International Bulletin of Business Administration ISSN: 1451-243X Issue 4 (2009) EuroJournals, Inc. 2009 http://www.eurojournals.com/IBBA.

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Factors Affecting New Product Development in Malaysian Manufacturing Industry

Azaze @ Azizi Abdul Adis School of Business and Economics, Universiti Malaysia Sabah, Malaysia E-mail: azizi@ums.edu.my Tel: +6088-320000; Fax: +6088320360 Izyanti Awang Razli School of Business and Economics, Universiti Malaysia Sabah, Malaysia Abstract This study was designed to investigate the impact of strategic orientation, marketing strategy, and market research activities on new product development among manufacturing companies in Kota Kinabalu, Sabah. The paper also considers the moderating effect of the environmental factors on the relationships between strategic orientation, marketing strategy and new product development. The data was collected from the marketing managers, operation managers and those managers who have been involving greatly in the new product development process. A total of 80 usable questionnaires were completed. Data analysis was conducted using the multiple regression analysis and hierarchical regression analysis. The results shows that both strategic orientation and marketing strategy were directly influence new product development process, while the market research activities show no significant relationship on new product development. Also, the environmental factors did not appear to moderate the relationship between strategic orientation and marketing strategy on new product development in Kota Kinabalu manufacturing industry. Keywords: New product development, strategic orientation, marketing strategy, market research activities, environmental factors, manufacturing industry, Malaysia.

1. Introduction
New product development is an inter-linked sequence of information processing tasks where knowledge of customer needs is translated into final product design (Meybodi, 2003). It is one of the most powerful but difficult activities in business (Clark and Wheelwright, 1995). Business managers and marketing academics alike agree that an essential element of an organizations long-term survival is success in new product development (Henry et al., 1989). These studies have proved that new product development is crucial to determine the success of new product development process. Besides that, it is widely known that strategic orientation is important as one of determinant to improve company performance. There are several studies concentrated on the factors determining the success and failure of a new product as well as market orientation on company performance (see Cooper, 1979; Maidique and Zirger, 1984; Song and Parry, 1997). In addition, Kwaku and Satyendra (1998) research on strategic orientation and business performance, (Ramaseshan et al., 2002) on marketing orientation and company performance. But, very little of study consider this factor as one of the contributing factors in improving new product development process.

Involvement of marketing strategy in new product development process in developing countries remain unclear. Many of marketing activities influences on new product development process in manufacturing industry is still not been explored comprehensively especially in developing countries particularly the ways of it implications in determining new product development success. Furthermore, the use of R&D is known as one of important department that should be established within organization to ensure the innovation continuity. For example, Kohli and Jaworski (1990) has mentioned on the importance of market information in business decision. Thus, the role of market research activities in assisting the success of new product development process among Malaysian manufacturing companies is still vague and need to be investigated. Thus, this paper aims to investigate the impact of strategic orientation, marketing strategy, and market research activities on new product development among manufacturing companies in Kota Kinabalu, Sabah. The paper also considers the moderating effect of the environmental factors on the relationships between both strategic orientation and marketing strategy and new product development.

2. Literature Review
New Product Development A new product is a good, service, or idea that is perceived by some potential customers as new (Kotler and Armstrong, 2005). New product can be referred as original products, product improvements, product modifications, and new brands that the firm develops through its own research and development effort. According to David and Nigel (2001), new products and services introductions can be classified according to (1) newness to the market and (2) the extent of customer value created, resulting in the following types of new products: Transformational Innovation: products that are radically new and the value created is substantial. Examples include CNN News Channel, Automatic Teller Machines (ATM), and digital cameras. Substantial Innovation: Products that are significantly new and that can create important value for customers. Examples include Kimberly-Clark Huggies/Nappies and Diet Coke. Incremental Innovations: New products that provide improved performance or greater perceived value (or lower cost). An example is a new Coca-Cola flavor. Booz, Allen and Hamilton (1982) in their study of new product introduction success, propose 6 types of new products based on the degree of newness to the firm and market. These include: Radical products, i.e. products that are completely new to the world (10%). New product lines, i.e. products that are new to the organizations but not necessarily new to the markets (20%). Additions to product lines, i.e. products that supplement an organizations established product lines (26%). Modified products are existing products that have undergone some major or minor improvements (26%). Repositioned products are existing products that are targeted to new market segments (11%). Cost reduction products are new products that provide similar performance but a lower cost (7%). According to Ramaseshan et al., (2002), new products are essential to the survival and longterm growth of any firm. Success in new product development is a critical management issue particularly in technology driven firms. Managers of new products have little guidance on how to improve or redirect their organizations external orientation towards their product target market. Copper (1979) argued that market knowledge and marketing proficiency play the critical role in the outcome of a new product. Projects which were strong on this dimension were those market-oriented activities that were undertaken proficiently (market assessment, market studies, test market, market

launch). The firm had a sound understanding of needs and wants, price sensitivities, buyer behavior, market potential, and competition. Besides, sales force and distribution effort were strong and well targeted at launch. The obvious point needs reinforcement: the commercial viability of a new product rests in the hands of its potential customers. Therefore, a solid understanding of the marketplace together with an effective market launch effort is vital to the success of a new product. New product development is an inter-linked sequence of information processing tasks where knowledge of customer needs is translated into final product design (Meybodi, 2003) and one of the most powerful but difficult activities in business (Clark and Wheelwright, 1995). Business managers and marketing academics alike agree that an essential element of an organizations long-term survival is the success in new product development (Henry et al., 1989). Ramaseshan et al., (2002) mentioned that determinants of new product performance are interrelated and that the new product development process itself is central, namely the stages of initiation and implementation. The stage of initiation appears to be more important and it is strengthened by the factors such as customer orientation, crossfunctional integration, and proficiency of the new product team. Study by Wei and Morgan (2004) provided three implications of theoretical knowledge concerning firms new product performance. Firstly, the important role played by supportiveness of organizational climate in determining a firms market orientation is identified and supported empirically, which in turn explains significant variance in the success of new product in the Chinese firms. Secondly, the studys fieldwork interviews and its empirical result indicated the importance of the cultural contexts of the firm in explaining how firms engagement in processing market information enables them to achieve superior performance for new product. Thirdly, their findings indicate that organizational climate is important in determining new product performance through its effect on a firms market orientation behaviors. Cooper and Kleinschmidt (2007) concluded their study with reduction of the new product performance at the business-unit level to major underlying dimensions profitability and impact on the business. How profitable the total businesses new product efforts included: whether the total initiative meets profits objectives; its profitability relative to spending; and the impact of the total effort on the business units profits. The impact of the total new product effort on the business included: sales percentage of new products achieved by the business unit; impact of the new products on both sales and profits of the unit; achieved rate of success; and the rating of the technical success. Purposes of New Product Development Business firms spend large sums of money for new product development due to many important reasons. The reason for new product development is the most frequently cited by top business executives are corporate growth, diversification, and the quest for a competitive edge over rival business firms (Sachs and Benson, 1981). There is another specific reason for a firm to develop new products: exploiting new opportunities. The demand for certain product attributes can suddenly become so intense that a firm is well-advised to create and introduce new marketplace for the new products in order to exploit this new opportunity and meet the strong customer demand (Hise, 1977). Product development is potentially very important for the purpose of the business development. Along with other forms of development such as market development, product positioning development and supply development, product development can contribute to the attainment of key business objectives. One of the most important objectives can be contributed to by organic product development, it is rarely explained how this can be made to occur (Bruce and Biemans, 1995). The Relationship between Strategic Orientation and New Product Development Strategic orientation is originally conceptualized from the market orientation, which was popularly used to measure firm performance in the management literature (e.g. Pulendran et al., 2003; Matsuno and Mentzer, 2000; Han et al., 1998). Then, it was extended into strategic orientation (Noble et al.,

2002; Voss and Voss, 2000) and focused specifically into customer orientation (Deshpand et al., 1993) and technological orientation (Stewart and McAuley, 2002). Previous work regarding the effect of the market orientation on business profitability by Narver and Slater (1990) found that market orientation was an important determinant of profitability for both commodity and non-commodity businesses. Market orientation and profitability of non-commodity business was found positively related to each other monotonically, whereas among the commodity businesses, a positive market orientation profitability relationship exists among the businesses that are above median level in the market orientation. This has lead to the understanding the possibility of strategic orientation to influence new product development because it also effect the business profitability. Besides that, there was a positive impact for the level of market orientation on business performance. The quality of the marketing planning system on business performance is controlled. Furthermore, there were improvements exist in marketing plannings quality that would have an additional positive impact on the market orientation beyond expected from the main effects when the market turbulence and technology turbulence were high (Pulendran et al., 2003). In Malaysia, cues for new products are derived from the market, which contributing in products that meet the needs of the consumers (Wan Jamaliah and Nordin, 1999). New product development, specifically the ability of a company to develop products that outperformed their competitors in the marketplace had been proved to benefit a firm in building its own competitive advantages (Kok, 1996). A study by Yew (2002) pointed out that market orientation of business environment is an important determinant for the success of the new product development. Building an understanding of this relationship could help to achieve higher performance for the new product development that included overall business performance, firms profitability, sales revenue, customer satisfaction and technical performance of the products. Langerak et al., (2004) found that there was a positive relationship between market orientation with product advantage and to the proficiency in market testing, launch budgeting, launch strategy, and launch tactics of product development process. Wren et al., (2000) in their study on global industrial firms found general support of the importance of market orientation to new product success. Thus, it is assume that the strategic orientation also has positive influence on new product development process: H1: There is a relationship between strategic orientation and new product development. The Relationship between Marketing Strategy and New Product Development Marketing strategy is one of powerful tool to determine the product success. A study by Maidique and Zirger (1984) concluded that new product success was more likely when the developing organization is proficient in marketing and commits a significant amount of its resource to selling and promoting the product. Ramaseshan et al., (2002) suggests that while the implementation of marketing strategy could be important, it is the use of appropriate marketing strategies that are critical to the overall success of new products. The study also showed that formulation of the marketing strategy has a significant and positive effect on the project performance of new products. Again, it appears that the formulation of appropriate marketing strategies is very critical for the successful market and project performance of new products. It is confirmed that companys strategies influenced new product development process. For example, Wind and Mahajan (1988) proposed that during the new product development process, the execution of strategies affects the performance of new product development. If the company considers involving brand-new products in the new product market, it should adopt complete product development procedures. If it only introduces the original product to the market, it can skip process such as innovative production and concept evaluation. In 1990s, various studies have shown a positive relationship between the use of innovative marketing strategies and new product success (Andrews and Smith, 1996; Eisenhardt and Tabrizi, 1995; Hambrick et al., 1996; Menon et al., 1999; and Verona, 1999). These results consistent with recent study by Chung and Tsai (2007) found that the companies with better implementation of development strategies of new products have better development

performance of new products. So, the importance of strategies of marketing would give better impact on new product development. Thus, it is hypothesized that H2: There is a relationship between marketing strategy and new product development. The Relationship between Market Research Activities and New Product Development In order to complete the product development process, proper market research activities has to be taken in order to ensure all information gathered suit with the new product produce. Previous research proved the need of market research activities on export performance and new product development performance. Hart and Tzoka (1999) has proposed the importance of market research in determining the effectiveness performance, they suggested that those gather greater amounts of background or infrastructure information about the export markets which cover the economic background, transport infrastructure, growth trends, and government aid were tend to exhibit higher export performance. It is measured by the ratios of export sales and profits versus overall sales and profits rather than using more specific information on which used to assess individual market potential or the need to adapt products to the local conditions. Turning to the market research information vehicles used, the more formal market research activities, which involve a more proactive approach to gain market information, is clearly related to higher ratios of both export sales and profits. The study by Cooper and Kleinschmidt (1987) pointed out that in order to upgrade the performance of new product development, the company must first collect related market information, evaluate both internal and external environment and resources and plan development strategies of new products that match business goals. In reality, most new product development teams will use some form of market information in the development and design process survey results, market trends, focus group testing and so on (Ramaseshan et al., 2002). That means, firms have to gather as much market information to better understand the market needs and wants and give better input for better product development. Thus, it is posited here that market research activities influence new product development: H3: There is a relationship between market research activities and new product development. The Moderating Effects of Environmental Factors on Strategic Orientation, Marketing Strategy and New Product Development In terms of the moderating effects of environmental factors influence the independent variables, few studies have exhibit different views on different context (see Smith and Grimm, 1987 and Azaze et al., 2005). The study by Smith and Grimm (1987) focused on the environmental variation, which includes strategic change and firm performance of railroad deregulation. Their findings showed the important relationship between environmental variation and strategy. It means that most firms change their strategies and outperform those that did not with respect to environmental variation. Consistently, a study by Azaze et al., (2005) on export marketing performance found that certification of environmental factors appeared to moderate a few relationships between product and promotion adaptation, distribution strategy, design strategy and target market specification on export performance in Malaysian furniture industry. However, these contentions are still not strong enough to support the influence of environmental factors on the relationship between market orientation and marketing strategy on new product development. In particular, Yew (2002) suggests that a firm must develop and sustain competitive advantage in order to archive superior business performance. In that study, the author concluded that market orientation of business environment is an important determinant for the success of the new product development. Building an understanding of this relationship could help to achieve higher performance for the new product development that included overall business performance, firms profitability, sales revenue, customer satisfaction and technical performance of the products. Therefore, it is hypothesized that:

H4a: Environmental factors moderate the relationship between strategic orientation and new product development. H4b: Environmental factors moderate the relationship between marketing strategy and new product development.

3. Methodology
Research Method The quantitative approach was chosen as research design. Hypotheses testing was used to test existed relationships among variables. There are three types of variables to be measured in this study namely, dependent and independent variables. The dependent variable or measured outcome in the research is new product development (NPD). The independent, or presumed cause variables used in the study are strategic orientation (SO), marketing strategy (MS), and market research activities (MRA). Lastly, the moderating variable is environmental factors (EF). The research framework is shown in Figure 1. A set of questionnaires, which is modified and based on the past research, was used to measure these variables. All the variables were examined individually to find out whether any significant relationships exist between them or not. The data was collected from the marketing managers, operation managers and those managers who have been involving greatly in new product development. This is because they are the persons who have better experience in the new product development. Moreover, the unit of analysis in this study will be the manufacturing companies in Kota Kinabalu, Sabah.
Figure 1: A research theoretical framework on the impact of strategic orientation, marketing strategy and market research activities on new product development.

Strategic Orientation (Gatignon and Xuereb, 1997) Customer Orientation Competitor Orientation Technology Orientation Inter-functional Cordination H1

Environmental Factors (Azaze et al., 2005) Economic Situation Supply Condition H4a & H4b

Marketing Strategy (Shoham, 1999) Product Characteristics Price Characteristic Place Characteristics Promotion Characteristic

H2 New Product Development (Gray & Matheson, 1998)

Market Research Activities (Hart and Tzokas, 1999) Information Collection Vehicles

H3

The research focused on the companies that involve in manufacturing industry that produce either consumer products or industrial products. The list is obtained from Malaysia Yellow Pages 2006. Due to the financial and time constraints, only manufacturing companies located in Kota Kinabalu were chosen as the population for this study because most of the manufacturing activities in Sabah are based in Kota Kinabalu. The target population is located in Kota Kinabalu, Sabah with the total number of 150 manufacturing companies. Those areas are Inanam, Menggatal, Penampang and Tuaran.

The instrument that was used in this study is a survey questionnaire. The questionnaire takes about 30 minutes for each respondent to complete it. The questionnaire is divided into six parts which comprised of questions regarding strategic orientation, marketing strategy, market research activities, new product development, company profile, and demographic information. The measurement that has been used can be categorized into several divisions. Strategic orientation is measured using seventeen items instruments of Narver and Slater (1990) and Gatignon Xuerebs (1997). This instrument consists of customer orientation, competitor orientation, technological orientation, and inter-functional coordination. The five-point likert scales ranging from 1 (not at all) to 5 (to an extreme extent) is also being used. Marketing strategy is measured by 16 items based on five-point likert scales (ranging from 1 = not use at all to 5 = use as great extend). Marketing strategies are measured based on Noor Azlins (2003) study which are divided into 4Ps elements, which are product, promotion, distribution and price. Product characteristics elements are product design, product quality, service quality, number of product lines, and number of item in the product lines. For the promotion characteristics, it is operational using the size of advertising budget, budget setting process, media allocation and advertising and promotion contents. For the third element, which is distribution characteristics, physical distribution, type of channel of distribution, and sales force management are used to assess the extent of standardization of the distribution component. Finally, price characteristics are operational by price, currency used, payment security and credit terms. Market research activities are measured using Noor Azlins (2003) by means of a five-point likert scale, (ranging from 1 =not used at all to 5 = use to a great extend.) A total of ten information collection vehicles are identified in the element of market research activities. Environmental factors instrument was measured using economic trend and supply conditions of Azaze et al., (2005). Both dimensions were treated as environmental factors because they were categorized as uncontrollable factors. The five-point likert scales were range from 1 (None) to 5 (Substantial). For new product development, there are 30 questions adopted from Gray and Matheson (1998) measurement consists of sales, NPD objectives and expectations, NPD program, degree of proficiency and NPD in industry in overall. Although most of the scales were adapted from outside Malaysia, however, all of them were also used in various studies in Malaysia. This means, the scales have been modified according to local context. The cronbach alpha for each variable are shown in Table 1.
Table 1:
Aspects of questionnaire Custo mer orient ation 0.87

Reliability of each variable

Strategic Orientation Compet itor orientat ion 0.775 Technol ogical orientat ion 0.91 Interfunctional orientation 0.57 Product characte ristics 0.76 Marketing Strategy Promotion characteri stics 0.92 Distrib ution charact eristics 0.79 Pricing charact eristics 0.74 Market research activities Environmental Factors EconoSupply mic conditi-on situation 0.79 0.70 New product development 0.93

Cronbach

0.82

Data Collection Method The primary data in this study was collected through interviews with marketing managers, operating managers, general managers, or managing directors with experiences in product development for companies listed in the Malaysia Yellow Pages 2006. The data collection was conducted within onemonth period using personal interviews. This study mainly depended on personal interviews because it gave higher response rate compared to other methods. Telephone calls explaining the purpose of the study were made to relevant departments of each organization before any arrangements of appointment being made. About 95 sets of questionnaires were distributed to the manufacturing companies. Out of this, only 88 sets of questionnaires were collected. However, there are merely 80 sets were usable for further analysis. It means that this study has covered 53% among 150 manufacturing companies in Kota Kinabalu. The response rate was consider good than other study conducted in Malaysia (e.g. Azaze, 2005 and Wan Jamaliah and Nordin, 1999) which account of 33.5% and 33% respectively.

Secondary data in the form of public records, journals, books, masters theses, and magazines that reflect the area of investigation were also being extensively collected and reviewed for this study.

4. Data Analysis
Data was analyzed using the Statistical Package for Social Sciences (SPSS) version 15.0 for windows. First, the reliability analysis was conducted on the items of the questionnaire using the Alpha model. Second, descriptive analysis, such as frequencies, means, standards deviation, and mode and median will be utilized to present the characteristics of the sample. Third, frequency analysis will be utilized to determine the strategic orientation, marketing strategy, market research activity, and new product development adopted by manufacturing company in Kota Kinabalu, Sabah. Finally, multiple regression analysis was conducted to examine the relationship between the new product development and the factors of strategic orientation, marketing strategy, market research activities, and the moderating effects of environmental factor. Results There are a total of 14 types of product category out of the 16 types listed on the table 2 that are being involved in this study. Majority of the manufacturing companies is from food and beverage industry (21.3%). It is followed by furniture & wood related products (15.0%); construction & building materials (12.5%); others product (10.0%); machinery & engineering products (7.5%); automotive & component parts (6.3%); plastic products (6.3%); household products & appliances (5.0%); agricultural products (3.8%); pharmaceutical, medical, cosmetic & toiletries (3.8%); textiles & wearing apparel (2.5%); electric & electronic products (2.5%); iron & steel products (2.5%); and lastly rubber products (1.3%). Majority for type of market involved by manufacturing companies is fast moving consumer goods (33.8%). It is followed by consumer durable goods (26.3%); capital industrial equipment (21.3%); repeat industrial goods (16.3%); and lastly others types of market (2.5%). In terms of companys current position in their main market, majority of the manufacturing companies follow or challenge the market leaders (52.5%). There are 33.8% which are niche market and 13.8% which are market leader. The total numbers of full time employees in the organization. More than half of the manufacturing companies have been involved are having 100 or less fulltime employees (58.8%), followed by 101 to 300 person (30.0%), 301 to 500 person (7.5%), and others are more than 1000 fulltime employees (3.8%). The respondents interviewed are Marketing Manager (36.3%). It is followed by Managing Director (23.8%), Operation Manager (17.5%), General Manager (16.3%), Marketing Executive (5.0%) and lastly by Proprietor (1.3%).

Table 2:

Product Category
Frequency 3 10 17 4 2 2 1 2 5 0 12 6 3 0 5 8 80

Product Category Agricultural Products Construction & Building Materials Food & Beverage Household Products & Appliances Textiles & Wearing Apparel Electrical & Electronic Products Rubber Products Iron & Steel Products Automotive & Component Parts Chemicals Furniture and Wood Related Products Machinery & Engineering Products Pharmaceutical, Medical, Cosmetics & Toiletries Gas & Petrol Products Plastic Products Others Total

Majority of the manufacturing companies follow or challenge the market leaders (52.5%). There are 33.8% which are niche market and 13.8% which are market leader. Most of the company might have different main objective depends on their product, but majority of the manufacturing companies want to grow in the existing market (55.0%). There are 20.0% of them who want to expand to new market, 12.5% to maintain position or prevent decline, 11.3% to survive and 1.3% have other objectives (see Table 3).
Table 3: Company's Main Objective
Frequency 9 44 10 16 1 80 Percentage (%) 11.3 55.0 12.5 20.0 1.3 100.0

Main Objective To Survive To Grow in Existing Market To Maintain Position/Prevent Decline To Expand into New Market Others Total

Majority of the manufacturing companies have been involved are having 100 or less fulltime employees (58.8%), followed by 101 to 300 person (30.0%), 301 to 500 person (7.5%), and others are more than 1000 fulltime employees (3.8%) (See Table 4).
Table 4: Total Numbers of Fulltime Employees
Frequency 47 24 6 0 0 3 80 Percentage (%) 58.8 30.0 7.5 0.0 0.0 3.8 100.0

Fulltime Employee 100 or less 101 - 300 301 - 500 501 - 700 701 - 1000 More Than 1000 Total

Multiple Regression Analysis Based on Table 5, R Square of 0.567 indicates that 56.7% of the variance in the dependent variable is explained by the model. The results show that only strategic orientation and marketing strategy are

significant at = 0.05 level. It means that there is a significant relationship between strategic orientation and marketing strategy on new product development in Kota Kinabalu manufacturing industry while market research activities is not statistically significant to new product development. By looking at the coefficients, strategic orientation ( = 0.249), marketing strategy ( = 0.416), and market research activities ( = 0.185), they have proved that positive relationship exists on new product development.
Table 5: Regression Analyses of the Impact of Strategic Orientation, Marketing Strategy and Market Research Activities on New Product Development
Beta coefficients .249* .416** .185 80 33.202** .567

Independent variables Strategic Orientation Marketing Strategy Market Research Activities n F R *p<.05; **p<.01

Table 6:

Hierarchical Regression Analyses of the Impact of Strategic Orientation, Marketing Strategy and the Moderating Effect of Environmental Factors on New Product Development
Beta coefficients .291* .535** 80 47.963** .555 .284* .534** .037 80 31.726** .556 .281 .018 -.544 -.027 .859 80 18.896** .561

Independent variables Strategic Orientation Marketing Strategy n F R Strategic Orientation Marketing Strategy Environmental factors n F R Strategic Orientation Marketing Strategy Environmental factors SO X EF MS X EF n F R *p<.05; **p<.01

Based on the Table 6, R Square of 0.56 indicates that 56.1% of the variance in the dependent variable is explained by the model. The result shows that environmental factors will not moderate the relationship among independent variables and dependent variable. By looking at the Beta coefficient, environmental factors ( = -0.544) has shown the negative relationship on new product development. Researcher did not include independent variable of market research activities in this analysis because Table 6 showed that this variable is not statistically significant to new product development.

5. Discussions
There is a Relationship between Strategic Orientation and New Product Development The relationship between strategic orientation and new product development for Kota Kinabalu manufacturing industry is found to be significant. This indicates that strategic orientation (customer orientation, competitor orientation, technological orientation, and inter-functional coordination) influences the performance in the product development. Thus, this result provides support to Hypotheses 1. It is true that once the company is able to fulfill customers need, have competitive advantage, use advance technology compared to the competitors, and have good level of interfunctional coordination, it will certainly perform well in their businesses. This statement can be supported by the study of Pulendran et al., (2003) in measuring firms performance and it showed that positive and significant association between market orientation and business performance exists if the quality of the market planning system on business performance is controlled. Most of the manufacturing companies understand the important of strategic orientation. Manufacturers produce goods according to the customers satisfaction and needs in order to survive and gain more market share in the industry. Marketing is not limited to the old sense of making sales, but in the new sense of satisfying customer needs. Task of the marketers include understanding customers needs; develop products that provide superior value; and pricing, distributing and promoting them effectively (Kotler and Armstrong, 2005). Moreover in the study of Ramasashan et al., (2002), it shows that there is no significant difference in the level of market orientation and performance of the new products whether these are consumer or industrial products. Either manufacturers of consumer or industrial goods need to always improve their uses of technology in order to increase the performance of product development. It has been proved from the study of Ramasashan et al., (2002), which mentioned that success in new product development is a critical management issue particularly in the technology driven firms. There is a Relationship between Marketing Strategy and New Product Development The relationship between marketing strategy and new product development for Kota Kinabalu manufacturing industry is found to be significant. It indicates that marketing strategy (product characteristics, promotion characteristics, distribution characteristics, and pricing characteristics) influences the performance in product development. Thus, this result provides support to Hypothesis 2. Marketing strategy is significant to new product development because manufacturing company produce goods according to customers requirements, which in high level of product design and quality. This finding is consistent with the study of Porter (1973) which suggested that increasing similarities drive firms to standardize in order to achieve economics of scale in production, distribution, logistics, and promotions. Besides, he also suggested that firms in different industry segments would apply different marketing strategy to gain competitive advantage, and vary across different industries. The specific marketing strategy in an export venture is influenced by product characteristics (Cavusgil and Zou, 1993). For promotion, company is able to know whether customers accept their products or not. Information can be gathered during promotion for further improvement of companys products in the future. In the study of Ramasashan et al., (2002), it appears that the formulation of appropriate marketing strategies is very critical for the successful market and project performance of new products. There is a Relationship between Market Research Activities and New Product Development There is no significant relationship between market research activities and new product development for Kota Kinabalu manufacturing industry. There is no relationship between market research activities and product development. It indicates that by increasing the usage of the market research activities, it will not influence product development positively. This is due to manufacturing companies are more dependent on marketing strategy especially product characteristics in order to generate better result for

their product development. In addition, most manufacturers in Kota Kinabalu are lack of market research activities. This is due to lacking of experts in doing market research in their firm. This finding is consistent with Baker and Zeid (1982) who concluded that influence of market research activities on product development was scattered and conflicting from one another. It is always difficult to fulfill customer satisfactions and needs. Moreover, customer satisfaction will change from time to time. If we simply asked what customers wanted and delivered company might do alright but they would leave little scope for creativity and the really new product. Market research is a more complete process rather than just simply gathering market data. Most new product development teams will use some form of market information in the product development and design process survey results, market trends, and focus group testing (Ramaseshan et al., 2002). Through the interview with respondents, researcher found that most of the manufacturing companies in Kota Kinabalu do not have Research and Development (R&D) Department to collect valuable information and fit the new product development process. The responsibility for this department is taken over by other departments, such as marketing or operating department. The reason provided by the respondents showed that company might have limited capital, which is unable to set up a R&D Department in the company. Furthermore, respondents also said that it needs lot of money in order to conduct a market research. Therefore, companies are more willing to use that money in other usage. Environmental Factors Moderate the Relationship on the New Product Development and: (a). Strategic Orientation This study shows that environmental factors (economic situation and supply condition) do not appear to moderate the relationship between strategic orientation and new product development in Kota Kinabalu manufacturing industry. This indicates that the greater the influence of economic situation and supply condition of environmental factors on strategic orientation is, the less influence they will be on product development in manufacturing industry. Therefore, Hypotheses 4(a) is rejected. Baldauf et al., (2000) mentioned that the effects of the environmental dimensions on organizations are relatively unimportant by the managers. The external factors will not influence the management systems and commitment to the product development. Any negative forms of environmental factors will not give any impact or disturb on the management planning in the manufacturing industry. Furthermore, Kohli and Jaworski (1990) reported that a market orientation may not be strongly related to business performance under condition of booming economics. (b). Marketing Strategy This study shows that environmental factors (economic situation and supply condition) do not appear to moderate the relationship between marketing strategy and new product development in Kota Kinabalu manufacturing industry. This indicates that the greater the influence of economic situation and supply condition of environmental factors on marketing strategy is, the more negative influence it will be on product development in manufacturing industry. Therefore, Hypotheses 4(b) is rejected. The above finding contrasts with the study of Samiee and Kendall (1992) as they found no performance difference between firms guided by standardized strategy or by adaptation strategy.

6. Conclusion and Suggestions for Future Research

In conclusion, this study aims to find the impact of strategic orientation, marketing strategy, and market research activities on new product development among manufacturing industry in Kota Kinabalu, Sabah. It also examines the moderating effect of environmental factors (economic situation and supply condition) on the relationship between strategic orientation and marketing strategy towards new product development. Finding shows that variables of strategic orientation and marketing strategy have significant influences on new product development while variables of market research activities

have no significant influences on new product development. Furthermore, the result also shows that moderating effect of environmental factors does not moderate the relationship of strategic orientation and marketing strategy towards new product development among manufacturing industry in Kota Kinabalu, Sabah. The study adds new understanding in the product development literature regarding the factors affecting the process of development. However, the small sample size of 80 firms interviewed may influence the generalization of the finding. This is due to uncooperative and unwillingness of most of the manufacturing company to participate in the study. Suggestion for future research should examine the impact of strategic orientation, marketing strategy and market research activities with modification on the moderating effects according to the area of study on new product development might provides into better understanding and generalization of knowledge for product development. Finally, for future research, the influence of market research activities on new product development need to be investigated extensively by considering the influence of environmental factors to moderate those relationship.

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Appendix. Items
Strategic Orientation Instructions: Please indicate your opinion by using the following scale on the following statements. Here: 1 = not at all and 5 = to an extreme extent.

Customer Orientation Our business objectives are driven primarily by customer satisfaction. We constantly monitor our level of commitment and orientation to serving customers needs. Our strategy for competitive advantage is based on our understanding of customers needs. Our business strategies are driven by our beliefs about how we can create greater value for customers. We measure customer satisfaction systematically and frequently. We give close attention to after-sales-services.

Competitor Orientation We regularly monitor our competitors marketing effort. We rapidly respond to competitive actions that threaten us. We target customers where we have an opportunity for competitive advantage. Our salespeople regularly share information within our organization concerning competitors strategies. Top management regularly discusses competitors strength and strategies.

Technological Orientation Our SBU uses sophisticated technologies in its new product development Our new products are always at the state of the art of the technology

Inter-functional Coordination We freely communicate about our successful and unsuccessful customer experiences across all business functions. All of our business functions (e.g., marketing/sales, manufacturing, research and development [R&D], etc) are integrated in serving the needs of our target markets. All of our business functions and departments are responsive to each others needs and requests. Our top managers from every function regularly visit our current and prospective customers.

Marketing Strategy Instructions: Please indicate your opinion by using the following scale on the following statements. Here: 1 = not use at all and 5 = use to a great extent. Product Characteristics Product design Product quality Service quality Number of Item in Product Line (Depth of Product Line) Number of Product Lines (Breadth of Product Line) Promotion Characteristics Advertising and Promotion Budget Size Advertising and Promoting Budget Setting Process Media Allocation Advertising and Promotion Content

Distribution Characteristics Physical Distribution Channels of Distribution Sales Force Management Pricing Characteristics Price Currency Payment security Credit terms Market Research Activities Instructions: Please indicate your opinion by using the following scale on the following statements. Here: 1 = not use at all and 5 = use to a great extent. Customer Visits Distributor/Agent Visits Exhibitions Competitor Visits Interview with Individual Buyers Omnibus Surveys (Large Book) Test Marketing Mail Surveys Information Seminars Telephone Interviews Environmental Factors Instructions: Please indicate your opinion by using the following scale on the following statements. Here: 1 = none and 5 = substantial. Economic Situation Increase of demand of our product influence our production level. Customer preferences affect our production level. Supply Condition Supplier problems seriously affect our marketing. Supplier as partners in creating and delivering customer value. New Product Development Instructions: Please use the following scale to indicate extent of agreement. Here: 1= very low and 5 = very high. In the last five years period, what level of involvement did you have in the NPD program/undertakings of your company? In the last five years period, what was the impact of your NPD program/undertakings on the overall commercial performance of yours company? In the last five years period, what was the impact of your NPD program/undertakings on the profitability of yours company? In the last five years period, what was the impact of your NPD program/undertakings on the sales of yours company?

In the last five years period, what was the impact of your NPD program/undertakings on the customer satisfaction of yours company? In the last five years period, what was the impact of your NPD program/undertakings on the technical performance of yours company? Please use the following scale to indicate extent of agreement. Here: 1= very formal and 5 = very formal. How formal are the NPD program/undertakings and NPD process in your company? Please use the following scale to indicate extent of agreement. Here: 1= far below and 5 = very above. In the last five years period, to what extent did the commercial performance of yours NPD programs/undertakings meet your objectives / expectations? In the last five years period, to what extent did the profit of yours NPD programs/undertakings meet your objectives / expectations? In the last five years period, to what extent did the sales of yours NPD programs/undertakings meet your objectives / expectations? In the last five years period, to what extent did the customer satisfaction of yours NPD programs/undertakings meet your objectives / expectations? In the last five years period, to what extent did the technical performance of yours NPD programs/undertakings meet your objectives / expectations? In the last five years period, to what extent did the development cost of yours NPD programs/undertakings meet your objectives / expectations? In the last five years period, to what extent did the launch times of yours NPD programs/undertakings meet your objectives / expectations? In the last five years period, to what extent did the product performance of yours NPD programs/undertakings meet your objectives / expectations? In the last five years period, to what extent did the quality of yours NPD programs/undertakings meet your objectives / expectations? In the last five years period, to what extent did the speed to market (cycle times) of yours NPD programs/undertakings meet your objectives / expectations? Please use the following scale to indicate extent of agreement. Here: 1= much worse and 5 = much better. In the last five years period, how do you rate the overall commercial success of your NPD program/undertakings compared to the industry average? In the last five years period, how do you rate the profitability of your NPD program/undertakings compared to the industry average? How do you rate the sales of your NPD program/undertakings compared to the industry average? How do you rate the customer satisfaction of your NPD program/undertakings compared to the industry average? For the last five years period, how do you rate the technology performance of your NPD program/undertakings compared to the industry average? In the past five years period, to what degree of proficiency was each of the following stages / phases of the NPD process performed? Please use the following scale to indicate extent of agreement. Here: 1= very poor and 5 = very good. Exploratory Search and enquiry activities, idea generation Concept Development Elaboration and substantiation activities, clarification of idea/concepts Prototype Development

Development of commercially relevant prototype, model or product Prototype Testing Laboratory, field or production scale testing Market Development Market generation and stimulation, market analysis activities Manufacturing Start-up Initial product runs, scale-up and preparation for full-scale activities Marketing Start-up Preparation for full scale market entry Technical Services Follow-on market and technical activities accompanying the new products