CHAPTER TWO
By Ahmad Rawi (COUNTRY : MALAYSIA)
The writer can be contacted at : scholars.assist@gmail.com scholars.assist is a university level solution provider for assignments and theses. If you are facing difficulties in completing assignments or theses, do drop us an email to explore how we can help you.
LITERATURE REVIEW
LEVERAGING PRODUCT INNOVATION TO GAIN COMPETITIVE ADVANTAGE : A SURVEY OF IMPACT OF INNOVATION ON CUSTOMER SATISFACTION AND BRAND LOYALTY AMONG SAMSUNG TABLET USERS IN MALAYSIA
1. Introduction
In this chapter, the researcher will discursively review literature on the conceptual and theoretical frameworks of the constructs involved in this research.
2. Discussion
2.1. Competitive Advantage
The term competitive advantage, despite its widespread use and popularity, has no uniformly acceptable definition (Peteraf 2005, pg 178). Most often, it is described (as opposed to defined) in term of superior financial performance (Winter, 1995 cited in Peteraf 2005, p. 179). Michael Porter (1985, p.3 cited in Bredrup 1995,p. 43), the strategic management guru who popularised the term described competitive advantage as: “Competitive advantage grows out of value a firm is able to create for its buyers that exceeds the firm's cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price. There are two basic types of competitive advantage: cost leadership and differentiation.” Echoing Porter’s definition above, Saloner, Shepard and Podolny (2001) say that “most forms of competitive advantage mean either that a firm can produce some service or product that its customers value than those produced by competitors or that it can produce its service or product at a lower cost than its competitors.” They also say that “In order to prosper, the firm must also be able to capture the value it creates.In order to create and capture value the firm must have a sustainable competitive advantage.” In Peteraf and Barney (2003, p.314 cited in Peteraf 2005,p. 179), competitive advantage has been described as follows : “An enterprise has a competitive advantage if it is able to create more economic value than the marginal (breakeven) competitor in its product market.”
The following paragraphs will discuss further into the conceptual relationship between a firm’s service and product innovation and the firm’s potential to create more economic value (i.e. gaining competitive advantage).
2.2. Innovation Innovation, as an academic construct, has been given various definitions in the literature. Innovation leading theoretician is Joseph Schumpter (1883-1950). Schumpter has a broad vision of the concept of innovation. According to Schumpter, innovation encompasses new products, new production processes, new markets, new raw material and new forms of organizations. However, to Schumpter, there is a common thread between all these changes in that they involve carrying out new combination which are qualitatively important and introduced by dynamic business leaders or entrepreneurs (OECD,2006,p.86). There has been no significant change to the definition which is linked to any particular theorist up to recent times (OECD,2006,p.86). Among the newer definitions which is still anchored on Schumpter definition is that innovation is the generation of a new idea and its implementation into a new product, process or service leading to the dynamic growth of the national economy and the increase in employment as well as to a creation of pure profit for the innovative business enterprise (Urabe, Child and Kagono,1988,p.3).
2.3. Customer Satisfaction
As has been pointed out in the preceding paragraphs, the common theme in the definitions of competitive advantage is value creation- and topical in our research is how innovation create this value to the business. In the final analysis, it is the consumer who will be the judge of the value this innovation is supposed to create (OECD,2006,p.86). The relationship between these variables (i.e. innovation, competitive advantage and the consumer as arbiter of value) is succinctly explained by Jean-Paul Flipo (2001 cited in OECD,2006,p.86) when he states that : “(Innovation) is a process of creating new value (which is) geared first towards customers, as the main arbiters of business competitiveness, but one that can also involve other stakeholders as major beneficiaries, such as the organization itself (employees),shareholders (profitability), external partners, etc.” What this mean is that in today’s economy, to be successful, business must provides customers with the service or product they want in any form, at any time and in any place and in order to accomplish this, the business must be a customer oriented company (Poza,2010,p.182). According to Poza further, what matters most to customer oriented companies is the outcome from the perspective of the customer who is using their product or service (i.e. whether customers are satisfied or not with their product or service). Oliver (1997, cited in Andaleeb and Conway,2006,p.4) defines customer satisfaction as the consumer’s fulfilment response. It is a judgment that a product or service feature, or the product or service itself, provides a pleasurable level of consumption related fulfilment . In other words, it is the overall level of contentment with a service/product experience. Granted, this is not the only available definitions of customer satisfaction, but it is among the more pragmatic one, as can be seen from the review of the work of Lee and Joshi (2007) discussed below.
2.4 Brand Loyalty According to Mohammad (2012,p.113), there is no academic consensus in the literature as to the single and uniform of brand loyalty. However, among the most oft-cited definition of brand loyalty is that provided by Jacoby and Chestnut (1978). According to Jacoby and Chestnut (1978 cited in Kotler and Pfoertsch,2010,p.311) brand loyalty is defined as “biased (i.e. non-random) behavioral response (i.e. act of purchasing something) expressed over time (i.e. repetitively) by some decision making unit with respect to one or more brands out of a set of such brands”. The said definition also provides that brand loyalty is a “function of psychological (decision-making, evaluative) processes. Mohammad (2012,p.115) has surveyed various definitions of brand loyalty apart from the definition offered by Jacoby and Chestnut (1978) above. Among definitions surveyed by Mohammad (2012) are as follows : - Brown (1952) who indicated in his study of loyalty that loyalty is a sequence (repetition) or selection (purchase) of the same brand in all cases of purchase; - Jalab (1952) who defined loyalty as a preference of customers to buy specific products; - Guest (1964) who pointed out that preference is the only basis for judging the loyalty of the customer; - Najem (1952) who defined loyalty to brand as a measure of the degree of repurchase of a particular brand by the customer; - Oliver (1999) who defined loyalty as a deep internal commitment to repurchase the product or service on an ongoing basis in the future. - Cunningham (2000) defined loyalty as a percentage of overall purchases of a specific brand in comparison with other competitor brands. - Mowen and Minor (2001) referred to loyalty as the extent in which a customer holds positive attitudes towards the brand, commitment and intention to repurchase this brand in the future. - Tawfeq (2007) suggested that loyalty is determined because of customer purchasing habits i.e. a customer is loyal to the organization if he or she limited their transactions and purchases to this organization even if other organizations provide better products.
2.5 Theoretical Framework on the Relationship of the Construct A theoretical framework of the relationship of innovation with customer satisfaction and brand loyalty has been proposed by Nemati, Khan and Iftikhar (2010,p.303) as follows :

Figure 1: Relationship of innovation with customer satisfaction and brand loyalty

The above diagram is based on the hypothesis that innovation has positive relationship with customer satisfaction and brand loyalty. The diagram further indicates that customer satisfaction and brand loyalty are dependent variables whereas innovation is an independent variable and relationship between them is positive (Nemati, Khan and Iftikhar, 2010,p.303). Customer satisfaction and brand loyalty has long been acknowledged as among the sources of competitive advantage of firms - see for example Muller (1991) on competitive advantage and Gommans,Krishnan and Scheffold, 2001 on brand loyalty. Based on the above we proposed a refinement of the theoretical framework of relationship of innovation with customer satisfaction, brand loyalty and competitive advantage represented by the following diagram :

Figure 2: Relationship of innovation with customer satisfaction, brand loyalty and competitive advantage

2.6 Methods of Measuring Customer Satisfaction and Brand Loyalty Hallowell (1996,p.30) in his empirical study on the relationship of customer satisfaction, customer loyalty and profitability measured customers satisfaction in his study by using two distinct ways. The first measurement methodology to indicate customer satisfaction consists of responses to a single question :’Overall, how satisfied are you with…[subject of the research]?” Responses for all satisfaction questions were made on 1-7 Likert-type scales labelled “very satisfied” and “very dissatisfied” at each extreme with “1” denoting “very satisfied” and “7” denoting “very dissatisfied”. According to Hallowell (1996) further, the problems associated with the use of a single response variable were mitigated by the simplicity of the question. Yi (1990, p.71 cited in Halliwell, 1996,p.30) suggested that a single overall satisfaction measure scored as this one is “reasonably valid”. The second indicator of customer satisfaction used by Hallowell (1996,p.30) was satisfaction with service (Hallowell’s study is on customer satisfaction of service however this can be contextually modified for application to study on satisfaction of product as well) and satisfaction with price which he developed from theories found in the service management literature in particular the works of Heskett et. al. (1994) and Schneider and Bowen (1995). According to Hallowell (1996,p.30), these theories in a nutshell state that perceived value is a function of perceived quality and price and that differing levels of perceived value result in differing levels of customers satisfaction. In this regard, in innovation intensive business segment such as consumer electronic goods, the statement of Jean-Paul Flipo (2001 cited in OECD,2006,p.86) which equates innovation with value is relevant to the present research. Measurement of price is an important element in customer satisfaction measurement. Andaleeb and Conway (2006,p.5) in their empirical study on customer satisfaction found that the price of the item can also greatly influence customers because price has the capability of attracting or repelling the customers, especially since price functions as indicator of quality. According to Lee and Joshi (2007,p. 19) most of the definition of satisfaction in marketing literature are based on disconfirmation theory which postulates that the feeling of satisfaction is a result of the comparison between perceptions of a product’s performance and expectations. According to Lee and Joshi (2007,p.17) further, this theory, representing psychological evaluation processes, provides an understanding of expectations, desires, experiences, and performances that may affect customer attitudes, however it is not suited for general application for all product categories. As such, Lee and Joshi (2007,p.19) recommended adopting the typology of approaches suggested by Giese and Cote (2000) i.e. the context-specific satisfaction measures which is intended for application on a case-by-case basis. Approaches belonging to this typology rely on a customer’s affective or emotional response to form the basis for the measurement of customer satisfaction specific to a context, rather than assessing disconfirmation. In other words, context-specific measurements does not entail comparisons between perceptions of a product’s performance and expectations whereas the reverse is true for disconfirmation theory based measurements. Mohammad (2012) has provided a summary on how customers loyalty to a brand is measured. According to Mohammad (2012,p.115), there are three ways through which brand loyalty can be measured i.e. (1) the behavioural measure, (2) the attitudinal measure and (3) the composite of the behavioural and attitudinal measure. The Behavioral measure is defined as the desire of the customer to repurchase the same brand (Chaudhuri and Holbrook,2001,p.83 cited in Mohammad,2012,p.115). Behavioral loyalty indicators include the occurrence of regular repurchase behaviour (Dick and Basu, 1994 cited in Mohammad,2012,p.115), which is not the result of the customer’s psychological commitment towards the brand (Tepeci,1999 cited in Mohammad, 2012,p.115). Where customer’s repurchase behaviour is the result of customer’s psychological commitment towards the brand, it is known as attitudinal loyalty and is measured by the attitudinal measure. According to Mohammad (2012,p.115) further, attitudinal loyalty reflects an emotional relationship towards the brand, product or service and its dimensions include the intent to repurchase and recommendation. The third measure of loyalty is the composite of both behavioural and attitudinal measures. According to Mohammad (2012,p.115), the main benefit of the composite measure is that it consists of two dimensions (behavioral and attitudinal). In addition, it measures the customer loyalty through product and brand preferences, repurchase, the total purchased quality, and changing the brand (Hunter, 1998; Pritchard & Howard, 1997 cited in Mohammad, 2012,p.115). Therefore, the composite measure can gauge brand loyalty more accurately. In this current research, in designing the questionnaire to measure customer satisfaction and brand loyalty of Samsung tablet owners, the researcher has drawn guidelines from the above reviewed literature on customer satisfaction and brand loyalty measurement.

2.7 Research Survey Questionnaires Design Based on Literature Review In the scope of the presented research, customer satisfaction and brand loyalty is determined by evaluating the users answers to a questionnaire. Drawing from the literature reviewed, this research has come out with a 24 questions Likert-type questionnaire which seeks responses from Samsung Tablet users. For this research, the research had limited the survey only to users of the seven models of the current range of Samsung Galaxy Tab i.e. Galaxy Tab 7.7, Galaxy Tab 7 Plus, Galaxy Tab 8.9, Galaxy Tab 10.1 Wifi, Galaxy Tab 10.1, Samsung Galaxy Tab Wifi (GT-P1010) and Samsung Galaxy Tab (GT-P1000). These are the current Samsung tablet models as listed down by Samsung website (http://www.samsung.com/my/consumer/mobile-devices/tablet/viewall)

3. Synthesis of the Literature Review and Conclusion Competitive advantage of a product is closely connected to its value in the perception of the consumer (i.e. the customer value). What this mean is that, to be successful, business must be a customer oriented company . What matters most to customer oriented companies is the outcome from the perspective of the customer who is using their product or service (i.e. whether customers are satisfied or not with their product or service). Customer satisfaction will lead to brand loyalty which in turn will lead to the company gaining competitive advantage over its competitors. There is a dearth of literature on whether innovation is a factor leading to customer satisfaction and brand loyalty in innovation-centric market such as market for consumer electronic gadgets, especially in the Malaysian context. Hence, research is carried out to fulfil this gap.

REFERENCES

Andaleeb,S.S. & Conway,C. (2006). Customer satisfaction in the restaurant industry: an examination of the transaction-specific model. Journal of Services Marketing.20 (1), pp.3–11.

Bredrup, H.(1995) Competitivenes and competitive advantage, In : Rolstadas, A. (ed.) Performance management: a business process benchmarking approach. London : Kluwer Academic Publishers, pp. 43-60

Gommans, M., Krishnan, K.S. & Scheffold,K.B.(2001).From brand loyalty to E-loyalty : A conceptual framework. Journal of Economic and Social Research 3(1) 2001, pp. 43- 58.

Hallowell, R.(1996).The relationship of customer satisfaction, customer loyalty and profitability : An empirical study. International Journal of Service Industry Management. 7(4),pp.27-42.

Kotler,P. & Pfoertsch, W.(2010). Ingredient Branding: Making the Invisible Visible.Berlin : Springer-Verlag

Lee, K. & Joshi, K.(2007).An empirical investigation of customer satisfaction with technology mediated service encounters in the context of online shopping. Journal of Information Technology Management. 18(2), pp. 18-37

Mohammad, A.A.S.(2012). The Effect of Brand Trust and Perceived Value in Building Brand Loyalty. International Research Journal of Finance and Economics. 85 (2012), pp. 111-126.

OECD.(2006). Innovation and Growth in Tourism. Paris : OECD Publishing
Nemati, A.R., Khan, K. & Iftikhar, M.(2010). Impact of Innovation on Customer Satisfaction and Brand Loyalty, A Study of Mobile Phones users in Pakistan. European Journal of Social Sciences. 16 (2), pp. 299- 306

Muller,W.(1991). Gaining competitive advantage through customer satisfaction. European Management Journal. 9 (2), pp. 201–211

Peteraf, M. (2005) A resource-based lense on value creation, competitive advantage, and multi-level issues in strategic management research, In : Dansereau, F. & Yammarino, F.J. (eds.) Research in multi-level issues : Multi-level issues in strategy and methods. Vol. 4. Oxford : Elsevier Ltd,pp. 177-188

Poza,E.J.(2010).Family Business. Mason OH : Cengage Learning

Saloner,G, Shepard,A and Podolny,J.(2001). Strategic Management. New York, NY: Wiley

The Stationery Office of the Government of the Unitwed Kingdom (2010) Management of risk: guidance for practitioners.3rd edn.Norwich : The Stationery Office

Urabe, K.,Child,J. & Kagono,T.(1988).Innovation and management: international comparisons. Berlin : Walter De Gruyter

-----------------------

INNOVATION

CUSTOMER SATISFACTION

BRAND LOYALTY

COMPETITIVE ADVANTAGE

BRAND LOYALTY

CUSTOMER SATISFACTION

INNOVATION