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CHAPTER 1 INTRODUCTION
1.1 Background and Motivation
With the growth of global economy liberalization and internationalization, small and medium enterprises (SMEs) are up against more pressure to compete with domestic and overseas markets. In a new dynamic competition environment, traditional subcontractor industry has gradually lost competitive advantages due to scarce of capital-collecting ability, margin, innovation and talents.
In numerous markets, larger companies plays the main roles because of advantages like better economies of scale, bargaining power with suppliers/distributors, brand name reputation, experience of curve effects and ahead of monopoly to set prices (Fiegenbaum and Karnani, 1991). On the other hand, SMEs often are inferior to larger companies. Nevertheless, SMEs have other advantages such as more innovative especially in the early period of life cycle (Acs and Audretsch, 1987,2002), more customer contact (Coviello et al., 2000), greater propensity for action and more output flexibility. Another advantage is SMEs can integrate elements such as information processing, knowledge, and responsiveness into a unique strategic resource (Olavarrieta and Friedmann, 2008). Therefore, SMEs should utilize their advantages to reverse weakness in the market.
In Resource-based view (Wernerfelt, 1984), special resource (tangible or intangible) of company is in accordance with competitive advantages. Therefore, combining different resources to make innovative product/service in RBV is the key point to Blue Ocean Strategy. In addition, companies should emphasize operant resources (competences) to get competitive advantages for innovative solutions
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(Hafeez and Essmai, 2007).
While operant resources exerted across different companies (i.e., co-developing and combining operant resources cross industry-domain businesses), complex product is often involved. Complex product means “systemic, having multiple interactions, and non-decomposable product” (Singh, 1997), which is often involved while operant resources which act other resources contrary to operand resources (Vargo and Lusch, 2004) are exerted across different companies. In a firm’s position, to develop a successful business to business (B2B) complex product by systematically creating, digging out potential opportunities and useful operant resources from market customer and business involve two important factors which are analyzed from effectiveness of market variables view and achievement capability view.
1. Market Orientation:
First of the important factor related to effectiveness of market variables is market orientation (MO) (Madhavaram and Appan, 2010). MO relates to organization culture emphasizing customer, competitor coordination and inter-functional coordination as three successful keys (Kohli and Jaworski, 1990; Narver and Slater,1990).
MO has distinct difference between SME and big company. Raju, Lonial and Crum (2011) referred to a conceptual model which emphasizes five aspects such as Organizational Structure, Organizational Culture, Market Orientation, Environment Moderators, Mediators and Performance to measure mutual effect included many studies to distinguish MO’s effectiveness between the two. In the five aspects, the study of Market Orientation is emphasized most because of its influential factors like customer orientation, competitor orientation, responsiveness and interfunctional coordination being interactions between the stakeholder of business and market.
As a result, compared to big company, SMEs have certain significance such as (1) Ability to focus on the market is the successfully key word for SME (Ghosh et al., 2001)
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國立 政 治 大 學
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(2) Competing in narrow market niche facilitates SME’s intelligence generation (Chen and Hambrick , 1995). (3) Linkage between MO and product innovation would advance SME’s performance (Salavou, 2002). (4) MO effect SME’s innovative capability ( Low et al, 2007).
2. Operant Resource Capability:
Several studies pointed out the importance of knowledge, capabilities and competences in complex product (Madhavaram and Appan, 2010; Hofer and Halman, 2005; Singh,1997 et al.). All the concepts of capability, dynamic capability are regarded as operant resource (Constantin and Lusch, 1994). The competitive advantages of operant resource capability is similar to intellectual capital knowledge and knowing capability of social entirety such as organization, intellectual community and so on (Nahapiet and Ghoshal, 1998). Altogether, operant resource should be proactively sought, developed integrated by firms, which is along with potential predominance.
1.2 Research Question
According to the beginning of our research background and motivation, our research question direction will follow the two factors of complex product:
1. Market Orientation:
Due to the predominance between MO and SME, potential enterprises/resources have more opportunities to be found and collaborate with each other than the previous traditional methods. The process of traditional complex products is usually confined in a closed and conventional social relationship or working by their own observation and ideas, and the opportunity to innovate and co-create with other companies and distinguish new tendency from market is few. Therefore, the first research question we offered here is “What practicable mechanism can enhance SMEs’ Market Sensing and Market Relating Capability?”
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2. Operant Resource Capability:
Operant resources are regarded as an influencing factor in analyzing complex product. In Figure 1-1, there is a conceptual model (as Figure 1-1) analyzing the influencing factors of complex product (Sreedhar and Radha, 2010).
Figure1-1. A conceptual framework for developing complex, business-to-business products (Madhavaram, 2009)
As we can see, the conceptual model revealed two capabilities, market sensing and market relating capabilities, which enable business to formulate, examine, modify, renovate and redefine their market views (Anderson & Narus, 2007) and investigate relationship among all players in the market. The two capabilities are affected by internal and external social capitals, and, the two capitals also influence other capabilities like market response capability to offering or developing product/service to cope with market dynamics, product development capability to facilitate process of linking with customer and firm’s technology, co-creation capability to cooperate with supplier and customer and customization capability to customize product in more efficient or effective way. As a result, better operant resource capability by reinforcing whole six capabilities will lead better outcomes of complex product and firm’s performance. Based on above illustration, the question we propose here is “Do these two capabilities enable SMEs to discover market trend and new chance to create service value?”
Internal Social Capital - Structural Dimension
- Related Dimension - Cognitive Dimension
Operant Resource -Market Sensing Capability
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國立 政 治 大 學
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1.3 Research Method
Based on the advantages market sensing and market relating capability, this thesis dedicates on enhancing the two capabilities. The following brief explanations of the two capabilities will give a basic view:
1. Market sensing capability:
Sensing market orientation (as known as culture-oriented) makes enterprises to sense the customer’s preference, popular resource and reputation assets in different markets to analyze market turbulence, technological change, competitive intensity and new resources to innovate (Olavarrieta & Friedman, 1999).
2. Market relating capability:
The three elements of market relating capabilities are orientation, knowledge and skills, and integration and alignment of processes (Day 1999). Market relating capability helps participators (usually referring to R&D staff or sales manager) find a new chance from existing events in considering mindset, values, and norms inside or among organizations.
We will develop an information system to facilitate the two capabilities. For combining text mining tool, the system will enhance market sensing capability. On the other hand, for combining chance discovery theory (Ohsawa, 2003), the system will be good in terms of market relating capability. Finally, the system will be a bridge connecting user’s relationship as well as market orientation to achieve operant resource integration for service value creation.
1.4 Purpose and Contribution
However, in academic research, the observation of MO is almost performed in qualitative research, the past studies usually only focus on examining the relational
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effectiveness among performance, environment, business and consumer’s variables in market, etc. to point out the importance of MO. For instance, numerous studies refer the positive or negative influencing relationship among responsiveness, customer, strategic innovativeness, customer, competitor, organization structure and culture (Nakata et al., 2009; Raju et al., 2011) . For example, the greater levels of organization’s structural level are generally arrest MO within organizations (Jaworski & Kohli, 1993).
On the other hand, the four aspects of organizational culture organizational learning, market focus, entrepreneurial proclivity, and quality context are quite relevant to SMEs and provide SMEs advantages over larger organization. (Hurley & Hult ,1998; Verhoef
& Leeflang, 2009; Miller, 1983; Matsuno et al., 2002; Benson et al., 1991). The two factors of MO culture innovation and quality practices can lead to organizational performance (Zhou et al., 2008). Finally, the four major moderators market turbulence, technological change, competitive intensity and market growth also influence MO-performance (Jaworski and Kohli,1993; Olavarrieta and Friedmann, 2008; Slater and Narver, 1994). In contrast, little literatures emphasize how to realize MO, so our new method dedicates to realize MO by enforcing market sensing and market relating capabilities to make market innovative product is valuable in nowadays academic domain.
In order to effectively and efficiently create complex product with optimizing the two factors, information technology (IT) would be a means to conduce SMEs to accelerate production process and marketing, intensify the connection among business goal, ability and market tendency. and enhance MO capability in domestic or international market.
Therefore, our new method is developing a B2B2C information system helps various businesses seek new, necessary and related resources or fellow companies for each other to cooperate to form a complex product from different markets. On the other
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hand, we will obtain the goals resulting positive influence of market orientation, business performance and successful complex product through enhancing market sensing as well as market relating capability. In short, this thesis is dedicated on the research questions about “A new factual method to realize MO”, “Is the method can really help business to find new chance and successful resource combination to make an innovative product/service to satisfy target market?”, and “What are the advantages of the method to industry and academic?”
1.5 Content Organization
Basically, the research of the thesis is organized by the principle of Henver’s design science research framework (Henver, March, Park and Ram, 2004). In Figure 1-2, Henver’s design science research framework illustrates the relationship among the research’s essential factors Environment, Knowledge Base and IS Research. Problem space is defined in factor Environment, applying theory foundation as well as methodology in knowledge base. To pursue the solution of organization’s or object’s difficulty, IT artifact is developed.
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Figure1-2. Henver’s Design Science Research Framework
In other words, important factors such as environment, IS Research, knowledge base, relevance and Rigor will be elaborated in the research chapters as bellow in briefly introduction:
Chapter 1 – Introduction
To provide an overall understanding of research background, motivation, question and purpose, this chapter expatiates on present environment and difficulties to define problem space, business needs and opportunities.