CHAPTER 1
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
A driving force for competitive scuffle in the present chaotic business environment is innovative marketing strategy. Introducing new products and services by small businesses are at the nucleus of economic growth and development. The ability to innovate has caused researchers to study activities leading to initiative advancement of individuals and organizations. Small firms all over the world furnish a strong increase to employment and economic growth specifically due to their innovative activities which becomes a main force of explaining competitive advantage and firm performance (Ussahawanitchakit, 2012). Accordingly, the values fashioned by innovative marketing strategy shows potential circumstances that uncovered new ways of doing things or new products and processes that add benefits to economic fortunes.
A firm performance is related to the ability of the firm to gain profit and growth in order to achieve its general strategic objectives (Neu & brown, 2005). It is a consequence of the interaction between actions taken in relation to competitive forces that allow the firm to adapt to the external environment, thereby integrating competence and usefulness In both developed and developing countries of the world, small companies have proofed to be prominent in terms of employment and added values to gross domestic product, ‘yet their full potential remains untapped’ Schlogl, (2004). The support given for the start up of small firms, necessitate them to becoming important engines for innovation and technological advancement especially in the field of marketing. In 2007, The World business council for sustainable development gave a summary of the weight small firms in general lend to government and individuals.Small firms that are properly supervised become means of employment prospect and affluence creation. They aid in the generation of revenue and create communal solidity. Bigger organizations are provided with local services and supplies and communities have access to affordable goods and services at lower costs. Furthermore, ‘by working closely with small firms, large corporations can develop a new customer base that may not be accessible to the traditional distribution networks of these corporations’ (Menna, 2013). Thus small firms are a reliable source of supply and have understanding of the pattern of procurement.
Small firms, world over have been found to provide jobs for about 75% of the workforce of any country. In periods of liberalization and privatization small firms especially in emerging economics, has become vital economic tools and bedding seeds for entrepreneurship development and indigenous technology that create employment and are better positioned over bigger firms in their capacity to be innovative. However there are barriers to the activities of innovative marketing strategy in small firmswhich according to Menna (2013) include a lack in capital investment, infrastructure, education and training systems, encumber regulations, and in general deficiencies in know-how and skills acquisition. Other barriers include constrained managerial capabilities, difficulty in utilizing technology which results in low productivity among others. Consequently, investing in innovative marketing strategy strengthens the profit base, knowledge of employees and individuals that drive resilience of the organizations to create new products, processes, and new behaviour of working that generates improve competitiveness and achievement of necessary goals to shape performance.
Existing literature has described innovative marketing strategy differently. For example Aremu (2010) affirmed there are three types of innovative marketing strategy, product, process and strategy or business model innovation. Hussien (2010)explains innovative marketing strategy to include five types: new products, new methods of production, new sources of supply, the exploitation of new markets, and new ways to organize business. For Allocca & Kessler (2006), innovative marketing strategy will only be effective when there is a process of equipping in new, improved capabilities or increased utility. The present study seeks to examine the effect of innovative marketing strategy on small firm’s performance
1.2 STATEMENT OF RESEARCH PROBLEM
In the research project, the research problems that are of concern are spelt out from the above components of the research variables explained above. In relating the four aspects of the independent variables with two of the dependent, eight research problems are then provided. These research problems are thus described below;
There has been an increasing call for organizations to be creative in developing new products that will survive in the highly competitive environment (Ford and Gioia, 2000). New products creation environment is becoming more and more competitive and this results to increased pressure on organizations to adapt as well as create changes (Barclay and Dann, 2000).The development of new products and services is critical for firm survival and growth (Lehmann, 2006). Organizations are in no doubt enthusiastic about creating new products, but the benefits of such products to the larger society is an intriguing question that must be answered (Lehmann, 2006).
In creating new products, organizations must consider the various constraints that would be faced in delivering the product. These constraints include product quality, the cost of product creation, the period required to create the product, the legislative rule on such product (that is, the legal environment), the cost and the life cycle of the product. All these constitute problems that must be dealt with to have a successful new product creation.
Therefore, in creating a new product, the problems of high cost, market entry restraints, uncertainty of product acceptance, technological impact are issues that must be resolved. Thus, if these are resolved, the cost/benefit relationship of such resolution process is likely to affect the revenue of the organization.
Successful product innovation is vital to many organizations. The commercial success of the product innovation depends on how well the product’s design meets customers’ needs (Rothwell et al., 1974). Although, an innovative product tends to face low competition at the point of introduction, the
high profits earned attract imitators. The sudden surge of imitators increases the level of competition faced by the product as time passes. This increased competition leads to a reduction in profits. The organization is thus faced with the problem of making sure that adequate profits are earned from the innovative products before imitators invade the market. Problems that constitute restraints for the innovation of products include presence of narrow roles and limited relationships amongst workforce, organizational standard that may not fit the innovative product (Dougherty, 1992). All these must be resolved such that organizational innovation is promoted.
The steady evolution of technology, with the associated increased costs, is a major factor affecting the success of an enterprise. Experiences in technology management have shown that having a well-organized, consistent approach to technology planning … are key factors necessary to ensure successful program (Haselkom et al., 2007). Technology has been defined as a system consisting of components and linkages amongst the components, with an additional fact of it including proprietary design knowledge, embodied in the physical artifact (Hughes, 1983; Layton, 1974). Organizations are faced with cost issues in developing and introducing new technology, the timing of new technology introduction as well as the appropriateness of the technology for a particular situation.
Research and development activities incorporate all the aforementioned issues, that is, product creativity, product innovation, and technology. Research and development initiates new product design and development, new technology, new market, which are all crucial factors to the survival of the organization. The problems related with research and developments are examined in line with the phases of the processing system of research and development presented by Brown and Svenson (1988). Firstly, the organization is faced with decision to determine the right input level, that is, people, information, ideas, equipment, and funds to advance innovation in the organization. Secondary, the direct output, that is, products or processes, knowledge and patents should reflect the quality of input provided. Finally, major problems encountered in achieving entrepreneurial success as it relates with research and development include cost reduction, sales increase, or product improvement that would suit both customers’ expectation and organizational objectives.
1.3 RESEARCH OBJECTIVES
The research objectives are outlined as shown below;
1. Determining the extent to which product creativity affect the sales increase of the enterprise taking into consideration its competitive internal and external environment
2. Identifying the impact product creativity has on profit increase achieved by the enterprise in a highly competitive market environment.
3. Determining to what level the ages of the small business owners affect the product creativity that exists in the enterprise
4. Determining the extent to which the marital status of small business owners influences product creativity of the organization within a dynamic environment
1.4 RESEARCH QUESTIONS
The research questions relevant to the study of which answers are to be provided are itemized below;
1. Can a significant relationship be established between product creativity and sales increase of the enterprise?
2. Is there a link between product creativity and the profit increase of the enterprise?
3. What level of influence do small business owners’ ages have on product creativity?
4. What effect does marital status of small business owners have on product creativity?
1.5 RESEARCH HYPOTHESES
In this research, the relevant hypotheses tested are;
H1: There is no positive significant relationship between product creativity and sales increase of the enterprise
H2: There is no positive significant relationship between product creativity and profit increase of the enterprise
H3: There is no significant relationship between small business owners’ ages and product creativity in the enterprise
H4: There is no significant relationship between small business owners’ marital status and product creativity in the enterprise
1.6 RESEARCH METHOD
The estimated population of the business enterprises present in Ikeja Local Government Area, Lagos State as provided by the Federal Inland Revenue Service (FIRS), Lagos State is 346; therefore a reasonable sampling size of 186 business enterprises (excluding the private and public companies) is determined (using the YARD’S formula) to carry out the investigation.
The primary data required for analysis is retrieved from the respondents/entrepreneurs through the use of questionnaire. Since the study involves analyzing the relationships that exist between two variables, that is, product creativity and sales volume; product creativity and profit level, the Pearson product moment correlation is used for the analysis.
The research study is basically faced with time limitation, as well as the number of respondents used for the study. The 186 entrepreneurs, who run their own businesses, are selected so as to accommodate them all within the limited time available.
The designed questionnaire is the main source of primary data for the study. Other materials used for the study are retrieved from the Covenant University Centre for Learning Resource.
1.7 SIGNIFICANCE/JUSTIFICATION FOR THE STUDY
The study is significant basically in providing an objective position of the influence creativity and innovation have on the operations of the enterprise, its sales volume and profit level. The sales volume and the profit level indicate the success of the entrepreneur/enterprise. Therefore, if a high degree of significance in the relationship between the dependent and independent variables can be established, then organizations can see how important it is to be creative and innovative.
1.8 SCOPE OF THE STUDY
The study focuses on a population of entrepreneurs within Ikeja local government area of Lagos State as well as other neighboring local government area entrepreneurs who operate in Ikeja and thus pay their tax to the Federal Inland Revenue Service (FIRS), Ikeja.
The dependent variable entrepreneurial success is measured by sales volume and profit level only, while creativity and innovation are limited to process and product of the business enterprises. In
consideration of the time available for the study, two research questions would be focused on and thus four hypotheses will be tested. The hypotheses include; hypotheses 1, 2, 3 and 4.
1.9 OUTLINE OF CHAPTERS
The research project is made up of five chapters. Chapter one centers on the introductory section of the research study, which includes the background to the study and related issues to research methods amongst other aspects. Chapter two is on the literature review, examining various literatures that have been written on the variables in the research topic. The third chapter focuses on the research methodology, fourth chapter on data analysis and interpretation, and the final chapter concludes and summarizes the entire study, making relevant recommendations that would benefit new and existing entrepreneurs in advancing their enterprises.
1.10 OPERATIONALIZING THE RESEARCH TOPIC
The topic for the research project, “The dynamics of organizational creativity and innovation on entrepreneurial success”, has the dependent variable as entrepreneurial success and independent variables as creativity and innovation. The dependent variable, entrepreneurial success, is operationalized as sales volume increase, increase in profit.
Generally, in literature, the concept of creativity and innovation are applied to products, processes, and market. The independent variables, creativity and innovation are operationalized as product creativity, process creativity, product innovation, process innovation within the context of the research.
Product creativity can be explained as the act of making completely new product that will meet the needs of consumers/potential customers as well as generate more profit for the organization through its wide acceptance and the resulting larger market. Businesses thus, clamor for creative breakthrough ideas that will lead to attractive products and then provide significant competitive advantages for the enterprise (Coy, 2000).
Process creativity on the other hand means the ability of the entrepreneur to create a new process by which the production of goods is achieved and also services that promotes the acceptance of the products in the market. Process creativity, in a nutshell thus means bringing into being an absolutely
new process of getting things done in the business enterprise such as would yield desired goals and objectives.
Product innovation involves the use of existing materials and resources to develop a more useful and attractive product that presents better and improved features comparatively with the older product. In product innovation, the old and existing attributes are improved upon such that it may have a new appearance that may hold the attraction of both existing and potential customers, possess new features that would yield a higher marginal satisfaction to its existing and new users and thus may lead to increase sales and profit level for the enterprise.
Process innovation involves the improvement on old production processes, services and other activities that results in the overall achievement of the organizational expectation. Therefore, the management process must be such that provides the flexibility to respond to innovation and the structure to cope with such innovations (Smith, 1980). When the flexibility and the structure required to advancing innovation and creativity in the enterprise are considered, then all members of the enterprise would be motivated to adjust and promote innovative and creative measures, policies and decisions made by the management of the enterprise.
The above is expressed mathematically as shown below:
Y = f (X) , where Y = Entrepreneurial success and X = Creativity and Innovation
Y = (y1, y2, y3, y4 … yu)
Where y1 = sales volume,
y2 = profit level
X = (x1, x2, x3, x4 … xu)
Where x1 = product creativity,
x2 = process creativity,
x3 = product innovation,
x4 = process innovation
In summary, the research project focuses on linking process creativity, product creativity, process innovation, product innovation with enterprise’s sales volume and profit level. The data analysis would reveal the extent to which innovation and creativity indeed have impacts on the success of the enterprise.
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