The influence of competitive pressure on innovative creativity.

Author:Meutia
Position:Report
 
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INTRODUCTION

Small to Medium sized Enterprises or SME is a part of economy protection in a country, including Indonesia. SME has an important role to improve economy development pace, enlarge job opening, improve domestic income and strengthen community empowering. Right now, SME in Indonesia represents about 90 percent of Indonesia's business and contribute about 57 percent of Bruto Domestic Product in Indonesia.

Economy crises in 1998 proved that SME is much tougher compared with larger industries and has higher rate of flexibility, uses local material and able to survive in economy crises. In 2015, ASEAN Economy Era will be applied and it will not only become an opportunity but also challenge for Indonesia's economy. By applying ASEAN Economy Community in the end of 2015, ASEAN members will have experienced the free flow of goods, services, investment and well educated person from and to each country. By performing this kind of activity there will be solid integration called as "free trade area", the omission of tariff rate among ASEAN members, free labor and capital market. These will influence on stronger competition of SME's product especially in creative industries in Indonesia. One creative industry in Indonesia that becomes unique feature is batik.

Batik is an artistic creation and local heritage in Indonesia. Batik is well known throughout the world. Batik is unique feature acknowledged by UNESCO as Intangible World Heritage in October 2009, besides kris and puppet. Batik has made Indonesia as one of the leader countries to produce the soft traditional fabric, origins from the old, artistic and rich tradition in Indonesia. One area in Indonesia that is well known as batik central is Pekalongan (Meutia, 2012).

Marketing development in facing globalization era becomes certain challenge for SME in developing its business. It needs innovative development and creativity to be able to survive and face the competition from foreign SME. SME needs to be more creative in producing products, and adapting with business environment change in Indonesia to keep marketing performance in line.

High rate of adaptive ability in business environment change and innovative creativity will become the strength that has to be owned by SME to face competition. Entrepreneur ability in adapting with business environment change will become internal resource that is imperfectly imitated by other company, and it will create competitive advantage in an organization. Krajewski & Ritzman (2003) stated that managing ability and adaptability will create competitive advantage oriented strategy.

Besides adaptability factor, innovative creativity also becomes one of the triggers to create SME's marketing performance. Formerly, innovation term can be meant as a new product related breakthrough. As the development goes on, innovation term also includes the application of new ideas and process. Innovation also viewed as organization's mechanism in adapting with dynamic environment. Innovative creativity is a strategy to put an organization one step ahead in competing with same field products from competitors.

Entrepreneurs' incompetence to maintain and preserve challenges will make performance declining and company's failure (Hill and McGowan, 1999). Study on marketing performance done by Menon et al. (1999) stated that marketing program creativity does not deeply influence marketing activities. Other stated that creativity provides important influence on marketing performance since it will be useful to develop certain product (Menon et al., 1999). Other study recommended that in developing countries, environment adaptability has an important role for performance improvement. Based on some previous results, problem for this study is to know and further analyze the influence of competitive pressure on business environment adaptability and innovative creativity to improve marketing performance.

HYPOTHESES DEVELOPMENT

The Influence of Competitive Pressure on Business

Business change and competitive pressure push entrepreneurs to keep their business stable. Competitive pressure pushes entrepreneurs to be more creative doing something new compared with their competitor in order to produce innovative creativity. Porter (1985) explained how organizations keep their business under competitive pressure by using five strength model that will influence industrial competition. They are new comer, substitute product, supplementary product, supplier bargaining power, customer bargaining power and industrial competition threat. Competitive pressure will push an organization to be adaptable with fast and uncertain change in business environment.

Business environment is always considered as barrier factor for industrial growth. The element of competitive environment should be further studied because industrial failure in reaching sales comes from management's inability to analyze present changes in industrial competitive environment. Broader knowledge about marketing environment will improve management's ability to analyze received data and choose needed data to decide organization's aim as response for environment change condition (Menon et al., 1999).

Business environment is the combination of social, law, economy, physic and politic factors that will influence business activities. Significant changes in these factors will make business pressure for organization. The lack of market strength, dynamic business environment and the emergence of new markets will make SME fragile to face external influences from larger organizations (Man et al., 2002).

The higher competitive pressure requires organizations to continually adapt with business environment change such as anticipation to face market preference and customer preference change, government policy and adaptability. Based on phenomenon and results above, the first hypotheses proposed as follow:

H1: The higher Competitive Pressure, the higher Business Environment Adaptability will be

The Influence of Competitive Pressure on Product Innovative Creativity

Government policy to open free market triggers every organization and SME to face freer competition. It will produce competition in business world. An organization must compete and maintain its product to keep business survival. Temtime & Passiri (2005) explain that when a competition improves, entrepreneurs need more than just skill and knowledge to manage their own business.

Environment change and competitive pressure require entrepreneurs to keep their survival effort. Competitive pressure pushes entrepreneurs to think more creative in performing something new compared with their competitor; as a result it will produce innovative creativity. Porter (1985) explained how organization maintains its survival effort under competitive pressure in an industry by using five strength model that influence industrial competition. These strengths are new comer, substitute product, supplier...

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