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The Effects of Brand Orientation, Brand Distinctiveness and Design Innovation on the Brand Performance of the Malaysian Furniture Manufacturing Firms Puteri Fadzline Tamyez 1 , Norzanah Mat Nor 2 , Syed Jamal Abdul Nasir Syed Mohamad 3 Faculty of Business Management 1 Universiti Teknologi MARA Shah Alam, Selangor [email protected] Arshad Ayub Graduate Business School 2 Universiti Teknologi MARA Shah Alam, Selangor [email protected] Arshad Ayub Graduate Business School 3 Universiti Teknologi MARA Shah Alam, Selangor [email protected] AbstractThe study develops and empirically tests a model of the effects of brand strategy and design innovation on brand performance in furniture manufacturing firms. Questionnaires were sent to 500 furniture SMEs operating in Malaysia and 204 effective responses were returned. Confirmatory factor analysis is used to validate the constructs. Research hypotheses are tested using structural equation modeling. The proposed model fits the data well. The results show brand orientation, brand distinctiveness and functional innovation have direct effects on brand performance. Finally, implication and recommendations of these findings are discussed. The paper encapsulates the role of each dimensions of brand strategy and product design innovation to determine a stronger brand performance in the furniture manufacturing firms. Keywords—brand distinctiveness; design innovation; aesthetic innovation; functional innovation; meaning innovation; typological innovation, brand performance I. INTRODUCTION This study examines the role of brand strategy which are the two independent theoretical areas i.e. brand orientation and brand distinctiveness in relation to SME product design innovation on their brand performance. Drawing on the brand strategy process theory by [74] and the design innovation pyramid by [60], it is argued that firms pursuing design innovation and brand strategy will tend to develop superior market dominance and allowing them to achieve brand performance. Exploring this theoretical domains suggest a research gap in which design innovation as a new kind of an innovation approach that can be used to support confirmatory test of its theoretical contribution of knowledge in the field of SME brand studies. The importance of market and brand performance is advanced as a key to a greater firm performance [62, 46, 70]. Brand performance in Malaysia are indicated by two certifications which are the National Mark of Malaysian Brand and Malaysia Pride Quality Mark that depicts quality, excellence and distinction of products by Malaysian companies. There are only two furniture firms that have succeeded in being certified with the National Mark of Malaysian Brand, whereas to date, another 13 leading furniture companies had successfully reached the Malaysia Pride Quality Mark [18]. The present study aims to shed light on these questions. Although some empirical research has been done on the performance effects of brand performance, comprehensive understanding is yet to develop. No studies examine the interplay of design innovation, brand orientation and brand distinctiveness and how this nomological network influence brand performance. The present study makes a further contribution to this field. Our objective is to develop and empirically test a model of the effects of brand strategy and design innovation in furniture manufacturing firms towards brand performance. Besides its contribution to the theory of small business branding, the study has implications for practitioners, allowing them to better understand the benefits of the synergy of both brand strategy and design innovation. II. LITERATURE REVIEW After reviewing the literature pertaining to brand performance, several main gaps were identified. First, it is obvious that little is known about the relationships of the antecedents of brand performance. With the exception of [74], the majority of studies either focused on the importance of brand loyalty in determining brand performance in context of

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Page 1: The effects of brand orientation, brand distinctiveness and design innovation on the brand performancee of the malaysia furniture manufacturing firms

The Effects of Brand Orientation, BrandDistinctiveness and Design Innovation on the Brand

Performance of the Malaysian FurnitureManufacturing Firms

Puteri Fadzline Tamyez1, Norzanah Mat Nor2, Syed Jamal Abdul Nasir Syed Mohamad3

Faculty of Business Management1

Universiti Teknologi MARAShah Alam, Selangor

[email protected]

Arshad Ayub Graduate Business School2

Universiti Teknologi MARA Shah Alam, Selangor

[email protected]

Arshad Ayub Graduate Business School3

Universiti Teknologi MARA Shah Alam, Selangor

[email protected]

Abstract— The study develops and empirically tests a model of the effects of brand strategy and design innovation on brand performancein furniture manufacturing firms. Questionnaires were sent to 500 furniture SMEs operating in Malaysia and 204 effective responses were returned. Confirmatory factor analysis is used to validate the constructs. Research hypotheses are tested using structural equation modeling. The proposed model fits the data well. The results show brand orientation, brand distinctiveness and functional innovation have direct effects on brand performance. Finally, implication and recommendations of these findings are discussed. The paper encapsulates the role of each dimensions of brand strategy and product design innovation to determine a stronger brand performancein the furniture manufacturing firms.

Keywords—brand distinctiveness; design innovation; aestheticinnovation; functional innovation; meaning innovation;typological innovation, brand performance

I. INTRODUCTION

This study examines the role of brand strategy which are the two independent theoretical areas i.e. brand orientation andbrand distinctiveness in relation to SME product design innovation on their brand performance. Drawing on the brand strategy process theory by [74] and the design innovation pyramid by [60], it is argued that firms pursuing design innovation and brand strategy will tend to develop superior market dominance and allowing them to achieve brand performance. Exploring this theoretical domains suggest a research gap in which design innovation as a new kind of an innovation approach that can be used to support confirmatory test of its theoretical contribution of knowledge in the field of SME brand studies. The importance of market and brand

performance is advanced as a key to a greater firm performance [62, 46, 70].

Brand performance in Malaysia are indicated by two certifications which are the National Mark of Malaysian Brandand Malaysia Pride Quality Mark that depicts quality, excellence and distinction of products by Malaysian companies. There are only two furniture firms that have succeeded in being certified with the National Mark of Malaysian Brand, whereas to date, another 13 leading furniture companies had successfully reached the Malaysia Pride Quality Mark [18]. The present study aims to shed light on these questions. Although some empirical research has been done on the performance effects of brand performance, comprehensive understanding is yet to develop. No studies examine the interplay of design innovation, brand orientation and brand distinctiveness and how this nomological network influence brand performance. The present study makes a further contribution to this field.

Our objective is to develop and empirically test a model of the effects of brand strategy and design innovation in furnituremanufacturing firms towards brand performance. Besides its contribution to the theory of small business branding, the study has implications for practitioners, allowing them to better understand the benefits of the synergy of both brand strategy and design innovation.

II. LITERATURE REVIEW

After reviewing the literature pertaining to brand performance, several main gaps were identified. First, it is obvious that little is known about the relationships of the antecedents of brand performance. With the exception of [74], the majority of studies either focused on the importance of brand loyalty in determining brand performance in context of

Page 2: The effects of brand orientation, brand distinctiveness and design innovation on the brand performancee of the malaysia furniture manufacturing firms

customers [15], based on brand team’s, customers’ and employee’s perception of the brand [15], and Dirichlet benchmarks as a brand performance measure [24]. Other research focuses on customers’ satisfaction to perception of the brand’s performance [14].

[74] focused on brand orientation and brand distinctiveness along with innovation in determining a brand’s performance. Motivated by their work, this research expands further the work of [60] which encompasses several unexplored dimensions that lately have attracted research attention in other disciplines [69]. Some of these unexplored types of design innovation appear to be important and worthy of investigation in the context of design-driven innovation.

Hence, this research intends to integrate the work of [74] with the study of [60] by investigating design innovation as a possible antecedent of brand performance, rather than innovation in a general term. In essence, it is theorized that a symbiosis of brand orientation and brand distinctiveness alongwith design innovation directly affect on brand performance toenhance the brand performance of a firm. Consequently, this framework helps to develop three hypotheses which are proposed in the next section.

A. Brand Orientation

Extensive research by [70, 34, 16, 9, 8, 48, 59, 64] have been conducted on brand orientation due to the increasing number of customers that have consistent hunger for branded products either through online shopping or directly from the store. However, little research has been done on the advantages of companies that are brand-oriented especially among SMEs as revealed by [40, 70, 52, 71]. Conceptual development on brand orientation are carried out by scholars [67, 16], and other scholars focused on brand orientation through case studies [70, 46, 72]. Orientating the brand is a perfect choice for a long term strategy that must not be an unseparated part of a firm’s value [22, 50, 9]. The concept of brand orientation can be carried out as a whole and therefore itis considered as a multidimensional construct that consists of the firm’s values, beliefs, behaviours and practices towards brands [35]. Therefore, [9] suggested that brand capabilities are built through orientated organization value practices. Thus,it is hypothesized that:H1: Brand orientation is a positive determinant of brand performance

B. Brand Distinctiveness

[43, 29, 47] posited that brand distinctiveness is one of the premium principles in marketing theory and practice. Companies are currently striving to build brand distinctivenessto avoid being labeled as commodity companies [71]. Recognition of a brand or triggered brand associations are some benefits from being distinctive [35, 11]. [19] clearly stated that brands are capable to be distinctive from others. Besides that, [31] reported that having a distinctive brand marks as a warranty of consistency and this enables a better way for decision-making. Most scholars namely [31, 19]

suggested that distinctive capabilities are critical to achieve their brand objectives. Distinctiveness is considered one of themost important factors in a brand’s growth and much more substantial than differentiation as it produces a lasting brand when pursuing distinctiveness, although both are important [11]. Hence, brand distinctiveness is the most fundamental andprerequisite to develop a strong brand [70]. Thus, it is hypothesized that:

H2: Brand distinctiveness is a positive determinant of brand performance

C. Design Innovation

The process of innovation requires integrated alliances, outsourcing and partnerships with other firms, institutions and universities [69]. Values are created and added when design synergizes with creativity, innovation and strategy. This is carried out by applying creativity as an idea development, innovation as exploiting the new ideas and branding as a tool of differentiation and finally designing the product or service that touches the emotions and experience of the users [1]. In fact, [56, 30, 23] had proved that design contributes to twice the level of innovation in their companies. This implies that higher innovation reflects to higher success in market competitiveness. Identically, the combination of technology, design and organizational innovation contribute to higher company performance [27].

[75] agrees to the notion and added that design innovation also focuses on exploring new market potential and boost the brand image. [1] posited that even though design tend to be more innovative, more profitable and grow faster than other competitors, the application of design is in fact much broader than the aesthetics and merely on the looks of the products. The technology development within the wood processing industry is driven by rapidly changing wood materials quality, increasing production as well as energy costs, increasing responsiveness to environmental pressures, and increasing consumer demand for wood products that are greatly enhancedin comparison to products from other materials [57]. [1] reveals that meaning innovation touches the mentality and emotion of the customers and does not involve the functional and aesthetics of the product itself [61]. Thus, it clearly signifies that design innovation is crucial for management [10,23, 10, 49, 65, 54]. Thus it is hypothesized that;H3:Design innovation is a positive determinant of brand performance

By integrating brand strategy and the design innovation pyramid of the brand performance, the main premise of the theoretical model as exhibited in Figure 1 is that brand performance can achieve advantages in both local and foreign market and in turn, superior performance through deploying appropriate dimension of design innovation in the brand competitive strategies. All in all, the proposed research model is depicted in Figure 1:

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Figure 1: Conceptual model

III.METHODOLOGY

CEOs and marketing managers in furniture manufacturing firms located throughout Malaysia were selected as the target sample using stratified random sampling method. Brand orientation, brand distinctiveness and brand performance questionnaire were developed by [74]. The 27-item design innovation questions were adapted from [60] which were grouped into 4 different dimensions: aesthetic, functional, meaning and typological innovation. 910 furniture firms were drawn from SME Corporation Malaysia according to their sales revenue in 2011.

Overall, of the distribution of 500 samples, 204 usable questionnaires were received after elimination of missing data and outliers. The model was tested using Structural Equation Modeling (SEM) techniques using AMOS 21. Scholars such as [13, 32] suggested SEM as a rigorous tool to develop a reliable and valid measure. Previous studies on brand orientation also adopted SEM in estimating and testing complex systems of conceptual relationships. Thus, SEM provides an overall model fit and individual parameter estimate test simultaneously [32, 42].

IV. FINDINGS

D. Reliability and Validity

This stage replicates the work of [33] which examines theconstruct validity through both the convergent anddiscriminant validity. Content validity is also assessedsubjectively to measure the scale and characteristics of thevariables involved [50]. The developed questionnaire wasscrutinized by lecturers from University Teknologi MARA;Faculty of Art and Design and Business Management and theChairman of the Malaysian Furniture Promotion Council(MFPC), for content validity.

In this stage, the AVE, composite reliability and CronbachAlpha were performed. AVEs above 0.5 are treated as theindications provided by the convergent validity. AVE alsoemerges from the two-step procedure as contained in theproposal of [2]. The composite denotes the amount of the scalescore variance that is accounted for by all the underlyingfactors. Composite reliability, thus, corresponds with the more

commonly used notion of reliability, as far as the classicaltheory is concerned. Composite reliability should equate, orbe greater than 0.7 suggested by [32].

Table 1: Reliability and Validity

Construct Factorloading

AVE Compositereliability

Cronbach'sAlpha

Brand Orientation 0.796 0.64 0.91 0.91

Brand Distinctiveness 0.856 0.73 0.95 0.95

Functional Innovation 0.880 0.77 0.96 0.96

Meaning Innovation 0.864 0.75 0.95 0.95

Aesthetic Innovation 0.735 0.54 0.76 0.86

Typological Innovation 0.759 0.59 0.80 0.87

Brand Performance 0.798 0.64 0.85 0.91

Discriminant validity adopts the Pearson’s correlation toassess the discriminant, as well as probing into the magnitudeand direction of the correlational relationship [33]. Accordingto [25], the correlation of 0.5 may be a distinct concept, whilea correlation of 0.8 and above may be hinting that the lack ofconceptual distinction has surfaced. [42] suggested a specificcriterion of r<0.85. This is agreed by [13, 66] whorecommended highly correlated constructs will notdemonstrate discriminant validity. These results as presentedin Table 2 show that the constructs are all below 0.8,suggesting that the discriminant validity is present between theconstructs.

Table 2: Discriminant Validity

Correlation BO BD FI MI AI TI BP

BO 1

BD .526** 1

FI -.311** -.576** 1

MI .287** .548** -.372*

*1

AI -.141* -.363** .291** -.239*

*1

TI .370** .453** -.311*

*.296** -.207** 1

BP -.237** -.385** .508** -.267*

*.159* -.214** 1

Note: BO = Brand orientation, BD = Brand distinctiveness, FI = Functional innovation, MI = Meaning innovation, AI = Aesthetic innovation, TI = Typological innovation, BP = Brand performance

E. The Structural Model and Analysis of Paths

Test of fitness of the model used on the whole sample produces a χ² value of 1235.224 with the freedom of 970. Therefore, the CMIN/DF was reported to be 1.273. Referring to Chi square, the model does not seem to be compatible. However, the chi square value offers a certain degree of sensitivity to the sample size. As another option, there are several indices which serve to be a potential indicator that can

Untested Theoretical Relationships

Supported Theoretical Relationships

BRAND STRATEGYBrand Orientation

Brand Distinctiveness

DESIGN INNOVATION

BRAND PERFORMANCE

AestheticFunctionalMeaning

Typological

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determine the goodness of fit. Noticeably, the TLI and GFI values were above 0.9 which suggest that the model can fit thedata well. TLI, NFI and GFI are close to 1, which suggest that the model and the data are also harmonious with one another [35].

GFI shows a reasonable value of 0.803. The RMSEA value was 0.037 and the 90% confidence interval varies from 0.031 to 0.043. The narrow confidence interval of 0.012 suggests that the RMSEA value is precise and 0.05 implies that it has good fitness. The SEM test was performed which covers the estimation of path coefficients describing the relationships between dependent and independent variables, and covers R-Square value which represents the amount of variance explained by the independent variable. Non-standardized regression coefficients are represented by the path coefficients, as exhibited in Table 3:

Table 3: Path Analysis

V. DISCUSSION

F. Hypothesis One: Brand orientation positively influences brand performance

The results of the structural model show that brand orientation positively influences brand performance (CR=3.22, p<0.05). This implies that the important role of brand orientation cannot be denied in terms of explaining brand performance. Brand orientation demonstrates a strong positive influence on brand performance [74]. More precisely, [25, 8, 72, 67] posited that it portrays a more positive influence in the perspective of awareness, loyalty, image and reputation. In this respect, managers have to comprehend the development from a market to a brand oriented company in order to elevate the brand orientation of their companies [7]. Supplementary to this, orientating a brand in a firm will reflecta change in a customer’s taste which strengthens the position of a brand before it enters the market. However, to escape from a mature original market or a decline of market, a firm must consider a long-term perspective by investing the brand over a long period [39].

G. Hypothesis Two: Brand distinctiveness (BD) is a positive determinant of brand performance

The finding reveals the significant association between brand distinctiveness and brand performance (CR=6.69, p<0.05). This result is congruent with [73]’s work that recommends a strong brand requires differentiation from the firm’s perspective. Due to that, customers will have higher willingness to pay more for a brand which owns a set a of

unique values unlike the other brands [38, 62]. In essence, brand distinctiveness is not only a determinant towards brand performance, but also towards brand equity and success [41, 68].

H. Hypothesis Three: Design innovation positively influences brand performance

This study indicates that product design innovation doespromote brand performance (CR=5.52, p<0.05). [67] revealedthe real challenges of today’s designers in putting emotionneeds or meaning innovation as soft attribute in productsrather than technologies as hard attributes. This interpretationcontrasts with that of [57] who argued that the Malaysianfurniture industry are urged to innovate with the latestmanufacturing technologies to remain competitive asenvisaged by the government in the NATIP plan (NationalTimber Policy 2009-2020) in achieving RM 16.0 (USD5.24)billion furniture exports by year 2020. Italian companies thathave strong brands as well as unique designs are goodexamples of applying the ‘design push’ or a combination offunctional and meaning innovation as stated by [45,69].

VI.IMPLICATIONS AND CONCLUSIONS

An empirical study was conducted to identify determinants of brand performance for the furniture manufacturing firms in Malaysia. The results demonstrated that brand performance can be explained in terms of brand orientation, brand distinctiveness, and design innovation. These findings confirmthe results of [74, 72, 73, 3, 61]. This research has combined branding and design innovation domains to propose how branding might facilitate better brand performance. The proposed model could help decision-makers to identify key variables of design innovation that can be controlled on a managerial level depending on their firm’s ability. Developingan improved strategy or model by fine-tuning these set of variables of design innovation to their structure of firm will enable to develop a more design innovative environment with a synergy of orientated, distinctive brand to create a superior competitive advantage.

Brand orientation and brand distinctiveness were confirmedas antecedents of brand performance, a brand process model applied by firms to perform brand activities in their organizations. The findings highlighted the importance of these two elements of branding which needs to have consistentmonitoring to ensure competitiveness among the players in theindustry. Supplementary to this, design innovation particularlyfunctional innovation had been highly emphasized in the National Timber Industry Policy to enhance market penetration and strengthening the domestic market [17].

Hence, functional innovation may be a good option to be adopted by furniture manufacturing companies in Malaysia. According to [3], companies in UK that had invested in designhas higher turnover than non-design led companies. However,

Path Β S.E CR PH1 Brand

Orientation→ Brand

Performance.460 .143 3.22 ***

H2 BrandDistinctiveness

→ BrandPerformance

.542 .081 6.69 ***

H3 DesignInnovation

→ BrandPerformance

.792 .144 5.52 ***

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this strategy needs to be decentred to fit acceptable dimensionssuch as the role of designers and manufacturers in Malaysia.

The search for a Malaysian identity is a retrospective effortin innovation and it is possible to turn to the traditional artsand culture as a source of reference [4]. Ultimately, firmsshould be able to create different designs that willappropriately fit to numerous markets around the world. Asiandesigns would be respected by the world over through thatstatus [5].

To conclude, this research provided a good starting point in investigating brand performance in non-western countries. A strong brand will create a valuable asset which would avoid any imitation and difficulty for any competitors to copy [69,75].

ACKNOWLEDGMENT

Special gratitude and acknowledgements to the Malaysian Furniture Promotion Council (MFPC) and fellow respondents who have been supportive throughout the research.

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