COMPETITIVE ADVANTAGE AND PRODUCT INNOVATION: KEY SUCCESS OF BATIK SMES MARKETING PERFORMANCE IN INDONESIA.

Author:Nuryakin
Position::Report - Abstract
 
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INTRODUCTION

The modern era has consequences for entrepreneurs in creating market opportunities. Business-oriented organizations must be able to sustain their market amid the increasingly fierce competition and that even need to seize the market from competitors. One of the efforts required by a company to gain market share is with marketing capabilities (Guenzi & Troilo, 2006). Even, marketing capabilities are the key for organization in achieving competitive advantage through the creation of low-cost advantage and differentiation advantage, so that their products are better known than the competitors' products (Tan & Sousa, 2015).

Studies on marketing capabilities have also been extensively researched in different scopes of organizations, as on the sales managers (Guenzi & Troilo, 2006), hotel industry (Mohammed & Rashid, 2012), across different industries (Morgan, Slotegraaf & Vorhies, 2009a) and even on firms with export-oriented market (Tan & Sousa, 2015). The importance of marketing capabilities for business performance with adequate strategic resources will be easier to sustain their survival, to expand and to take profits and business performance (Nuryakin, Aryanto & Setiawan, 2018).

Globalization also enables companies to allocate their internal resources as the source of competitive advantage (Barney, 1991). Internal capabilities as the source of competitive strategy advantage can create uniqueness for the company than the competitors and can directly assure the superior corporate performance. This is the importance of internal capabilities for the company, where the existing opportunities and chances will be utilized by the company so as to win the competition.

Sin, Tse, Yau, Chow & Lee (2005) examined the impact of customer orientation, competitor orientation and inter functional coordination on business performance. The result found that market orientation gave positive and significant effect on business performance. Another research by Kohli & Jaworski (1990); Narver & Slater (1990); Slater & Narver (1994) have become a reference for studies on the impact of market orientation on business performance.

Innovation can also be considered as pivotal for a company in creating competitive advantage (Darroch & McNaughton, 2002). Efforts in achieving success, the main task of the company is to determine market perceptions, needs and demands to be able to create products with superior value. This superior value is highly subjective and lies only in the customers; minds. Organization need to study the entrepreneurship on the business performance (Wulandari, Djastuti & Nuryakin, 2017).

Based on the theory of competitive advantage, competitive advantage consists of two main dimensions, namely low-cost advantage and differentiation advantage as the key in achieving superior performance (Porter, 1980). In the theory of competitive advantage even explains about a company's internal capabilities to attain organization strategic advantage (Day, 1994). Meanwhile, one of the company's internal capabilities that need to be considered to achieve competitive advantage is marketing capability.

One type of companies that seeks to achieve competitive advantage and marketing performance is the Batik SMEs in Indonesia. Competition among batik industries has demanded the marketing managers to improve their marketing capabilities. A study developed by Olson & Hult (2005) emphasizes three important points in achieving competitive advantage: 1) implementation of competitive advantage will be successful for the superior corporate performance, 2) marketing plays a pivotal role in implementing strategy and 3) the role of marketing in the implementation of corporate strategy is the unity of a more specific corporate strategy.

The scope of this research is Batik SMEs in Indonesia. This is interesting to conduct amidst competition with imported products from other Asian countries. The trend of development of marketing activities also shows a tendency of change so that SMEs still require development towards an increasingly global market through the creation of competitive advantage and technological adoption (Nuryakin & Retnawati, 2016). Role of marketing managers in the SMEs scale is still urgently needed in encouraging and creating marketing capabilities of the industry. Therefore the problems of Batik SMEs in Indonesia were to enhancing marketing capability and new product innovation. Moreover, Batik SMEs in Indonesia needs speed access to competitor response and consumer response with marketing capabilities and product innovation.

This research aims to contribute to literature on the conceptual model of the influence of marketing capabilities to competitive advantage and marketing performance, the relationship of market orientation on product innovation and marketing performance. Moreover, this research attempts at providing empirical evidences to the importance of competitive advantage and product innovation in achieving superior marketing performance.

THEORETICAL BACKGROUND

The study developing based on theory the theory about theory resources based view. Resources based view was at developed in the study Barney (1991). Resource based views explains that companies based internal resources to be able to develop and competitive advantage and business performance. The literature review of the theory in the study about these concepts is conducted to achieving of marketing performance. On behalf, to test the concept of this research developed in the model empirical research in seven hypothesis that actually appear to be in figure under to testing the effect of between the variable of this research.

Competitive Advantage and Marketing Performance

Teece, Pisano & Shuen (1997) have developed a theory on organizational dynamic capabilities. Dynamic capability is a company's ability to integrate, build and reconfigure internal and external competencies to address rapid environmental changes. Beyond that, dynamic capability reflects the organization's ability to gain a form of competitive advantage and innovation. Dynamic capability also emphasizes the key role of strategic management in performing conformity, integration and reconfiguration correctly to skills, resources and organizational functional competences to adapt with the environmental changes. The term dynamic refers to the capacity to renew competencies so as to achieve conformity with the business environmental changes and be able to achieve competitive advantage.

David Chew, Shigang Yan & Charles Cheah defines capability as the main key for an organization to attain competitive advantage. Further stated, a positive relationship between core capabilities and strategic advantage exists. The study also concluded the importance of core capabilities and strategic advantage as the main driving factors to achieve superior performance.

Performance, according to Yildiz & Karakas (2012), is crucial for a company with the correct approaches and criteria in achieving sustainable competitive advantage. Currently, the concept of business performance has become one often used instrument by both academicians and professional managers in all areas of business environment, particularly in the strategic management study. Yildiz & Karakas (2012) measure the dimension of business performance with eleven indicators that comprise profit and profit growth, sales and sales growth, market share and market share growth, successful launch of new products, entire business performance, return on sales, return on investment, customer satisfaction, good quality of goods/services procurement, reputation and image and competitive advantage. Nuryakin & Retnawati (2016) measure marketing performance indicate with sales growth, profitability and market coverage.

Mappigau & Hastan (2012) explain that the core competence of a company may create competitive advantage. Their finding also shows that core competence development will focus on the development of design, color and exclusiveness of motives for new materials and material interior and souvenirs. Lertputtarak (2011) studies the characteristic of Human Resources managers and organizations and also examines their levels and knowledge competencies in the market within organizational performance. The results showed that managers with different characteristics on personal and organizational data have significant differences on Human Resources. The Human Resources and competencies in a market knowledge influences organizational performance.

A research from Gomes, Yasin & Lisboa (2009) concluded that there are several factors that contribute to corporate competitive advantage and marketing performance. The factors are closely related to market leadership. Market leadership covers a set of methods that signifies the importance of a company in responding to market. The second factor is production and product. This factor reveals an organization for specific products and company's production process. The third factor is organizational innovation. The variables included in this factor express special attention to sustainable corporate innovation. The fourth factor is through efficiency and service.

Another study done by Singh & Garg (2008) found that SMEs have not received attention yet to develop their effective strategies. In export sector, SMEs encounter many constraints due to lack of resources and poor of innovative capabilities. To maintain their competitiveness, they must have a benchmark of their assets, process and performance related to superiority of the best product in their industry. A similar research also concludes the value supply chain may determine corporate competitive advantage and marketing performance (Gurau, 2004).

Product Innovation

Companies must realize the need for changes to product design. New product designs used to restrict to certain corporate and industry only, but in the current era of market competition have changed...

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