THE EFFECTS OF NEW PRODUCT DEVELOPMENT AS A STRATEGY FOR CORPORATE GROWTH IN UNILEVER NIGERIA LIMITED
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 CONCEPT OF PRODUCT DEVELOPMENT
Product development is a sequential decision process. It's a series of decisions, not one. It is key, therefore, to concentrate attention on the precise new product decision at hand, and think through the market research and creative tools needed for that stage. Technical specialists and industry experts prepare a detailed requirements specification and product concept design, with a full description of functional features and benefits. At the same time, business analysts write a business plan on the basis of the selected business model and expert reviews. Additional marketing researches, investment searches, and many other types of product research can be conducted at this stage as well. The result of this stage of development is a completed documentation package that defines the product concept. However management, ensure the system do not run into difficulties which may affect the original purpose of which the plan was set up. In order to do this, the company successfully answered a major question which was what product can be seen as a real need that industrial should develop an offer for sales. Like in any other company, the issue of concept testing with respect to complex product mix was very important. One of the objectives of the concept testing which has to be addressed by the company on research effort whether the new idea fit into existing consumption habit or does it follow at the end in which consumption habit seems to be changing or does the product fit a gap in offering of similar products at time? The answer to this question was in the alternative. In developing of concept testing for new product care must be taken to note the limitation, which is that some respondent may just accept the question because they have nothing at stake. After the product testing, it is usually the policy of the company to do market testing before the product is finally launched in the market as full scale. This is done here in the country through town storming.
2.2 NEEDS FOR PRODUCT DEVELOPMENT
The problem involving the marketing research of the any company calls for an intensive research to improve the product. In the light of that, there is need to conduct more research in the product to maintain quality. It is an indisputable fact that most companies pay more attention to sales promotion than marketing research. While large sum of money is budgeted for sales promotion annually only little is done with respect to marketing research. There is the need to change this orientation and invest more in marketing research. This will improve the quality of the product as well as its total revenue. Calantone and Cooper research (1999) shows that the number one reason for a new product to fail is the lack of attention paid to the real needs and wants of the market place. They also noted that this most common type of failure (28%) typically described a technology driven product. The second most common type of failure (24%) was the “me too” product. In this case the new product copied an already successful competitive product. As a result, customers saw no reason to switch. There are three key elements to meeting a customer‟s need when developing new products or services.
- Desirability: the new product or service must be desirable, i.e. a person wants to use it
- Purpose: the new product or service must have a useful purpose, i.e. a person will use it
- User Experience: the new product or service must provide customer satisfaction, i.e. a person is happy using it.
When creating and designing a new product or service it is important to consider the use of the product (what does the product do), the level of usability of the product (how does it work, can it be used comfortably) and the meaning that the product conveys. Meaning refers to its aesthetics, cultural messages, inherent symbolism and the metaphors it incorporates. Well-designed products consider both function (use and usability) and meaning as both affect a person‟s total perception of the product. “Often the product‟s meaning is most influential in the customer‟s purchase decision and in the creation of a positive ownership and use experience”, (Sara Beckman & Johannes Hoech, Harvard Business Review, 2000). The reason that the product‟s meaning is so important is that people want to buy and use a product or service that matches their beliefs, values and desires, not purely for fulfilling a purpose. However, every product that is created should also have a consistency with need, usability and meaning, covering, product development, design, manufacturing, marketing, branding, advertising, packaging, etc. You cannot create a meaning of quality and elegance through design, packaging and advertising if the product‟s need and usability are not of equal quality and elegance. As Michael Barry (an inventor of many successful products) puts it, “a successful product is the physical embodiment of a strategy that aligns users, technology and culture”.
2.3 STAGES OF PRODUCT DEVELOPMENT
When designing new products, there should be adherence to a strict classification of development stages developed by most company. Skipping any stage of project development, maximize the risks and shift them, as a rule, to the final stage of product full-scale production. Some stages can have several iterations, and this is normal in the process of creating technically complex and competitive products. Iterative approach is also often applied when creating software-hardware platforms, designed for building product lineups on their basis. A successful new product will pass through each of these stages before it is finally launched in the market not all the product progresses from the first stage in the process it can be dropped if it is not found to be feasible, this implies that not all product ideas see the light of the day.
2.4 EMPIRICAL REVIEW
Using World Bank ICS data from Brazilian manufacturing firms, a study by Goedhuys and Veugelers (2008) identified innovation strategies of firms in particular internal technology creation and external technology acquisition and their effect on successful process and product innovations. The study used the World Bank’s Investment Climate Survey (ICS) data collected in Brazil in 2003. The survey collected data for the period 2000, 2001 and 2005, through intensive interviews of firms while analysis was done through Chi-sq test, bivariate probit for significance in correlation. The results indicated that innovative performance is an important driver for firm growth in particular the combination of product and process innovations that significantly improves firm growth. Both innovation and growth performance are supported by access to finance. The study though stated that international openness is important for stimulating firm growth performance, this openness works particularly through competition as an incentive device for cost improvements, stimulating firm growth, but not necessarily as a mechanism for technology absorption improving innovative performance (Goedhuys and Veugelers, 2008). While examining empirically the effects of new product development outcomes on overall firm performance, Anurag and Nelson (2004) chose the pharmaceutical industry as the empirical context. This was appropriate for the study’s analysis due to the gate-keeping role played by the Food and Drug Administration (FDA) provides a specific event date on which to focus the event study methodology. The study estimated market model parameters using a 300-day period. Daily return data were obtained on individual securities from DataStream International and abnormal return for firm. The expected returns were estimated using the market model where returns on security, the daily returns of each firm in days were regressed against the return on market portfolio during the corresponding time period to obtain estimates. This study’s results showed that market valuations are responsive strongly and cleanly to the success or failure of new product development efforts. Further conclusions were that financial markets may be attuned sharply to product development outcomes in publicly traded firms (Anurag and Nelson, 2004). However the study did not consider the intersection of marketing and finance literature. Strategic Alliances and Product Development in High Technology New Firms, with the moderating effect of Technological Capabilities study was done by Haeussler (2008). Using a database of biotechnology firms the study sought to know how new firms maximize the benefits of these alliances while reducing their risks. Testing the study hypotheses required measuring the alliance portfolio, technological capabilities and product development by HTNFs. The study surveyed biotechnology firms in the UK and Germany, the largest and most developed biotech industries in Europe. Face to face Interviews were conducted with 118 British and 162 German firms which agreed to participate in the study. There was a response rate of 47 percent for Germany and 34 percent for the UK. In the study analysis the study used descriptive statistics to determine correlations among, the study’s variables. The study found that the specialization of new firms’ technological capabilities can help managers use alliances more productively when it comes to NPD. The results were stable over a variety of different model specifications and when accounted for the endogeneity of alliances (Haeussler, 2008). However, the results drew attention to the importance of the breadth versus depth of the degree of a firm’s technological specialization, an issue not explored in this study. A research seeking to understand which of three different strategic orientations of the firm (customer, competitive, and technological orientations) is more appropriate, when, and why, in the context of developing product innovations was done by (Gatignon & Xuereb 1997). By using questionnaires to collect data from market executives, of these 239 marketing executives, 87.5% (209 managers) agreed to participate in the study. Multiple item scales were developed based on items previously proposed and used successfully in survey research studies. The results suggested that the appropriateness of a given strategic orientation, even a customer orientation, is not unconditional (Gatignon & Xuereb 1997). It was however difficult for the study to evaluate the reasons for the part of the variance which is unexplained. Cusumano and Nobeoka (1991) examined recent empirical research conducted or published on product development in the automobile industry. Their objective was to identify what has been learned, and what is yet to be learned about the effective management of this activity. The study focusesd 22 organizations from Japanese manufacturers in general, while the basic framework used to compare the studies examined variables related to product strategy, project structure or organization, and project as well as product performance. Evidence from the study indicated that Japanese automobile producers have demonstrated the highest levels of productivity in development as well as of overall sales growth, and have used particular structures and processes to achieve this (Cusumano and Nobeoka, 1991). The evidence does not however clearly indicate what the precise relationships are between development productivity and quality or economic returns.
2.5 THEORETICAL FRAMEWORK
New Product Development (NPD) is often costly as it involves substantial expenses. Therefore, it is essential to manage NPD effectively and efficiently. In terms of managing NPD performance,( Anderson 2008) stated that a company‟s overall new product performance depends on the five elements: the NPD process; the organisation of the NPD programme; the NPD strategy; culture and climate for innovation; and senior management commitment to NPD. However, application to actual practice has been somewhat less common. (Poolton and Barclay 1998) even suggest that much research on NP success factors is too generic, and has not actually been applied to specific contexts very well. They say that success factors and their importance depend heavily on industry and firm characteristics. They also suggest that much research focuses too heavily on variable by variable analysis. NPD studies are markedly broad. Over the past decades, a number of researchers such as (Cooper, 1979; Cooper and Klein Schmidt, 1987, 1993; Maidique and Zirger, 1984) investigated many aspects of innovation. What emerged from such work was that one of the key themes in innovation research was to identify the factors that are associated with NPD success. In facing vigorous competition globally, many manufacturing and engineering companies have adopted various techniques or advanced methods in order to be innovative and competitive. Although NPD brought many new opportunities to companies, however, the potential risks underpin the NPD process causes a number of cases of failure due the inadequate management process in NPD. Empirical studies thus point to high failure rates of new products, especially in consumer markets (Brockhoff, 1999; Crawford, 1987; Urban and Hauser, 1993). It is therefore development of an effective and efficient management approach in NPD process is highly expected to companies, particularly those small and vulnerable businesses. Further, because NPD research has not translated very strongly into managerial practice, “managers are still relying on gut-feel with respect to „best practice‟ in development …” (Poolton and Barclay 1998,). Thus, it is important to look more carefully at success factors within the specific context, and more at the basic concepts, rather than at many specific variables. Most larger and more mature firm where new product development is derived out of corporate strategy is undertaken as part of new product development. Additionally, it was argued that NPD should be considered across a number of process related dimensions rather than in terms of process-specific activities. That is, the elements of corporate strategy relating to new product development, NPD process features and the adoption of new product success factors are dimensions of NPD that more accurately describe the NPD process in most company. In turn, the resulting NPD activity undertaken by companies has direct implications for new product success and as a result directly impacts on overall firm success. Additionally, as business incubators can play a positive role in the formation of new firms (Sherman & Chappel 1998), it further argues that this positive role may extend to the NPD activities of some firms. Thus, the relationships between corporate strategy and new product development and the effect of these relationships on new product success, as well as the impact of business incubators on NPD activity, was addressed. Based upon a review of the literature within the three background theories of new product development, corporate strategy and business incubationIn particular, it is the better understanding of the inter-relationships between corporate strategy and new product development as it relates to companies that provide the most important of these potential contributions. There are considerable bodies of knowledge about both corporate strategy and new product development and the linkages between them for established and large organisations. More specifically, the literature argues that corporate strategy is the foundation for new product management (Crawford & Di Benedetto 2002). However, when considering entrepreneurial start-ups certain conflicts arise within the literature. The basis of these apparent conflicts is that on the one hand entrepreneurial theory points to the conclusion that the starting point for the establishment of an entrepreneurial new firm is commonly that of a new product concept which, in turn, becomes the starting point for the NPD process (Cooper 1994; Timmons & Spinelli 2004). On the other hand, new product development literature argues that NPD activity evolves out of corporate strategy suggesting a linear progression (Cooper & Kleindschmidt 1993; Cooper 1994). Thus, this would signify a closer relationship between corporate strategy and NPD processes in the context of some companies than may be suggested in some of the literature. Having considered new product development from a process management perspective, as well as technology transfer as a form of new product development, the issue of new product success in terms of the factors for success and success measurement now will be considered. To commence, the literature relating to new product success will first be considered. At the product level, it is widely held that the percentage of new product failures is high, even though the rates of failure vary from study to study, and that any company embarking on a new product development program faces a high risk of failure (Cooper 1999; Wind & Mahajan 1997). To address this high rate of failure, a vast amount of research on new product success has been published in fields of marketing, management, and R&D and technology management, while some of these studies relate to research management processes and firm-level environmental and corporate culture issues associated with product success, it is within the product development literature itself that the factors that determine the outcome of new product development are addressed. More specifically, insights into the determinants of success and failure in new product development can be gained from several studies in the area (Brown & Eisenhardt 1995; Calantone & Di Benedetto 1990; Cooper & Kleindschmidt 1990; Cooper 1999; Ernst 2002; Johne & Snelson 1988; Lilien & Yoon 1989; Baker & Sinkula 2005). (Craig and Hart 1992) categorise the literature relating to new product success factors as either „generalist‟ or „specialist‟. The generalist theory (studies) seek to identify those variables that have a major impact on new product success or failure and include numerous independent variables in their research design (Rothwell 1976; Cooper 1982; Cooper & Kleinschmidt 1987; Calantone & Cooper 1981; Link 1987; Maidique & Zirger 1990). On the other hand, specialist theory (studies) tends to concentrate their investigations on one specific driver of product success and investigate it in depth for example, the involvement of users and market orientation of NPD and relationship to success. (Rothwell et al 1974; Baker & Sinkula 2005). However, because previous studies addressing NPD success factors have not been all-encompassing, there is not yet a comprehensive theoretical model of the determinants of innovation success. Indeed, most studies to date have focused on identifying those internal and external factors which are in the direct control of management rather than those outside the direct control of the firm (Ernst 2002). The literature which identifies these elements can be summarised according to five dimensions: three organisational dimensions and two contextual dimensions. We will consider the organisational dimensions. These include the NPD process dimension (addressing the effectiveness of the NPD process itself), new product development (that is, those structural and management factors internal to the organisation which may directly affect the effectiveness of the NPD process) and culture (that is, those elements which foster a culture of creativity within the organisation).
2.6 CONCEPT OF MARKETING RESEARCH
An inevitability result of the specialization of production and her growth of companies has been the separation of management and the market that they sell. For example, Paul revere, a highly skilled on silversmith, dealt directly with his customers. Most of the patter, teapots and other silver items reproduced were custom made. He was immediately and directly aware of his customers needs and desire and their reaction to his products and the price that he charged. Marketing research was developed as the specialized function to obtain and analyzes information about market and the company‟s activities in serving its customer. In one sense, it completes a communication „loop‟ between the seller, and the market. Though advertisement and personal selling, on elaboration and formally organized system of communication is established between the seller and the market. Market research is a formally organized system of communication form the market back to the seller in engineering reference, one of the functions itself it to act as a „‟feedback‟‟ loop. The sole purpose of market research is to help companies make better business decisions about the development and marketing of new products. Market research represents the voice of the consumer in a company. A company must conduct market research so that management can be provided with relevant, accurate, reliable, valid and current information. Market research helps the marketing manager link the marketing variables with the environment and the consumers. It also helps remove some of the uncertainty by providing relevant information about the market variables, environment and consumers. Without relevant information of customers, companies cannot predict market reliably and accurately.
2.7 RESEARCH IN MARKETING
Marketing research is the systematic combination of logical and data to define and solve important problems in the field of marketing. The logical of cost, must be based on sound premises and the consistent in its development. While the data must appropriate to the nature of the problem and significant in quality, note that, analysis of problem is important if data are later to be selected and organized for it, we define a problem briefly as an objective to attained, the solution implies to at least a step towards objective by improving the marketing decision, the result might be increased in profit sales and advertisement, readership, perhaps decrease in selling time or marketing cost. For basic problems a solution implies a contribution to knowledge. According to Brow and Belk (2008) that since the definition to marketing research is consistent with a broad definition of scientific methods and alternative definition would be that marketing research is the use of scientific methods, in the solution of marketing problem for an applying field, use off available combination of methods and data will provide an opportunity. To improve decision whether or not the immediate result approach the executive growth of scientific knowledge, as decisions are improved and generalization tested by application in a verity of contexts, marketing research gradually contribute to marketing knowledge. Although, marketing decision requires many judgment elements asking to an art rather than science, the fact does not prelude improving judgment through use of scientific techniques wherever appropriate. The above definition tends to agree with the one given by (Nagel 1961) in the philosophy of science. According to the Marketing Research Association (2000), "Marketing Research is the function which links the consumer, customer, and public to the marketer through information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process. "Marketing Research specifies the information required to address these issues; designs the method of collecting information; manages and implements the data collection process; analyzes the results; and communicates the findings, recommendations and their implications." According to Williams R. Davidson president of journal of marketing research, either one of the above definitions requires some application of the areas of marketing research might operate perhaps the most commonly used definition of the American Association. The committee defines marketing as „‟the performance of business activities that direct to flow of goods and services from the producer to the consumer or user‟‟ When use to help define the area of operation for marketing research, the definition does not need added explanation the marketing boundaries are not always clear because they overlap another policy areas may be illustrated by following examples. In products research, there is a difficult and perhaps overlapping distention. As to what constitute marketing research on products and what the preview of the deign engineer is. Product engineer cannot avoid visualization of customers and their use of a product, but they are seldom specialists on how consumer view and use a product. An engineer must think primarily in term of product efficiency as measured by engineering qualities and he must be aware of product cost. Marketing research in the product view must consider many which products will promote sale by suiting consumer‟s needs and wants, and they must keep a wider eyes on the price consumer will pay relatively to product features. Since both forms of information affect product design and may not in accord, there is room for difference of opinion, cooperate and coordination is needed at any time in a firm. Views on product design provide one example. A forecast of sales is commonly needed by marketing managers in order to plan sales effort, advertising and other activities, sales forecast also become the base for financial and production planning. To predict the sales of a firm it is often necessary, to adjust company share of the market to an industry forecast, industry forecast in turn has strongly affected by the level of activities in economy with the result that industry and firm figure are conditioned by economic forecast. A business furthermore, is not usually offer today‟s sales only‟, its manager must provide for sales into the future. To do so, they must plan post sales services policies in order retain consumer‟s contact and invite repeat. Trade takes pains to promote favorable company and broad image to perpetuate opportunism for repeat trade and to extend trade to new customer or to new product. An alternative definitions of marketing might provide a more appropriate guide to the scope of marketing research, marketing consist of those businesses activities which align the needs and wants of customers its appropriate goods and services to the capabilities of the firm. The purposes of our definition if to provide a description of the research function in the field of marketing and by doing so, to indicate the subject matter of the project. As a practical matter, there are some potentials overlap with the product design, economic and other fields where realistic, the need for co-ordinate effort may arise.