Strategy Implementation:
The introduction of Digital OnePager in Australia and Japan
Master’s Thesis of Business Administration University of Groningen
Martin Neef
Strategy Implementation:
The introduction of Digital OnePager in Australia and Japan
University of Groningen
Faculty of Management & Organization Department of Business Development
Master’s Thesis Business Administration First supervisor: Ir. G. Henstra
Second supervisor: Dr. Ir. M.C. Achterkamp Martin Neef
Eendrachtskade Zuidzijde 10 C10 9726 CW Groningen
Student number: 1335839 martinneef@gmail.com
+316 300 25 267
De auteur is verantwoordelijk voor de inhoud van het afstudeerverslag.
Het auteursrecht van het afstudeerverslag berust bij de auteur.
Executive summary
This Master’s Thesis contains the results of the investigation of how to introduce Lucem Incendo’s Digital OnePager into the markets of Australia and Japan. The reason for this investigation was that Lucem Incendo has knowledge about how to develop a product, but not about how to market this product in foreign countries. Therefore, the following goal has being formulated for this investigation:
To do recommendations for strategies to Lucem Incendo for introducing the product Digital OnePager into the Japan and Australian market. These recommendations will come from literature on this subject, combined with the judgements of the author and will give an indication of the possible new product performance of Digital OnePager in Australia and Japan.
The research on the subject of new product introduction is concentrated in three areas, Market, Product and Organization. After theoretical research, factors influencing the concept New Product Performance are clustered into components, 18 in total. Under those are: Staff skill, Product quality and Market size and growth. Each of these components influence new product performance in a positive of negative way. The components are viewed graphically in a conceptual model in figure 4.2 on page 23.
All components from this conceptual model are researched in the diverse categories. Market was judged by information about Australia and Japan (separately); Product was judged by information about Digital OnePager and the components from Organization were judged by information about Lucem Incendo.
With the results from those judgements and the strong and weak points of Lucem Incendo and Digital OnePager in combination with the situation in Australia and Japan, options were formulated for each component of investigation. These options were the input for formulating introduction strategies for Lucem Incendo in Australia and Japan; the following strategies are drawn up:
• Partnering; about building a reputation with help of other, bigger and more known companies;
• Serving high quality to a few customers; about focus on quality to earn a distinct place in the market;
• Quick market penetration; about low prices and serving many customers to gain quick cash flows;
• Concentration on one subsidiary; about the possibility of first concentrate only on one subsidiary, probably Japan.
After a partially objective judging method, the second option, Serving high quality to a few customers has been chosen. However, the possibility of concentrating on one subsidiary remains useful with this strategy.
Implications for Lucem Incendo concerning serving high quality to a few customers are
starting a helpdesk, developing Digital OnePager together with customers and offering a high
price. The most important point for the implementation of this strategy is to do all things in
concordance with this strategy of focus on quality.
Foreword
This Master’s Thesis is executed for the completion of the Master’s program of Business Administration, specialization Business Development. Lucem Incendo, an innovative ICT and strategic management consultancy company, needed help to introduce Digital OnePager -a strategy implementation tool- in Australia and Japan. Throughout the whole research of almost five months, several persons helped me a lot:
From Lucem Incendo, I want to thank especially John Hartholt, Aart Tieleman and Refik Kocak. Fenny Hartholt was also helpful with supplying information about Japan. Further, I would like to thank Richard Janssen for the feedback on my concept Thesis and Jilt Bakkes for the interview and a view on the other side, at the customer’s.
Also, I am thankful to Vincent Manakane, for the conversations, feedback and lots of other things. Jasper Donkerbroek helped me with feedback on the concept Thesis. My girlfriend Suzanne motivated me when I needed it and supported me all the way, thank you! Last but not least, I want to thank my mentors at the University, Greald Henstra and Marjolein Achterkamp for their feedback and for pushing me on the right way.
Groningen, August 2006
Martin Neef
Index
Executive summary ...2
Foreword...3
1. Introduction ...5
1.1 Central problem ...5
1.2 Composition of this Thesis...5
2. Description of the organization ...6
2.1 Lucem Incendo ...6
2.2 Digital OnePager ...7
2.3 The subsidiaries in Australia and Japan...9
3. Investigation plan ...13
3.1 Problem statement...13
3.2 Concepts in the Thesis ...14
3.3 Methods (1) ...15
3.4 The situation ...16
4. Theoretical Framework...17
4.1 Introduction ...17
4.2 Dividing...17
4.3 Clustering ...19
4.4 The model...22
4.5 Main question ...23
4.6 Sub questions...24
4.7 Methods (2) ...24
5. Empirical Investigation ...26
5.1 Market ...26
5.2 Organization ...29
5.3 Product ...31
6. Developing options and strategy ...33
6.1 Résumé from the previous chapters...33
6.2 Possible options in the introduction strategy...33
6.3 Formulation of strategies...39
7. Choice of strategy and implementation ...41
7.1 Comments on strategies ...41
7.2 Choice of a strategy ...42
7.3 Implementation issues...43
8. Discussion...46
8.1 Conclusion...46
8.2 Reflection and evaluation of the investigation ...47
8.3 Further research ...47
Literature...48 Appendix 1: Definitions of antecedents
Appendix 2: List of interviewed people
1. Introduction
In this chapter, the general introduction of this investigation will be treated. Paragraph 1.1 will present the central problem the company is coping with. In paragraph 1.2, the composition of the Thesis will be treated.
1.1 Central problem
The central problem of this investigation is about Lucem Incendo, a small ICT-consultancy and strategic management consultancy company which has been established in 2005. A product of Lucem Incendo, Digital OnePager has been developed as a strategy implementation and communication tool within the client company. This is done in cooperation with Avebe, and especially Refik Kocak, who is the director of Lucem Incendo Australia now. More details about Lucem Incendo and Digital OnePager will be explained in chapter 2.
In The Netherlands, the product is already on the market, but still in the testing phase. The first customer (Avebe) is satisfied with the results of the implementation of the program in their systems; Avebe has implemented the system in their world-wide Sales division, and there are plans to implement Digital OnePager in more divisions. With the success and thus potential of the program, an intention has grown to market the company and its product also outside the borders of the home country of Lucem Incendo. There are already contacts in Australia and Japan (subsidiaries are, or will be opened), but there has not been a product introduction in these countries. Lucem Incendo is struggling with the question of how to introduce the program successfully in these foreign countries.
This question serves also as the central problem of the company; “How does Lucem Incendo need to introduce Digital OnePager in Australia and Japan in order to be successful?” Many issues are concerned with this problem: the cultures of Japan and Australia; probably the product has to be modified, different business environments will apply, many possibilities of how to introduce the product and many more. This investigation will help Lucem Incendo in a theoretical and practical way to make Digital OnePager successful in Australia and Japan.
1.2 Composition of this Thesis
After the chapter of introduction, Lucem Incendo will be presented in chapter 2. Also, Digital OnePager and the subsidiaries and circumstances in Australia and Japan will be treated. In chapter 3, the investigation plan will serve as a start to the theoretical and empirical research.
The theoretical research will be presented in chapter 4. After this theoretical research, the
empirical results will be presented in chapter 5. With the combination of these chapters, the
development of options and strategies will take place in chapter 6. After this, a choice from
these strategies will be made in chapter 7. Chapter 8 will be formed by the discussion. The
last part of this Thesis will be the appendices, where theoretical definitions from the used
literature and interviewed people are described.
Lucem Incendo B.V.
Director: John Hartholt
Integra Strategic Management Consulting
Japan YK Director: Ross Csaszar Lucem Incendo
Australia Pty Ltd Director: Refik Kocak Lucem Incendo
Europe B.V.
Director: Aart Tieleman
2. Description of the organization
The description of the organization will start with Lucem Incendo. After this, Digital OnePager, the program Lucem Incendo has developed will be treated. The subsidiaries in Australia and Japan are described in chapter 2.3, together with their environments.
2.1 Lucem Incendo
Lucem Incendo B.V. has been established in 2005 by John Hartholt. After his work on ICT- departments as project manager at Holec Projects and team manager at LogicaCMG, he decided to start a company on his own.
First, the company was named ‘JH Consulting’, but after a short period of time a new, more appealing name was sought and found in the Latin name ‘Lucem Incendo’. This means ‘I set light in the day’, referring to the consultancy services Lucem Incendo wants to provide.
Lucem Incendo now focuses on Consultancy and ICT-based projects.
From the day of the start of Lucem Incendo, business went well. After a short period of time, the first employee started to work at the company. The employee base is planned to be around fifteen at the end of 2006.
The company’s activities can be split up into three parts:
• Lucem Incendo Services; this part supplies infrastructure, software development and total company system advice.
• Lucem Incendo Products; supplies Business Process Improvement programmes on the Microsoft platform.
• Management Consulting; a supporting activity for the other parts, but supplies also total company solutions
The company structure of Lucem Incendo can be summarized in the organization chart:
Figure 2.1: Company Structure of Lucem Incendo
Source: Lucem Incendo
In this organization chart, there are already three international subsidiaries of the company. In
Europe, Aart Tieleman is the director of Lucem Incendo Europe B.V.. This company supplies
Csaszar) will be directed mainly at Strategic Management Consulting and will be started at the end of 2006. In Australia, Refik Kocak is the director and owner of the Intellectual Property of the program Digital OnePager. This subsidiary has been established in April, 2006.
2.2 Digital OnePager
Digital OnePager is a software application which is running on the Microsoft platform, and has been invented in 2005 by Refik Kocak and John Hartholt. The program is based on two concepts: The Balanced Score Card (Kaplan & Norton, 1992) and the concept ‘winning by sharing’.
Concepts behind Digital OnePager The Balanced Score Card
The Balanced Score Card (BSC) is developed in the early 1990’s by Robert Kaplan and David Norton (1992). The main idea of this monitoring tool is to give top managers a “fast but comprehensive view of the business” (Kaplan & Norton, 1992:71). The BSC is divided in four parts: Financial, Internal Business, Customer and Innovation & Learning. These perspectives are all linked together and have goals to reach and it is given how to measure this performance.
In the BSC, it is important to put strategy and vision at the centre in order to adjust performance when needed. Through the BSC, a company will be cross-functional integrated, customer-focused, globally targeted and on its way to continuous improvement (Kaplan &
Norton, 1992).
Winning by Sharing
In many companies, there are a lot of secrets about the performance of the company, even towards employees. Turnover, profit and other measurements are kept secret (Teresko, 1997).
Winning by sharing, on the other hand, is targeted at revealing those ‘secrets’. Positive results are possible when the information is shared for a good purpose and on a systematic basis (Husted & Michailova, 2002).
Digital OnePager combines both concepts: structured goals and measurements, available and structured in a computer program and accessible for whoever needs this information within the company. The system is available via the intranet at different levels in the organisation of the customer of Lucem Incendo. Information from the program can also be published offline by posters and other material throughout the company where the program is implemented.
The product
The product as delivered to the customer is not only a program; the whole package of maintenance, service and implementation will be done by Lucem Incendo. Proper use of the program will be guaranteed in this way. Also, this is the part where profit will be gained. The program itself could easily be copied and distributed. However, the knowledge of how to use it, the maintenance and the solid implementation into the system should be concentrated in Lucem Incendo. In this way, the customer remains dependent on Lucem Incendo, which means that a stream of incomes is guaranteed. The advantage for the customer is that problems with the system and updates will be solved quickly.
Digital OnePager is still in development; during the beginning of the investigation, the
implementation of the program at Avebe takes place. This can be seen as a testing phase for
the product; Avebe pays a lower price in return for development time of the program at the
company. Digital OnePager can be tested in this way, feedback is taken into account and Avebe is assured of the newest updates and best service at the time.
The development of Digital OnePager will not stop in the coming years. Due to the simple idea, which is the basis of the program, the interface and graphics are also simple. Here can major gains be accomplished; the sophistication of the program is therefore an important point in the development of the program.
Getting Digital OnePager up and running
For the customers of Lucem Incendo, the greatest benefits are the loads of information available that is reduced to a simple sheet (OnePager). This sheet provides quick information about a specific department and the whole company. Alignment of strategy throughout the company and the association of daily activities with the mission, vision and goals of the company are the most important benefits of Digital OnePager. The communication of the performance of the company reaches all layers in the company; this leads to clarity and control.
The role of Lucem Incendo in implementing the system into the company’s intranet is divided into the following processes, most with consultation of the customer:
1. Investigating mission, vision and goals for each department;
2. Determining Key Performance Indicators (KPI’s);
3. Designing an implementation of the program into the system;
4. Identifying the ‘owners’ of the OnePagers (moderators of information in the system);
5. Implementing and test the system;
6. Training all employees for using the system and communicating the information from the program.
After this final step, the role of Lucem Incendo is reduced to maintenance and further development of the program, which will be updated in the intranet of the company. Also, frequently there will be a validation check on possible changed or new KPI’s.
The market of Digital OnePager
Lucem Incendo places the product in the market as a tool for enriching the experience of strategic management consulting and for strategy implementation. The main target for marketing the product is the industrial and financial services sector. Lucem Incendo has chosen for these sectors because it is a new company which needs quick cash flows and can not implement the product for two years, and after this period gain the money. In the financial and industrial sector, the cash flows are mostly relatively quick, so this should be a good opportunity for Lucem Incendo (Hermesse, 2003).
The main competitors for Digital OnePager are the major consultancy firms, which are also developing strategy implementation tools for monitoring the company. Later in the investigation, specific information about competition will be provided.
To have a view of the program Digital OnePager, a screenshot is provided. This is an
OnePager in the tree of OnePagers going from higher management to middle management
and operations. The OnePagers are all linked together for monitoring the performance of each
department with its own goals (Key Performance Indicators).
Figure 2.2: Screenshot Digital OnePager
Source: Digital OnePager Presentation, Lucem Incendo
Information about each department will be put into these OnePagers; Mission, Vision and Strategy will lead to Major Improvement Opportunities, Key Performance Areas and Key Performance Indicators (KPI’s). The KPI’s will be filled in with information of, for example, sales in a given period. This information will give a signal to the areas above the KPI’s, indicating if the company is on the right track. Finally, all the information from the lower level OnePagers (each department has a OnePager) will arrive at the top OnePager, for the management. A good alignment of all the factors in the OnePager, combined with positive results is a good indication of a healthy company. This need for alignment make this program especially suited for strategy implementation.
2.3 The subsidiaries in Australia and Japan
This paragraph will introduce the subsidiaries in Australia and Japan, where Digital OnePager is going to be introduced. After this, a short introduction of the countries will follow.
Australia The subsidiary
Since Lucem Incendo Netherlands wants a global coverage, it wants to start two new companies as subsidiaries in Australia and Japan, to introduce the product Digital OnePager and other services in those countries. Other options available were to start a partnership, a joint venture and licensing the product. With the start of Lucem Incendo Australia Pty. Ltd., first is chosen for a direct approach. This can be changed when more information about the product introduction is collected.
Lucem Incendo Australia is started in April, 2006. Refik Kocak is, as the director of the company, responsible for introducing Digital OnePager down under. The activities of this subsidiary will not exactly be the same as the activities of the parent company; Australia will concentrate more on communication issues. The activities in Australia will be fourfold:
1. Communication and strategy implementation consultancy, based upon Digital
OnePager
2. Project management of Microsoft CRM implementation
3. Improving business processes through customized ICT-solutions
4. Digital Pest Registration, a pest registration tool, mainly targeted at government(s) The main target of this subsidiary is the base of medium sized companies in the service and manufacturing industries with IT-systems operating on Microsoft platforms. For this group is chosen because of the quick cash flows, necessary to be a healthy company in the short and the long term. The activities will be mainly executed by Lucem Incendo Australia, but supported with knowledge from other Lucem Incendo’s in the world. With this multidisciplinary team, the most important wishes of the customers in Australia can be fulfilled.
Australia should be a good target for Lucem Incendo to start a business for several reasons.
First, there are contacts in this region (Refik Kocak, now director of Lucem Incendo Australia) who know how to do business in this culture. Second, the business culture does not differ in great ways from the European business culture (Hofstede, 2001), and more specific, the Dutch one. Third, there are relatively short sell cycles, thus combined with quick cash flows (Hermesse, 2003). These cash flows can make Lucem Incendo Australia a healthy business in a relatively short period of time. Fourth, there is definitely a need for strategy implementation and communication tools. This research and knowledge comes mainly from Refik Kocak in Australia.
The goals of Lucem Incendo Australia are to expand the business to New Zealand and South- East Asia with an employee base of five to ten persons with expertise in different kinds of disciplines.
The business environment in Australia
According to the Australian trade commission in the Netherlands, Austrade, there are many similarities between the Netherlands and Australia in the business subject. It is, however, very important to have a solid distribution channel in Australia because of the long distances in the country.
Businesses in Australia are further more targeted at quality, but are also cost-conscious. This results in more careful trade down under. It is common to start with a sample of the product and learn how to use it. After this, Australian firms are willing to negotiate. This is different from The Netherlands, where orders are being given more quickly.
Further, in Australia, reputation is more important than in the Netherlands. Before contracting a firm, there is often a need for a solid business plan. This is also a kind of risk-avoiding behaviour. The most important conclusion from Austrade is that businesses in Australia are seeking more reliability and certainty. The experience from Austrade shows further that if a product is successful in the Netherlands, there is a great chance that this will be also in Australia.
Australia is further known for its poor industrial performance (Dwyer & Mellor, 1993). Not
only because of the small population, also because of the high transport costs, the industry
was not booming. Although this information is 13 years old, it gives an indication of the
industry of Australia. Companies are targeting mainly the biggest part of the population,
resulting in bulk production, which is not very value adding. Here, opportunities for Digital
OnePager and Lucem Incendo arise. With a solid strategy and good implementation of the strategy, a competitive advantage can be gained, with the help of Lucem Incendo.
On the subject of culture, Geert Hofstede is the best known author. On his personal web site (www.geert-hofstede.com), all countries are judged upon his five criteria: Masculinity, Individualism, Power Distance, Uncertainty Avoidance and Long Term Orientation (1991).
Hofstede here concludes that Australia is much more masculine than the Netherlands. This means that Australian companies are more focused towards control, power and achievement.
Japan
The subsidiary
In Japan, Ross Csaszar will be the director of Lucem Incendo Japan (due to pronunciation, Lucem Incendo is working on an other name). The company is not yet an entity, the goal is to have the company started in 2006.
Lucem Incendo Japan is not a completely new start-up however. Ross Csaszar is now running a management consultancy firm, Integra Strategic Management Consulting YK. Because Lucem Incendo wants to be a worldwide brand, chosen is for renaming the company in Lucem Incendo Japan. The activities will also be expanded; the ICT-services and products (of which Digital OnePager) will be added to the portfolio in Japan. The activities in Japan will then be threefold, here with the specialty of Strategic Consulting:
1. Improving business processes through customized ICT-solutions 2. Offering products, of which Digital OnePager is an important part
3. Management Consulting; this will be a continuation of the activities of Integra Strategic Management Consulting
For Lucem Incendo, this is a good development because Integra has some nice contacts in Japan. Mitsubishi Fuso (Automotive) is one of their customers, which can give some opportunities to Lucem Incendo. However, the main target in Japan is not the big companies, but they start to market the product for medium-sized companies and go later into the big- company market.
The main goal for this part of the Lucem Incendo subsidiary is to successful turn into the Lucem Incendo brand, keep the customers, expand the new activities into these companies and gain some new medium-sized customers.
The business environment in Japan
A lot of literature is published on the subject of the Japanese culture and Hofstede (1991) has also judged the country of Japan. Of his criteria, it is unmistakable that the long term orientation of Japan is important. Further, Japan scores high on the dimension of masculinity and uncertainty avoidance. This means that Japanese companies work by securely stated goals and very performance based. This also emphasises the long-term planning Japanese companies tend to follow.
Another factor that is important in Japan is trust; relationships in Japan can only exist when there is a lot of trust. This has consequences for approaching Japanese companies; this should be done very careful and preferable with a trusted partner.
Another difference from the Netherlands is that Japanese business men think more in
processes than in outcomes. This is also noticeable in diverse production methods Japanese
companies have developed. One can think of just-in-time and LEAN (Toyota) as important examples. The just-in-time principle in the LEAN-method has now also convinced several businesses in the United States and Europe of its effectiveness. Japan also continues with cost-cutting measures to reach maximum efficiency in producing (Slack et al., 2001).
An important point for Digital OnePager in Japan is that communication to all employees is a new concept there. In the past, there was not much communication, but when done, it could be very successful (Interview Fenny Hartholt).
These points are several differences from doing business in the Netherlands. The power distance between an ordinary employee and the top management is almost the same in Japan and the Netherlands Despite the general opinion of the ‘big bosses’ in Japan and the simple employees who work very hard, it is nearly the same situation as in the Netherlands (also:
Hofstede, 2001). This is confirmed by Woronoff (1992), who states that Japan acts more and
more like Europe and the United States. This may be caused by the fact that top management
in Japan is infiltrated by Europeans and Americans (Woronoff, 1992).
3. Investigation plan
In this part of the paper, the outline of the investigation will be treated. This will be done in an academic way, according to Braster (2000). This means that in this Thesis, theory, data collection and data analysis will be treated. Further, it is important to do this in a chronologic way. The steps that should be included in this research are the following (Braster, 2000):
• Formulating a problem statement for investigation
• Drawing up a theoretical framework and conceptual model
• The interpretation of the conceptual model into the method of investigation
• The selection of investigation units
• Data collection and processing
• Data analysis
• Report
From these steps, first the problem statement will be formulated in chapter 3.1. The theoretical framework will be treated in chapter 4, followed by the conceptual model and the method of investigation. The selection of investigation units is included in the method. After this, the data collection and processing, followed by analysis takes place. Reporting will finally complete the investigation.
In this chapter, after the problem statement, section 3.2 will explain all the concepts occurring in this paper. The third paragraph will be an outline of the methods used in this research. The last paragraph (3.4) is about the situation at hand the will be worked with and will also serve as an extra explanation of the goal of this investigation.
3.1 Problem statement
In chapter 1, the central problem of the company is treated. The main issue for Lucem Incendo is how to market the product Digital OnePager successfully in Japan and Australia.
This Thesis will give an answer to this problem in the form of an advice concerning diverse aspects of the launch. This will not be a concrete marketing advice, but will consist of guidelines and recommended strategy of introduction. To reach this goal, an investigation of diverse factors concerning the market, the product and the company is needed.
Therefore, the most common option is to develop a conceptual model of factors that may influence the performance of such a product if marketed in Japan and Australia (Braster, 2000). The conceptual model should be designed in such way that it links the goal of the investigation with the sub questions. This conceptual model will be the product of chapter 4, the theoretical framework.
To have a comprehensive view of the investigation, a problem statement is needed. The
problem statement is build with the parts goal of the investigation, main question and
preconditions and is a structured way to solve a problem in an academic way (De Leeuw,
2000). The goal of the investigation can be formulated in this chapter, but the main question
needs more information because the main question functions as a starting point of the
empirical investigation. The question will be formulated in paragraph 3.5.
Goal of the investigation
The goal of the investigation answers the question to what purpose the investigation is being made. It will serve also as a sort of contract between the investigator and the principal, in this case Lucem Incendo. The goal can be formulated as following:
To do recommendations for strategies to Lucem Incendo for introducing the product Digital OnePager into the Japan and Australian market. These recommendations will come from literature on this subject, combined with the judgements of the author and will give an indication of the possible new product performance of Digital OnePager in Australia and Japan.
Preconditions
The preconditions give the conditions under which the investigation has to be done. The preconditions can have an effect on the process and on the product (De Leeuw, 2000). The following preconditions are formulated for this investigation:
• The investigation should be done according to the rules as formulated by the Faculty of Management & Organization of the University of Groningen.
• The investigation concerns the company Lucem Incendo B.V.
• The investigation concerns the subsidiaries of Lucem Incendo in Japan and Australia.
• The investigation should lead to an advice of how to introduce the product in the markets of Japan and Australia. The implementation is not treated in this investigation.
The investigation should take place within 4,5 (four and a half) months of time spent and should be ready on September 1
st, 2006.
3.2 Concepts in the Thesis
In this paragraph, the concepts, as used in this Thesis will be explained.
Digital OnePager: The product where this paper is about; it is a software application developed by Lucem Incendo. The product is used by other companies in aligning strategy in daily activities.
Lucem Incendo helps with the implementation and maintenance of the product.
Avebe: A worldwide starch producer and the first client of
Lucem Incendo where Digital OnePager is invented and first implemented.
Conceptual model: A model with diverse components which will be the output of the theoretical research and the input for the empirical research
Product Introduction Strategy: A product introduction strategy consists of those marketing decisions that are necessary to present a new product to its target market and begin to generate income from sales of the new product. These marketing decisions have been referred to under the collective terms of launch strategy, market entry, product launch, commercialization and introduction (Green &
Ryans, 1990).
New Product Performance: The performance of a new product (in this case Digital OnePager), as measured in turnover and profit.
Key Performance Indicators: An important aspect of Digital OnePager. Here, the information concerning the wellness of the organization will be placed.
Antecedent: An antecedent is in this case, a factor influencing new product performance. This term is widely used in the relevant literature on this subject.
3.3 Methods (1)
The method for investigation in this Thesis will be outlined in this paragraph. The Thesis contains several parts which need other procedures of where the information is collected.
However, not all methods can be known on this point because the theoretical framework and the conceptual model have to be made. For that reason, a more detailed and dedicated
‘method’ will be treated after the theoretical part of this Thesis.
On this point, mainly the method of theoretical research and a first impression of the traject after that will be given.
Theoretical research
The process of investigation will start with a research of relevant literature. After this, empirical research is being done; dependent on the goal of the investigation, this will be knowledge-enriching or problem solving. In this case, the research is started with a problem that needs to be solved. Therefore, the theory will not be tested in practice; all research is targeted at solving the problem Lucem Incendo is coping with.
To have a solid understanding of the problem of Lucem Incendo, the theoretical research should have a clear subject. Because of the content of the problem (product introduction in Australia and Japan), the theoretical research will be targeted at the main subject ‘new product introduction’. But Digital OnePager is not a totally new product in The Netherlands.
However, in Australia and Japan, it is a new product for that market. For that reason, the chosen subject can apply to this investigation.
With the main research subject ‘new product introduction’ and other related issues like
’product launch’ and ‘new product performance’, academic sources of literature will be searched. For basic literature in background information about the subject, the library of the University of Groningen will be used. For more recent views on the subject, the database Business Source Premier, a widely used database of academic publications, will be used. The result of this theoretical research will be a lot of academic information on which the conceptual model will be build.
This conceptual model will be made by a selection of factors found in the literature. Only
relevant factors will be enclosed in the model. After completion of this model, the other main
part of ‘method’ will be made.
3.4 The situation
In the last paragraph of the investigation plan, the situation at hand and the preconditions from which the empirical investigation will start will be treated.
At the beginning of this Thesis, the situation was that the product Digital OnePager was developed already. Other decisions like an intended strategy and choices for countries of where to introduce Digital OnePager were already made. Not that these decisions are irreversible, but it is more difficult to change choices than develop new ones.
For this reasons, this Thesis will focus on aspects of the introduction that are adjustable or changeable. Hultink et al. (1998) divide the possible antecedents of new product performance in strategic and tactical decisions. Strategic decisions have already been made, like the product, or are not changeable, like the characteristics of the market of introduction.
Therefore, in this Thesis, the focus is on the tactical decisions and where possible, on the strategic ones. However, since this investigation is not targeted at developing an operational marketing plan, but at developing possible introduction strategies, recommendations about adjustments of strategic decisions that have already been made could follow.
Things that are already decided contain issues like the specific introduction in Australia and
Japan. These countries have already been chosen and only a reflection of these choices will be
treated in this Thesis. Further, the quality image of Digital OnePager will be maintained,
because the development was also targeted at a quality product. Furthermore, the main target
of the company to market the product will be evaluated, but respected in the beginning. The
Fortune500 companies have a strong recommendation from Lucem Incendo.
4. Theoretical Framework
In the theoretical framework, relevant theory on the subject of new product introduction is collected and brought together to finally develop a conceptual model. This model will be the input for the next chapter, the empirical part of the investigation.
4.1 Introduction
An important part of the theoretical background of this Thesis will be summarized in the form of a conceptual model. A conceptual model is (Braster, 2000; 125): A model with a temporary answer to the main question, regarding functions of investigation subjects and relations between them.
This results often in a tree-like model. This model will be investigated in practice; the subjects of the conceptual model will be analyzed according to the practice of Lucem Incendo, the markets in Australia and Japan and Digital OnePager.
The conceptual model is formulated according to relevant literature as found on this subject.
Much is written about product introduction in common, and differences between countries specific. In this Thesis, the focus will be on the product introduction in common, with the characteristics of the countries Japan and Australia on the background. When the model is tested in practice the countries will be treated. Of the product introduction, the main parts are Lucem Incendo (the company in general) and Digital OnePager.
According to Van de Graaff (2005), the antecedents of new product performance can be divided into three main subjects, Market, Organization, and Product. Hultink et al. (1998) confirm this view; they also split the new product performance in these three (strategic) parts.
The tactical marketing decisions, Price, Promotion, Product and Place will complete the subject, according to Hultink et al. (1998). Antecedents from the literature are easy to implement in such a structure and the investigation will become clear with this structure.
Further, the subjects are also the main components of Business Development in general. So, these three categories are the starting point for the conceptual model. In table 4.1, literature on the subject is summarized. The antecedents as mentioned in the table can be split up later to measure things in practice.
The literature that is selected has to be concrete and about the introduction, not about the development stage. The development stage at Lucem Incendo is already done; only reflection of this process is possible, which is not the subject of this Thesis.
Investigation in the last decade is mainly done on the subject of competitive reactions, which is only a small portion of this research. Major research about product introduction and its antecedents is principally done in the 1980’s and 90’s. These articles can thus be considered as covering the most important issues. If this was not the case, more research after the millennium would have been done. This development can partially be explained by the economic depression in the world throughout the first years of the 21
stcentury. Further, the main research topics in this subject where one can think of (antecedents, strategies, several industries) are already covered by leading authors in this subject.
4.2 Dividing
With all the literature on this subject, there are many components possible for the conceptual
model. However, to keep the model clarifying and easy to investigate, all the factors that have
been found are going to be divided in the main subjects Market, Organization, and Product.
This process is done upon the description of the factors in the articles, combined with the description of the main subjects in Van de Graaff (2005) and Hultink et al (1998). The definitions of the antecedents, as formulated in the articles, can be found in Appendix 1.
Table 4.1; Antecedents of New Product Performance
Author(s) Publi- cation date
Category Antecedents
1. Guiltinan 1999 Product Relative advantage, Compatibility with beliefs, Complexity, Trailability, Observability
2. Mishra et al. 1996 Competitiveness, Market attractiveness, Product-firm Compatibility, General Characteristics, Newness to the firm, Product offering, Launch effort, Market research
3. Storey 1996 Staff skill, Communication, Effective operations, Company-product fit, Product distinctiveness, Reputation, Market Research, Distribution strength, Quality of service delivery, Technology use, Tangible quality, Launch planning, Product champion, Innovativeness, Low risk to consumer, Quick response, Understanding of product, Compatibility (corporate strategy)
4. Montoya et
al. 1994 Strategic Product advantage, Market Synergy, Strategy, Company resources Market Market potential, Market competitiveness, Environment
Organizational Internal communication, External Communication, Organizational 5. Di Benedetto 1999 Launch High quality back office, Good management of launch, -- of support
programs, Relative timing Market
information Testing, Feedback studying, Advertising testing, Outsourcing specialized work
6. Calantone et
al. 1996 Marketing resources and skills, Market intelligence, Technical resources and skills, Product quality
7. Cooper 1991 Synergy, Product/Market fit, Quality of launch, Superior product, Quality of marketing, Market size & growth, Service expertise, Quality of technical activities, Quality of service, Tangible evidence 8. Cooper 1987 Product advantage, Market potential, Marketing synergy,
Technological synergy, Protocol, Proficiency of market-related activities, Proficiency of technological activities, Top management support
9. Hultink et al. 1998 Strategic Product, Market, Firm
Tactical Product, Place, Promotion, Price
10. Link 1987 Synergy with marketing, Synergy with technical and manufacturing, Product quality, Benefits for users, Good targeting and pricing, Distribution channel support, Market prediction, Product champion, Good stock cover, Good development phase, Little change in attitude of users, Sales force training, Promotion, Target market large or growing
11.
Easingwood et al.
1991 Internal marketing and synergy, Communications strategy, Overall quality, Technological advantage, Market research, Distribution support, Direct mail support, Responsiveness
12. Cooper et al.
1994 Financial Marketing synergy, Market driven NP process, Marketing communication, Customer service, Managerial and financial synergy, Launch preparation
Relationship Launch preparation, Responsiveness, Product advantage Market
development Innovative technology, Effective communication
The factors from table 3.1 are now being divided into Market, Organization, and Product, with the numbers referring to the authors in table 3.1. This process is being done according to the definitions of the antecedents, in combination with the definitions of Market, Organization and Product.
Market:
Competitiveness, Market attractiveness, Market research (2), Market research (3), Market potential, Market competitiveness, Environment (4), Testing, Feedback studying, Advertising testing (5), Market intelligence (6), Market size & growth (7), Market potential (8), Product (9), Market prediction, Target market large or growing (10), Market research (11);
Organization:
Launch effort (2), Staff skill, Communication, Effective operations, Reputation, Distribution, strength, Technology use, Launch planning, Product champion, Quick response, Understanding of product (3), Strategy, Company resources, Market Synergy (4), Internal communication, External Communication, Organizational (4), High quality back office, Good management of launch, -- of support programs, Relative timing (5), Outsourcing specialized work (5), Marketing resources and skills, Technical resources and skills (6), Quality of launch, Quality of marketing, Service expertise, Quality of technical activities, Quality of service (7), Marketing synergy, Technological synergy, Protocol, Proficiency of market- related activities, Proficiency of technological activities, Top management support (8), Firm, (9), Distribution channel support, Product champion, Good stock cover, Good development phase, Sales force training, Promotion (10), Internal marketing and synergy, Communications strategy, Distribution support, Direct mail support, Responsiveness (11), Overall quality, Technological advantage (11), Marketing synergy, Market driven NP process, Marketing communication, Customer service, Managerial and financial synergy, Launch preparation Launch preparation, Responsiveness, Effective communication (12);
Product:
Relative advantage, Compatibility with beliefs, Complexity, Trialability, Observability (1);
Product-firm Compatibility, General Characteristics, Newness to the firm, Product offering (2), Company-product fit, Product distinctiveness, Quality of service delivery, Tangible quality, Innovativeness, Low risk to consumer, Compatibility with corporate strategy (3), Product advantage (4), Product quality (6), Synergy, Product/Market fit, Superior product, Tangible evidence (7), Product advantage (8),Product, Product, Place, Promotion, Price (9), Synergy with marketing, Synergy with technical and manufacturing, Product quality, Benefits for users, Good targeting and pricing, Little change in attitude of users (10), Product advantage Innovative technology (12).
With this information, one can see that there are a lot of similarities and double antecedents.
Therefore, a selection and explanation will be made in the next paragraph. This will be done by the components Market, Organization and Product.
4.3 Clustering
In this section, a selection will be made from the factors mentioned in the previous paragraph.
The goal of this selection is to build a comprehensive and clear set of antecedents that influence new product performance. The selection is based upon the definitions of the academic articles. The antecedents are merged in case of major overlap of the definitions.
Further, a first selection of irrelevant antecedents for this investigation (such as antecedents
concerning the development process) takes place. These factors will be removed.
Market
In this section, most of the components are derived from market research being done. This market research, however, should lead to knowledge about the market, only doing it is not good enough. Now, when all the double factors and ‘Market Research’ are removed, the following antecedents remain (with explanation from the authors writing on the subject:
1. Competitiveness; this antecedent is characterized by Mishra et al. (1996) by the components of product homogeneity, (price) competition, number of competitors, dominance of competitors, loyalty and satisfaction. Montoya & Calantone (1994) further emphasise on the intensity of competition with respect to price, quality, service and distribution;
2. Market Environment; Montoya and Calantone (1994) conclude that within the environment, governmental regulation, risk and uncertainty are of importance;
3. Product Testing; Di Benedetto (1999) says that product and marketing testing are of importance in the final performance of the product. Testing, evaluating changing are the results of this stage in the launch process;
4. Advertising testing; Here, Di Benedetto (1999) also emphasis the importance of testing in practice. Advertising of the product should be tested to gain an optimal result;
5. Market size & growth; According to Montoya & Calantone (1996), this factor should indicate the importance of the product to the customers. Cooper & Kleinschmidt (1987) and Cooper & De Brentani (1991) further emphasise this and state that size and growth determine the market potential.
Organization
This section is about the processes and other components of the organization. For this investigation, the most important and relevant antecedents are selected and subjects like ‘top management support’ and ‘synergy’ are being removed, because of the lack of relevance in a small organization. With these selection criteria, the following subjects remain:
1. Staff skill; Mishra et al (1996) underline diverse skills that are important, for example:
R&D, Engineering, Management, Production, Sales force and Promotion skills;
2. Effective communication; According to Storey and Easingwood (1996), this is outbound communication (marketing). Effective here means raising awareness, explaining the product, consistency and effective promotion activities. Montoya &
Calantone (1994) mainly investigate the communication in the company’s relation (customers, suppliers etcetera);
3. Reputation; Mishra (1996) says that reputation and newness of the firm and the product to the world significantly influences new product performance. Storey and Easingwood (1996) further underline the importance of the reputation of the firm to the (potential) customers as a predictor of success;
4. Distribution strength; Link (1987) means with this point that there should be a widespread distribution channel in order to guarantee a higher chance of success.
Storey and Easingwood (1996) agree on this point with Link (1987);
5. Responsiveness; Easingwood and Storey (1991) as well as Storey and Easingwood (1996) indicate responsiveness on factors emerging from the market in the period of distribution as of importance to performance;
6. Company resources; according to Green et al.(1995), this point contains mainly
money and employees. Montoya & Calantone (1994) agree with them, but add the
point of compatibility of these resources with the project at hand;
7. Relative timing; Green et al. (1995) state that time since the first entrant, product life cycle stage and the number of previous entrants are important in judging this point. Di Benedetto (1999) agree with them with the definition containing customers and competitors;
8. Quality of launch; Storey and Easingwood (1996) emphasise that planning is very important in the launch. Cooper and De Brentani (1991) further emphasise that testing and protocol of the launch is of importance. Di Benedetto (1999) agrees and emphasise the marketing efforts and direction of the launch;
9. Quality of marketing; Cooper et al. (1994) state that the quality is determined by awareness, knowledge of benefits, effectiveness and positioning. Cooper and De Brentani (1991) further state that the launch and market intelligence influence performance;
10. Quality of service; the extra service that comes with the product is very important according to Storey and Easingwood (1996). Service should further be efficient, prompt, courteous and friendly, according to Cooper et al. (1994);
11. Promotion; according to Link (1987), mainly the effort that is done, is important in this point. Hultink et al. (1998) further emphasise the importance of the ‘P’ of promotion, described in much literature;
12. Top management commitment; Cooper (1987) emphasises that it is very important to have commitment from the board in a new product. This means involvement, guidance and giving direction to the project.
Product
The product section is about the relative advantage of the product regarding the competition in the market. In this section, the factors with ‘synergy’ and so forth are also of little use in such a small organization. Therefore, after the selection, the following factors remain:
1. Relative advantage; this point is emphasized by many authors; Guiltinan (1999), Montoya & Calantone (1994), Cooper & De Brentani (1991), Cooper et al. (1987) and Cooper et al. (1994) say that the product at hand should have a relative advantage compared with its competitors;
2. Tangibility; According to Guiltinan (1999), tangibility comes forth out of triability and the need to observe and hold the product;
3. Innovativeness; the degree of innovativeness can be measured by number of patents and being ‘new to the world’ (Cooper et al., 1994). Storey (1996) emphasises the firm as being innovative as a major factor contributing to new product performance;
4. Product quality; Storey and Easingwood (1996) underline the importance of quality in tangibility. Further, the product should be reliable and accurate to gain a high level of quality. Other authors, like Calantone (1996) emphasise the relative quality in comparison with competitors;
5. Price; this is easy to use and should be used in comparison with competitors and product benefits (price/quality) (Hultink, 1998), (Link, 1998);
6. Benefits for users; Guiltinan (1999) states that the benefits for the users means that the product should be easy to use and have relative benefits over competitive products.
Storey and Easingwood (1996) continue with the criteria of failure risk (should be
low) and costs involved. Further, they agrees with Guiltinan (1999).
4.4 The model
The conceptual model will explain the relationships between the antecedents, as described above, and the target variable, New Product Performance. To keep the model as simple as needed, no relationships between other variables are explained. Further, the type of relationship is given in the text below; a variable can have either a positive relationship or a negative relationship on the target variable New Product Performance.
Figure 4.1; Conceptual Model of factors influencing New Product Performance
This model is the basis for further research in this Thesis. However, to get a good view of the things that need to be investigated, the relationships will be shortly explained in here. To start with the variable group ‘Market’, the Market environment needs extra explanation. According to the definition of Montoya and Calantone (1996), this factor is about risk, uncertainty and regulation by the government. Therefore, Market environment can be explained as having a negative impact on New Product Performance. All other factors except competitiveness can be judged as positive; if these factors score higher, New Product Performance should also be higher. The group ‘Organization’ contains only positive relationships to New Product Performance. Further, the group ‘Product’ has only one negative relationship, Price. All other factors are positive.
Now that the relationships are clarified, there need to be a further investigation into the factors
mentioned in the model. Because of the fact that the variables need to be measurable for
investigation and the investigation can, due to time and money restrictions, not be exhaustive,
several factors are of little value. To start with the group ‘Market’, product testing and
advertising testing are difficult to measure because of the time frame of this research. Further,
this research will serve as a basis for product introduction of Digital OnePager so most of this testing stage should take place after completion of this Thesis.
In the group ‘Organization’, the variables ‘Quality of Launch’ and ‘Quality of Marketing’, as well as ‘Promotion’ can only be intended at this moment. The same problem occurs in the
‘Market’ group, where advertising testing and product testing for Australia and Japan will be only of importance in the future. These factors will therefore not be taken into account in the final model of investigation. Further, in the ‘Product’ group, all factors can be of use and are able to do research on. All these factors will come back in the final model.
The variables that are now removed from the model will not disappear. Research has demonstrated that these variables have considerable effects on new product performance.
Lucem Incendo should therefore also take a look at these factors when introducing Digital OnePager in Australia and Japan. The final research model, without the mentioned factors can be presented as following:
Figure 4.2; Final research model for Lucem Incendo of factors influencing new product performance
