Download Julian Orsea 2014

CUSTOMER DEMAND AND GREEN PRODUCT INNOVATION INFLUENCE
TO FIRM PERFORMANCE: CASE OF FOOD MANUFACTURING FIRMS IN
TANZANIA
BY
Julian Kimario (AL)
University of Dar es Salaam Business School (UDBS)
Presentation Outline
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Introduction
Literature Review
Hypotheses
Methodology
Findings
Discussion of Findings
Conclusion and Managerial Recommendations
Introduction
The study was to assess whether customer
demand and green product innovation can
influence firm performance as a way of
enhancing wealth creation.
Why the study
• Increased debate and interest on whether green
product innovation can improve firm’s performance
(Pujari, 2006).
• Green product innovation can present an
opportunity for firms to utilize (Porter and Linder,
1995)
• Relationship between customer demand, green
product innovation and firm performance is still
controversial. (Pujari, 2006, Chein, 2001, Berchicci
and Bodewes, 2005)
• Conflicting findings - scholars have indicated a
concern of further research in this area e.g Koellling,
2008
Literature Review
• Green production refers to manufacturing firms
adopting best practices in the design and production
process of products that are consistency with the
demand of customers and nature in large (Yang et al.,
2003).
• Such practices link to sustainability with
manufacturing firms having ability to meet the needs
of the present customers without infringing the
needs of the future generation.
Literature Review Cont….
• From literature, the following variables were
identified for measuring firm performance:
– Market share
– Sales volume/revenue
• Green innovation
– number of new or redesign process,
– new products or improved existing products
• Customer demand
– Flexible prices
Literature Review Cont..
• These elements are considered important factors for
firms to compete in the markets place (Chen, 2008;
Oltra and Saint, 2009).
• Many firms have taken market share as a way to
push sales volume and to satisfy customer needs
(Rex and Baumann, 2007).
• Firms that have adopted the green production have
successfully push more volume to the market place
Rubik et al., (2005)
• Today customers have increased demand for green
and efficient products and even ready to pay for high
prices (Meyer and Clavel, 2006).
Hypotheses
• H1a: There is no relationship between customer demand and green
product innovation
• H1b: There is a relationship between customer demand and green
product innovation
• H2a: There is no relationship between green product innovation
and market share
• H2b: There is a relationship between green product innovation and
market share
• H3a: There is no relationship green product innovation and sales
volume/revenue
• H3b: There is a relationship between green product innovation and
volume/revenue
Methodology
• 75 manufacturing firms in Dar es salaam were
purposively sampled from food manufacturing
companies .
• Green product innovation is measured by number of
new or redesign process, new products or improved
existing products introduced to the market.
• Market share is measure as percentage of firm’s
specific market to total market share and sales
volume/revenue is measured in units.
• Market demand can be measured by price flexibility
Methodology
• Questionnaire was designed with four parts:
descriptive data of participants, customer demand,
green product innovation and firm performance with
five likert scale.
• The questionnaire was pre- tested in two stages:
– First it was given to experienced researches to critique on clarity,
ambiguity and to comment on the appropriateness of the items to
operationalize the constructs.
– In the second test the questionnaire was sent to three marketing,
technical directors and CEOs in the industry to give their opinion on
the readability, understability, accuracy and completeness of the
instrument.
Findings
• Cross tabulation was run to perform Chi-square test
to demonstrate the relationship between the
variables.
• Data about demographic characteristics was
collected to summarize participating firms’
background features.
• Results show that more than 61% of the responding
firms have more than ten years of operations, 53.6%
with a turnover between TZS 10 billion and 350
billion. 43.1% with a capital of more than TZS 1
billion and with more than 150 employees.
Findings Cont..
• The mean and standard deviation were calculated to
explain association between customer demand,
green product innovation and firm performance.
N
Mean
Std.
Deviation
Customer Demand
75
4.10
0.78
Green Product innovation
75
4.26
0.73
Firm Performance
75
4.33
0.86
In the table above the mean range from 4.1 to 4.33, implying that
many firms have taken actions to implement green product innovation.
Findings Cont…
• The constructs are considered to have high content
validity, since the instrument was adopted and
modified from Wong and Law, 2002.
Constructs
Customer Demand
Green Product Innovation
Firm Performance
Cronbach’s α values
0.848
0.960
0.754
Findings Cont…
• Three hypotheses were tested to establish
relationship between the variables.
• The results are significant if p-value <0.05
– Hypothesis 1: There is relationship between Customer
demand and product innovation
Value
Pearson Chi-Square
Likelihood Ratio
Linear-by-Linear
Association
N of Valid Cases
*Significant at p<0.05
48.626(a)
21.335
1.718
75
Degree of
freedom
24
24
1
Asymp. Sig.
(2-sided)
.002*
.619
.278
Findings Cont…
– Hypotheses 2, and 3 aimed at establishing relationship
between green product innovation and firm performance
which is measured items of market share, enhanced
revenue and increased reputation of the firm.
Pearson Chi-Square
Market Share
Sales Revenue
N of Valid Cases
*Significant at p<0.05
Value
23.789(a)
22.110(a)
75
Degree Asymp. Sig.
of
(2-sided)
freedom
24
12
.004*
.036*
Findings Cont…
• The tests evidenced that all variables are significant
since p-values are less than hypothesized values
(p<0.05)
• Therefore there is relationship between customer
demand and green product innovation.
• and also a relationship between green product
innovation and firm’s performance.
Discussion of Findings
• Findings reveal that customer demand has relationship
with green product innovation.
• These findings are consistent with other studies
(Lunghwa et al., 2013, Gronhaug and Kaufmann, 1988)
who said customer demand can exert significant pressure
to firms to adopt the green innovation design and
process, and to introduce new products development
strategies.
• A discussion with some respondents in the industry
revealed that firms that adopt flexible strategy in
meeting customer demand by introducing the ecofriendly products have increased business sales and
revenue.
Discussion of Findings Cont..
• There is significant relationship between green
product innovation and firm performance. The
findings are in consistency with the finding of Lin et
al., (2013).
• This mean that green product innovation is an
important element to induce performance and not
otherwise.
• A discussion with some respondents in the industries
said that implementation of the green innovation can
require huge investment which in turn cannot enable
firm to attain their competitive position.
CONCLUSION AND MANAGERIAL IMPLICATION
• The study provides a useful managerial guideline to
manufacturing firms on strategies to adopt in order to
improve performance.
• By showing a relationship between customer demand and
green product innovation, we recommend firm to take a
positive approach to study and understand customer
preference, anticipating changes of customer preferences in
the future and try to deliver products that satisfy the needs of
the customers.
• The firm that will be able to satisfy needs of customer
accordingly will be able to enhance its performance and attain
its market position.
• Also the green innovation should be taken as competing
strategy to gain competitive advantage, and firms should
always strive
END
THANK YOU
Q&A
Why Tanzania
• Following privatization, trade liberalization and regional
integration in 2000’s, performance of Tanzania
manufacturing firms is not impressive (TIC Report,
2012).
• She remains behind regional models both in terms of
quantity and quality of products produced in the region.
• Also she continue to relay heavy on unproductive
agriculture sector, extraction of raw minerals and low
value adding manufacturing products which has
resulted into a low share of GDP of 9.5% between 2000
and 2010 making her to be below regional average and
the least industrialized country in the world (TIC Report,
2012).
Why Tanzania Cont….
• Industrial sector in Tanzania contributed a GDP of
9.5% of the whole economy between 2000 and 2010
and employing 36% of all manufacturing labour (TIC
Report, 2012).
• Development and growth of manufacturing sector in
Tanzania is taken as key element in attaining 2025
vision
• By shifting a focus from agricultural economy to selfsustaining semi-industrialized economy, that will
transform the nation from least developed country
to middle income country by 2025 through
transformation of agricultural economy to industrial
economy.
The Conceptual Framework
Firm Performance
Market Share
Customer
Demand
H1
Green Product
Innovation
H2
H3
Sales Revenue