THE EFFECT OF PRODUCT INNOVATION ON THE PRODUCTIVITY OF AIRLINE INDUSTRY (A CASE STUDY OF ARIK AIRLINE)

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

A cardinal point for competitive scuffle in the present chaotic environment is product innovative strategy. Introducing new products and services are at the nucleus of economic growth and development. The ability to innovate has caused researchers to study activities leading to initiative advancement of individuals and organizations. Business organizations all over the world furnish a strong increase to employment and economic growth specifically due to their innovative activities which becomes a main force of explaining competitive advantage and firm productivity (Ussahawanitchakit, 2012). Accordingly, the values fashioned by product innovative strategy shows potential circumstances that uncovered new ways of doing things or new products and processes that add benefits to economic fortunes.

A firm productivity is related to the ability of the firm to gain profit and growth in order to achieve its general strategic objectives (Neu & brown, 2005). It is a consequence of the interaction between actions taken in relation to competitive forces that allow the firm to adapt to the external environment, thereby integrating competence and usefulness In both developed and developing countries of the world, small companies have proofed to be prominent in terms of employment and added values to gross domestic product, ‘yet their full potential remains untapped’ Schlogl, (2004). The support given for the start up of Business organisations, necessitate them to becoming important engines for innovation and technological advancement especially in the field of marketing. In 2007, The World business council for sustainable development gave a summary of the weight Business organisations in general lend to government and individuals. Business organisations that are properly supervised become means of employment prospect and affluence creation. They aid in the generation of revenue and create communal solidity. Bigger organizations are provided with local services and supplies and communities have access to affordable goods and services at lower costs. Furthermore, ‘by working closely with Business organisations, large corporations can develop a new customer base that may not be accessible to the traditional distribution networks of these corporations’ (Menna, 2013). Thus Business organisations are a reliable source of supply and have understanding of the pattern of procurement.

Business organisations, world over have been found to provide jobs for about 75% of the workforce of any country. In periods of liberalization and privatization Business organisations especially in emerging economics, has become vital economic tools and bedding seeds for entrepreneurship development and indigenous technology that create employment and are better positioned over bigger business organisations in their capacity to be innovative. However there are barriers to the activities of product innovative strategy in Business organizations which according to Menna (2013) include a lack in capital investment, infrastructure, education and training systems, encumber regulations, and in general deficiencies in know-how and skills acquisition. Other barriers include constrained managerial capabilities, difficulty in utilizing technology which results in low productivity among others. Consequently, investing in product innovative strategy strengthens the profit base, knowledge of employees and individuals that drive resilience of the organizations to create new products, processes, and new behaviour of working that generates improve competitiveness and achievement of necessary goals to shape productivity.

Existing literature has described product innovative strategy differently. For example Aremu (2010) affirmed there are three types of product innovative strategy, product, process and strategy or business model innovation. Hussien (2010) explains product innovative strategy to include five types: new products, new methods of production, new sources of supply, the exploitation of new markets, and new ways to organize business. For Allocca & Kessler (2006), product innovative strategy will only be effective when there is a process of equipping in new, improved capabilities or increased utility. The present study seeks to examine the effect of product innovative strategy on productivity.

1.2   STATEMENT OF THE PROBLEM

It is understood that product innovative strategy has become a key driver for better competitiveness of business organizations. Some studies have found that product innovative strategy is closely associated with firm productivity (Rosliet al., 2012; Mukhamadet al., 2011; Pla-Barber &Alegre, 2007; Gundayet al., 2011; Gary et al., 2008; Nada et al., 2008; Morgadoet al., 2008; Gunnar et al., 2009). Others suggested that the effect of process involved in product innovative strategy to have produced different results for firm productivity (Geroski&Machin, 1993). Mark (2004) further argued that product innovative strategy did not explain productivity, whereas others discovered that the process improvement did influence sales growth of Business organisations (Wolff &Pett, 2006). However, this study is conducted on the product innovative strategy of Business organizations to find out if innovative activities in the marketing strategy have impact on firm productivity. This study attempts to gauge how strong that product innovative strategy affects the productivity of Business organizations, with special reference to the mediating effect of organizational productivity and effectiveness.

1.3   OBJECTIVES OF THE STUDY

The major objective of this study is to analyze the effect of product innovative strategy on productivity in Arik Airline, Lagos State while the following are the specific objectives:

1. To examine the effect of product innovative strategy on productivity in the airline industry.
2. To examine the relationship between product innovation and organizational productivity in the airline industry
3. To identify the types of product innovative strategy that can promote productivity.
4. To determine the factors limiting productivity in the airline industry.

1.4   RESEARCH QUESTIONS

1. What is the effect of product innovative strategy on productivity in the airline industry?
2. What is the relationship between product innovation and organizational productivity in the airline industry?
3. What are the types of product innovative strategy that can promote productivity?
4. What are the factors limiting productivity in the airline industry?

1.5   RESEARCH HYPOTHESES

HO1: Product innovation has no significant impact on aviation industry

H02: There is no significant relationship between product innovation and organizational productivity

1.6   SIGNIFICANCE OF THE STUDY

This study on the impact of product innovative strategy on productivity in the aviation industry will educate stakeholders in business sector especially the marketers and the management team on the benefits of product innovative strategy emphasizing how it can enhance the customer base of an organization leading to improved firm’s productivity. The study may also contribute to the existing body of knowledge on the impact of product innovative strategy on productivity. The study will be a good reference material to students who may wish to use this study as a springboard to undertake their own research.

1.7   SCOPE/LIMITATIONS OF THE STUDY

This study is on the effect of product innovation on the productivity of airline industry using Arik Airline in Lagos state as a case study.

LIMITATION OF THE STUDY

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview)

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8   DEFINITION OF TERMS

Productivity: The accomplishment of a given task measured against preset known standards of accuracy, completeness, cost, and speed. In a contract, productivity is deemed to be the fulfillment of an obligation, in a manner that releases the performer from all liabilities under the contract.

Strategy: A method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem.

Innovation: The process of translating an idea or invention into a good or service that creates value or for which customers will pay.