact of market orientation on product innovativeness has been a popular area in recent years. There are many studies pay attention to the components of market orientation and their impact on product innovation. Numbers of studies reveal a positive influence of market orientation on new product introduction (Kohli and Jaworsky, 1990; Ruekert, 1992; Deshpandé, Farley and Webster, 1993; Slater and Narver, 1994; Atuahene–Gima, 1996; Gatignon and Xuereb, 1997). Market orientation is one of the core aspects of new product performance and firm innovativeness and the relationship between market orientation and product innovation are positive (Liu et al, 2002; Webster, 1992; Gatignon and Xuereb, 1997, Gima, 1995; Gatignon and Xurebeb, 1997; Bear and Frese, 2002; Calontone et al, 2002). Choe (2003) added that market orientation improves organizational performance. It is also play an important role in the strategy of firms and in their innovation strategy and performance. Market orientation drives innovation and firm innovativeness which in turn drive customer acceptance (Harmsen et al, 2000). On the other hand, there are studies mentioned that market orientation leads to imitation and makes continuous innovation development more difficult and consumer orientation makes commercialisation of new products more difficult (Bennett and Cooper 1979; Lawton and Parasuraman, 1980; Christensen and Bower, 1996). Lukas and Ferell (2000) added that consumer orientation increases the number of discontinuous innovations and decreases the number of continuous innovations, thus contesting consumer orientation as being the cause of incremental innovations. Kohli and Jaworksi (1990) suggested that in some industries, market orientation is not important to the innovative process. They added that market orientation had a negative impact on product newness. Verhees and Meulenberg (2004) in their study of SME’s found that market orientation inhibited product innovation in firms that were already highly innovative, while market orientation stimulated innovation in firms that were less innovative. Christensen (1997) mentioned that market orientation firms focus on existing customers, which may limit a firms ability to innovate, because managers are not capable to serve new customers. However, focusing on existing customers is not a market oriented. Slater and Narver (1999) argue that market orientation is not just focus on existing customers, but market oriented firm also focuses on potential customers and latent needs by evaluating market information in an anticipatory manner. Methodology Research Approach The research aims and objectives will be addressed by making use of a mixed methods approach that integrates both qualitative and quantitative strategies. While qualitative research is often exploratory and conducted as a means of understanding meaning, quantitative research is generally employed to measure variables and analyze hypothesized relationships within controlled contexts. Moreover, a qualitative research makes use of an individual perspective whereas its quantitative counterpart asserts that a common reality exists which individuals can agree on. Hence, multimethodology combines the gathering and analysis of qualitative and quantitative data in one study (Hesse-Biber, 2010). It then provides benefits for the researcher in such a way that words and narratives can be integrated onto numerical data, allowing findings to be more generalized for other studies and investigations in the future. Consequently, this can enhance the conclusions of the study, allowing them to become acceptable and appropriate for the advocates of either the quantitative and qualitative approaches. The mixed methods approach also enables the researcher to obtain better understanding of research problems as well as clarify the research outcomes (Ridenour, Benz, and Newman, 2008). In addition, the findings of the study may bring about new questions or issues that will entail clarification, thereby instigating new investigations and adding new findings to existing research. By using the mixed methods approach for the current study, a more detailed view on the impact of market orientation on product innovation in Saudi Arabia can be obtained through the use of both surveys and interviews. This may consequently yield results that may be applicable to other locations, populations, and contexts as well, hence increased generalization. Population of study and sampling This study is concerned about the effect of market orientation on product innovation in the Arabic countries. In other words, the dependent variable is product innovation, and the independent variables are components of market orientation. In marketing literature, there are few studies focused on the effect of market orientation on product innovation in the Arabic countries. The research will try to add new knowledge in marketing literature. The study will focus on profit organizations that are not highly protected or controlled by government. The study also will exclude young firms, because they can enjoy explosive growth which would bias the results. The researcher aims to obtain 80 participants for the study’s sample with which purposive sampling will be employed. This type of sampling entails that certain characteristics should be adhered to ensure the sample’s knowledge on the subject as well as the relevance of their information to the study. The researcher aims to collect qualitative and quantitative data from employees in 5 Arab manufacturing companies, hence 16 individuals for each firm. For the current research, participants must be knowledgeable of the concepts of product innovation and market orientation of their organization (e.g. product/product innovation managers), and should be willing to participate in the study. Instrument The collection of data for this study will be based on the framework presented by Lukas and Ferrell (2000) who conducted a similar study on the impact of market orientation on product innovation. For market orientation, three factors will be considered, including customer orientation, competitor orientation and interfunctional coordination. Sample items will include: “Our business objectives are driven primarily by customer satisfaction.” (customer orientation); “We rapidly respond to competitive actions that threaten us.” (competitor orientation); and “All of our business functions are integrated in serving the needs of our target markets.” (inter-functional coordination). These items can be scored within a 7-point rating scale. Meanwhile product innovation will be examined by: (1) the number of line extensions, which refers to the products which are not new to their company but are new to market; (2) number of me-too products, which are the new products in the company but are not new in the market, and (3) the number of new-to-the-world products that are new products both in the company and to the market. The interview questions will also be based similarly on the factors presented by Lukas and Feller (2000). According to Wright and Margaret (2000), “a questionnaire is a very useful tool for researchers. It is flexible, very time efficient; its ease of analysis and greater efficiency for the researcher are also beneficial. But there have also been problems with questionnaires including biased answers, biased questions (Robson, 2002; Quee, 1999). Methods of Data Collection A classification of research methods can be referred to as primary research and secondary research (Quee, 1999, Stewart, 1984 and Robson, 2002).This research will employ two methods for data collection; secondary sources and primary data sources. Existing data from the literature will first be collected: books, articles, on line readings, magazines of the companies and brochures (Robson, 2002; Quee, 1999). Keywords for searching among online search engines will include: “market orientation”, “market orientation in Saudi Arabia”, “product innovation”, “product innovation in Saudi Arabia”, and “the effects of market orientation on product innovation”. It will help to highlight the findings of the previous studies in the market orientation and product innovation. When secondary data has been collected, primary data will also be gathered by means of surveys and interviews based on the questionnaire presented by Lukas and Ferrell (2000). This will allow the researcher to look into the association of product innovation and market orientation. Consent forms will be sent to the potential participants of the study with which the management of selected Arab companies will be informed about the involvement of their members in the research process. Data Analysis Upon gathering the necessary data, two methods of data analysis will be conducted to interpret the quantitative and qualitative data. First statistical analyses through the SPSS version 15.0 will be employed for the quantitative data; and second, thematic analysis will be used to identify patterns or themes among the interview responses. The use of statistics and numerical data can increase the accuracy and reliability of the quantitative findings; meanwhile being able to distinguish common themes which are evident in the interview responses will enable the researcher to establish useful conclusions based on the qualitative data that has been collected. Ethical Considerations An imperative principle for the process of conducting research that will be employed for this study is the protection of all information that will be acquired. The confidentiality of each of the participant will be kept and the information they provide will be kept secure as well. To prevent any form of bias when the research methods are being carried out as well as to demonstrate consideration and respect for others is equally significant when conducting ethical research (Gregory, 2003). As such, an environment characterized by trust can be established. Participants will also be informed that they are free to make the decision of withdrawing from the survey and/or interview if they prefer to without being reprimanded. Conclusion The current study aims to employ the mixed methods approach in determining the impact of market orientation on product innovation in Saudi Arabia. Purposive sampling will be used to gather the desired number of participants in the study whereas the instrument used for collecting qualitative and quantitative data will be based on the framework presented by Lukas and Feller (2000). Statistical and thematic analysis will be carried out to interpret both the quantitative and qualitative results. Ethical considerations will also be complied with throughout the research process. References Atuahene-Gima, K. (1996), "Market orientation and innovation," Journal of Business Research, 35 (2), 93-103. Baker, W. E. and J. M. 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