Designing Marketing Innovation Model of date Business Cluster in Iran (Case study: Khuzestan Province)

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1 Designing Marketing Innovation Model of date Business Cluster in Iran (Case study: Khuzestan Province) Masoud Hekmat Department of Agricultural Development, Science and Research Branch, Islamic Azad University, Tehran, Iran Seyed Mehdi Mirdamadi: Corresponding Author Associate Professor, Department of Agricultural Development, Science and Research Branch, Islamic Azad University, Tehran, Iran Seyed Jamal Farajollah Hosseini Associate Professor, Department of Agricultural Extension and Education, Science and Research Branch, Islamic Azad University, Tehran, Iran Davood Samari Associate Professor, Islamic Azad University, Karaj Branch, Karaj, Iran Mohsen Ebrahimpour Institute of Planning and Agricultural Economics Research, Tehran, Iran Abstract: The aim of the research is to design marketing innovation model of date business cluster in Khuzestan, Iran. Regarding the nature of the subject, this study is quantitative and regarding the purpose, it is applied. In terms of methodology, it is descriptive-correlational and analytical, and causal-relational type regarding controlling the variables, and in terms of time, it is a review study. The study population includes all executives, assistants, and marketing staff of date production and processing workshops that are members of the date business cluster of Khuzestan. They are totally 67 workshops in which 392 people are employed in marketing. In this study, to determine the study population, random sampling method was used and the number of sample was selected in proportion to the village population. Using the table provided by Krejcie and Morgan (1970) and according to the number of people and volume of the study sample size, the study population was estimated as n=190. Dependent variable is marketing innovation aspects in date business cluster and independent variables are individual characteristics, policy factors, infrastructure factors, economic factors, social factors, management factors and educational factors. The results obtained using structural equation modeling indicated that "education-promoting" factor with factor loadings (0.87) has the highest and "policymaking" factor with factor loadings (0.79) has the lowest correlation with latent variable Marketing innovation dimensions of date business clusters." In addition, "innovation management" with factor loadings (2.28) has the most and "innovative activities" with factor loadings (-0.2) has the lowest correlation with the latent variable. Keywords: Business cluster, Khuzestan Province, Dates, Marketing, Innovation 21

2 1- Introduction Reduced economic efficiency, misallocation of resources and unfavorable income distribution with reduction of incentives to invest in the long term will negatively affect the economic growth of communities, especially Third World countries. In recent decades, some developing countries have reached considerable success in economic development and trade, especially non-oil exports (Hosseini and Hosseini, 2009). In past decades, Iran has had abundant oil revenues, but physical capital infrastructure has not been in good conditions. Legal and Cognitive institutions required for the country's economic growth do not exist, and unproductive sector has dominated the economy and affected the allocation of resources. All these factors combine to make such a difficult status of growth and prosperity to the country (Mehregan and Mohseni, 2012). One of the major factors that lead to failure to achieve the objectives of agricultural development and increased production and income of farmers in developing countries is the agricultural marketing system failure. Today, in most advanced countries, marketing of agricultural products is considered as one of the major sectors of the economy. Given the current world situation, the production has gotten away from traditional form and production for sale on the market is one of the main targets of manufacturers. Market is the embodiment of all activities of producers to get a profit from production. Thus, marketing campaign does not start from the beginning of harvest time but from the decision to produce. In this regard, the marketing of agricultural products gets special importance due to the particular characteristics of these products including corruptibility, seasonality and demand for all-season. One of the things that have always been in the marketing of agricultural products in less developed countries including Iran is the difference in price of the producer that is the price he gets with the price the consumer pays. However, it should not be assumed that this difference in price is only in developing countries, but it is also seen in developed countries. However, here the higher price differences are due to services such as packing, grading and converting the product whereas in less developed countries little service is done on the product. One of the factors blamed for this difference in prices is mediating factor called speculators. This mediating factor has a decisive role in prices and thereby becomes the owner of huge profits due to the monopoly control of the market (Mirzajani, 2011). Population growth, growth of urbanization, food security and food security crisis, the instability of the environment, the move from traditional agriculture to commercial agriculture have caused enhancing living standards and improving the income of producers to be the subject of agribusiness and providing innovative patterns to be important. This is such that marketing concepts in the current circumstances have assumed broader dimensions and instead of concentrating only on consumers, it includes all stages from planning stage to stages later after consumption. Therefore, it makes the importance of innovation in marketing of agricultural products and the need to review the current situation and the structure of the market and marketing of agricultural products inevitable (Kazemnejad, et al., 2004). Today, with the increasing number of domestic and foreign producers, competition for granting consumer satisfaction is an important goal of any market. Improved packaging, grading, storage and timely delivery of product, reducing the sale prices by reducing costs, reducing intermediation margin are of the factors that play an important role is satisfying 22

3 producers and consumers and lead to increase of product marketing and internal and external market boom (Rajai Nasiri, 2011). Increasing unemployment alongside increasing degradation of resources is of economiccultural challenges of many developing countries including Iran. These problems have more depth and complexity in rural areas. One of the basic economic problems of the agricultural sector in Iran in the past and now is the low average income of agricultural producers. Low income is the cause of many problems including poverty, inequality, and migration and so on. Low-income of farmers and producers have several reasons, one of the most important one is hidden and seen unemployment in the agricultural sector, which is due to the inability to create jobs in this sector. Agribusiness business clusters due to the nature of their activities and the focus on different areas can greatly reduce unemployment in their performance areas and prevent possible social damage in these areas. Thus, identifying and access to new markets and offering innovative models in the field of marketing of these clusters can play a significant role in reducing these problems (Mollashahi, 2012). Business clusters of agriculture could be the working engine of national and regional economy, and the development of agricultural enterprises and production units in the form of cluster development will be more efficient due to increased output of cooperation and collaborative activities. On the other hand, attention to marketing of agricultural business clusters and creating and deploying an innovative marketing system could increase the number of production units in the region, improve the employment, boost exports, create links with other areas, and identifying and access to new markets. Iran is considered as a major producer of dates in the world, so that in 2007, with production of more than 16% of world date, after Egypt won the second place in the world, but because of problems in the field of marketing, packaging and fulfillment of export promotion programs, it could not compete with other producers and exporters (Karimifard et al., 2011). This research seeks to explain and design the pattern of innovation in marketing of date business cluster in Khuzestan, to make it possible to offer the produced product with a simpler way to consumer markets and on the other hand significantly increase the income of the producers through decreasing the role of intermediaries and speculators. Obviously, achieving these goals paves the way for the entry of other interested in producing. Thus, improving the employment status in the region will not be away from reality that will bring about the economic growth in the studied area. Mousavi and colleagues (2014) conducted a study called social factors contributing to the enhancement of innovation management in agriculture and rural cooperatives in Tehran. The results showed that increasing cooperation and interaction between the managers and members of co-operatives in the field of innovation, beliefs, and convictions of members of the innovation in cooperatives and agricultural cooperatives with each other in exchanging innovative experiences have explained 55.2% of the changes of improving management of innovation in rural agricultural cooperatives. Saafi sis et al (2014) conducted a study titled comparative analysis of the role of public and private organizations in promoting the adoption of agricultural initiatives in Tarom, Zanjan. The results of the regression analysis showed that social capital of public sector of agricultural extension explains 31.5% of the and the changes in adoption of innovations, this is while the private sector accounted for only 3.5% of the changes of adoption. 23

4 Mousavi and Farajollah Hosseini (2013) conducted a study titled Effective educational strategies to promote innovation management in agriculture and rural cooperatives in Tehran. The results of multiple stepwise regression analysis showed that the solutions of visiting research-scientific centers active in the field of innovative technologies in agriculture and holding educational courses of introduction to innovation management for cooperative managers explained 45 percent of the change in promotion of innovation management in agricultural and rural cooperatives. Soltani et al (2012) carried out a study as the identification of factors affecting the management of innovation in small rural food industry in Tehran. The results showed that environmental factors and relationship with manufacturers factors have a positive impact on the companies becoming innovative. Among innovative companies, factors affecting the level of innovation management are the properties of company with negative impact contact with consultant with a positive impact. Moreira et al (2015) conducted a study called (Drivers of marketing innovation in companies in Portugal. The results showed that the financial support of the research and development of research activities within the company: the acquisition of machinery, software, and equipment, acquisition of foreign knowledge and performance of other producers affect marketing activities towards the tendency of companies to innovate in the marketing process. Omani (2015) conducted a study entitled Analyzing the innovation management prediction model in management of process industries of livestock. The results showed that the level of innovation management in the processing and finishing industries of livestock products in Khuzestan is not in a good condition. Income, competitiveness, responsibility, risk-taking, the desire to creativity, education and attitude towards innovation play a positive and effective role in improving the management of innovation. Mumtaz Baloch and Gopal Thapa (2014) conducted a study titled Agricultural Extension in Pakistan: access and content of date owners. Logistic regression analysis identified 5 variables out of 6 variables that had a significant effect on date owners access to extension services including age of household head, education of household head, number of palms owned by the household head, the trees inherited and the percentage of dead trees. The majority of farmers were not satisfied with three main ways to promote public extension services provided by the authorities. In order to overcome this shortcoming, reviewing policy and advocacy planning largely eliminates the problem of agriculture. Ghanee (2014) conducted a study titled Status of Iranian date market and its ability to enter the EU market. The results showed that Europe date imports has allocated 10% of world imports to itself while its value is 30% of the total value of world exports. The results reflect the fact that any country wishing to enter EU market to export date to Europe, at first must be removed from their traditional state. However, with ups and downs in the export, Iran does not have a permanent and stable overseas market, but Iran has the opportunity to match its date in line with international standards in terms of quality and packaging and in this way achieve widespread markets. 24

5 2- Research Methodology Regarding the nature of the subject, this study is quantitative and regarding the purpose, it is applied. In terms of methodology, it is descriptive-correlational and analytical, and causal-relational type regarding controlling the variables, and in terms of time, it is a review study. The study population includes all executives, assistants, and marketing staff of date production and processing workshops that are members of the date business cluster of Khuzestan. They are totally 67 workshops in which 392 people are employed in marketing. In this study, to determine the study population, random sampling method was used and the number of sample was selected in proportion to the village population. Using the table provided by Krejcie and Morgan (1970) and according to the number of people and volume of the study sample size, the study population was estimated as n=190. Dependent variable is marketing innovation aspects in date business cluster, which includes three aspects: innovation activities, innovation management, and Cognitive factors. Independent variables in this study are in the following groups: Individual characteristics (age, sex, level of education, experience in the production and marketing of dates, marital status), policy factors, infrastructure factors, economic factors, social factors, management factors, and educational factors. To identify latent variables of the research and their extent of effect, structural equation modeling using LISREL software was used. 3- Results The results obtained showed that 79.5% of the respondents with frequency of 151 were men and 20.5 were women with frequency of 39. In studying the marital status, it was found that 27.9% of the study population with 53 frequency were single and 72.1% with a frequency of 137 were married. The data showed that of the total of 190 staff members of the date business cluster associated with marketing activities regarding the age groups, 5.9% with a frequency of 11 subjects are less than 20 years, 35.3% with a frequency of 67 people in the group of years, 43.6% with frequency of 83 are in age group, 11.6% with a frequency of 22 people in the group and 3.7% with a frequency of 7 persons are in 66 years and over group. The results showed that 4.7% of subjects with a frequency of 9 people in terms of education are illiterate, 10.5 percent with a frequency of 20 have elementary level studies, 17.4% with a frequency of 33 people have guidance school education, 20 percent with a frequency of 38 subjects have high school education, 25.3 percent with a frequency of 48 have a diploma, and 22.1% with a frequency of 42 have higher than diploma level of education. The results showed that 60% of subjects with a frequency of 114 in terms of experience in date production are in 1 to 5 years experience, 19.5 percent with a frequency of 37 people are in group of 6 to 10 years, 8.4 percent with a frequency of 16 people are in from 11 to 15 years, 3.2% with a frequency of 6 people from 16 to 20 years, 7.3 percent with a frequency of 14 persons at 21 to 25 years of experience and 1.6% with a frequency of 3 subjects are in the group of 26 to 30 years of experience. 25

6 The results showed that 76.8% of subjects with a frequency of 146 in terms of marketing experience of date are in group 1 to 10 years, 11.6% with a frequency of 22 are in the group of 11 to 20 years of experience, 10% with a frequency of 19 people in the group from 21 to 30 years and 1.6%, with a frequency of 3 subjects are in 31 to 40 years (table 1). Table 1. Distribution of individuals according to personal characteristics Variables frequency (n) Percent The cumulative percentage Gender Man Women Marital status Single Married Age Groups Less than to to to and over Education Illiterate Elementary Guidance High school Diploma Higher than diploma The record in date production 1 to to to to to to Marketing experience 1 to to to to Modeling of structural equation Due to the inclusion of SEM measurement errors in the model, structural equation model provides more accurate estimates of the causal relationship. Weighted least squares estimation model with data correlation and covariance matrix asymptotic Couric were used 26

7 to analyze the data. Weighted least squares method was preferred because the data were stratified in five classes and Couric solidarity should be calculated instead of Pearson correlation. Chi-Square= df=428 P-value=0.12 RMSEA=0.044 Figure 1: Structural Equation Model of the Research Policy= Policy Making Factors Man= Managerial Factors COG= Cognitive Factors Social= Social Factors Edu= Educational Factors IM= Innovation Management Eco= Economical Factors INNO MAR= Innovation Marketing IA= Innovation Activity 27

8 Market ing Mechan isms Innovative Activity Innovation Management Cognitive Factors Designing Marketing Innovation Model of date Business Cluster in Iran Table 2: Studying the values of the structural equation Structures Symbol Standard rate T value Significance C Insignificant C Significant C Significant C Significant C Significant C Significant C Significant I M Insignificant I M Significant I M Significant I M Significant I M Significant I M Significant I M Significant I M Significant I M Significant I M Significant I A Insignificant I A Significant I A Significant I A Significant I A Significant I A Significant I A Significant I A Significant I A Significant According to the results obtained from this analysis, each of the options according to their special are placed in a special place. In cognitive factors, "the interaction between managers and employees" with the highest factor loadings (0.70) is the first priority, and "the importance of marketing and identifying new markets" with (0.58) factor loadings is in the last priority (Table 2). In innovative activities improvement of distribution network with the highest factor loadings (0.85) is in the first priority, and improving the quality of services with factor loadings (0.55) has the last priority (Table 2). In management of innovation the factor of investment in research and development with highest factor loadings (0.70) is in the first priority, and elements of marketing innovation must be accompanied by spending cuts with factor loadings (0.09) is in the last priority (Table 2). Table 3: Overview of structural equation modeling Latent variable Observed variables Standard rate T value Significance social factors Significant Economic factors Significant Management factors Significant 28

9 Dimension s of Marketing Innovation Designing Marketing Innovation Model of date Business Cluster in Iran Educational factors Significant extension Policy making Significant factors Innovation Significant Management Innovative activities Significant Cognitive factors Significant The results obtained using structural equation modeling indicated that "educationpromoting" elements with factor loadings (0.87) has the highest and "policymaking" with factor loadings (0.79) has the lowest correlation with latent variables "Dimensions of marketing innovation." Moreover, innovation management" with factor loadings (2.28) has the highest and innovative activities" with factor loadings (-0.2) has the lowest correlation with hidden variable marketing innovation." Table 4: Measures to assess overall fit of the structural model Row Index Value Desirable level status 1 X Df P 0.12 > 0.05 Desirable 4 X 2 /df 1.72 > 3 Desirable 5 RMSEA < 0.05 Desirable 6 GFI 0.8 < 0.9 Relatively desirable 7 AGFI 0.77 < 0.9 Relatively desirable 8 NFI 0.95 < 0.9 Desirable 9 CFI 0.98 < 0.9 Desirable 10 RMR Closer to Zero Desirable A total of 10 indicators to measure the structural model, 8 are in good condition and only 2 indices AGFI and GFI are in relatively good condition. According to the results, it can be stated that the overall fit of the structural model is in good condition. In other words, the quality of the overall fit of the structural model estimated is as appropriate. 4- Discussion and conclusion Management factors have an impact on marketing innovation of date business clusters. This result is consistent with many studies such as Mousavi et al (2015), Soltani et al (2013) and Mumtaz Baloch and Gopal Thapa (2014). It seems that the development of a strategic plan by the manager, getting advice from marketing experts by the manager and using specialists can pave the ground for marketing innovation in marketing innovation of date business clusters. Social factors have an impact on marketing innovation of date business clusters. This result is consistent with studies such as Moreira et al (2015), Ommani (2015), Mumtaz Baloch and Gopal Thapa (2014). It seems that the improvement of date consumption Cognitive in the community and considering the need of the consumer can provide the grounds for marketing innovation in date business clusters. 29

10 Economic factors have an impact on marketing innovation of date business clusters. This result is consistent with different studies such as Moreira et al (2015), Saafi Sis et al (2014) and Ghane (2014). It seems that regulating the pricing of date, narrowing the gap between wholesale and retail prices, and creating financial incentives, price adjustment, and processing industry on the market could pave the ground for the creation of marketing innovation in dates business clusters. Policy making factors have an impact on marketing innovation of date business clusters. This result is consistent with different studies such Mousavi and Farajollah Hosseini(2014), Soltani et al(2013) and Moreira et al (2015). This result suggests that the adjustment of the agricultural sector in relation to the date and manner of its exports, improving marketing research and complementary industries and increasing the capacity of the Union of date in protecting the rights of its members can lead to innovation in date business clusters. Participating in educational-promotion courses has an impact on marketing innovation of date business clusters. This result is consistent with different studies such as Moreira et al (2015), Saafi Sis et al (2014) and Mumtaz Baloch and Gopal Thapa (2014). This result suggests that holding educational courses for managers for familiarity with marketing firms, and specialized training programs for managers of enterprises, increasing advertising and marketing courses in innovative thinking can lead to innovation in date business clusters. Findings of structural equation modeling showed that cognitive factors have a significant positive correlation with latent variable "aspects of marketing innovation." Several studies such as Moreira et al (2015), and Mumtaz Baloch and Gopal Thapa (2014), Ommani (2015) support these findings. This result suggests that creating a comprehensive and holistic view towards creating new markets and to deal with strategic inertia (attachment to the previous strategies) could be the way to develop innovative marketing programs for managers and owners to attend workshops in competitive markets. Findings of structural equation modeling showed that the management of innovation has a significant positive correlation with latent variable "aspects of marketing innovation." Various studies such as Mousavi and Farajollah Hosseini (2014), Soltani et al (2013) and Mumtaz Baloch and Gopal Thapa (2014) support these findings. Based on these findings, it appears that investment in research and development, the relationship between managers and owners of manufacturing firms and research centers, implementation, development and enhancement of the quality management system in the company increase the production capacity of the firm through knowledge management. Suggestions From delving into research, especially its analytical results, some recommendations can be given especially with regards to policy making, promotion-education, and infrastructure, social, economic and administrative issues as follows to promote innovation in the field of date business marketing innovation clusters. Achieving some of these goals and improving educational programs to encourage authority in business workshops in the field of marketing innovation of date business cluster should be paid attention to by the authorities and other stakeholders in the agricultural sector so that the managers who are members of date business cluster could improve work situation in the field of marketing innovation boost it from lower and average levels to higher ones. 30

11 Since 84.7 per cent of producers are less than 50 years old, and on the other hand over 60 per cent of producers have less than 5 years' experience of manufacturing dates, it is recommended that Dried Fruits and Dates Union take advantage of people with experience and expertise in date production as the advisers of the workshops. Moreover, as 92.9 percent of producers have secondary level and lower in terms of education, it is recommended that higher education institutions (such as Scientific-Applied University and agriculture training centers and Agricultural Jihad), like other courses that have been required for the regional market and have also been established in these centers, try to create date production and marketing major, because date is the most strategic garden product of Khuzestan and has always brought good exchange for the country. The results showed that there is a significant positive correlation between management and innovation dimensions of marketing of date business cluster, so it is recommended that by developing a proper strategic planning and marketing strategy, along with the acquisition of advice from the experts and using specialists forces, they should enhance their innovation capacity and while reducing production costs, create new demand for production units. Instability of marketing policies, illiteracy and lack of information of business owners about legal and business issues have caused date production workshop managers of Khuzestan to act weakly in the field of date marketing research and complementary industries and not be able to use modern methods of marketing. Accordingly, it is recommended that Dried Fruits and Dates Union act more strongly in support of its members rights and by creation of active marketing units to monitor and educate about harvesting, packaging, grading, and transport to improve product exports for producers and producers be able to brand their products. Due to the instability of export earnings from dates because of the fluctuations in the demand for this product in Iran, by taking measures such as holding training-promoting classes in various stages of production (planting, maintaining and harvesting) for managers of workshops and date growers and by providing the required inputs such as pesticides and fertilizers by Agricultural Jihad pave the ground for the production of higher quality product so as it can compete in new competitive markets and obtain appropriate market favor, and thus increase the demand for it. With regard to the fact that in the present system of marketing the most interests is obtained by dealers (wholesale-retail and reseller) resulting in less revenue and profit for manufacturers that causes reduction of the incentive among producers and on the other hand, the date price increases much higher than the marketing costs on it, government and policy making organizations can establish marketing and distribution cooperatives of dates business clusters with the cooperation of member producers in Khuzestan and thus reduce the retail price and the marketing margin. Moreover, timely announcement of guaranteed purchase rate and cash funds for date producers can create the ground for the removal of profiteers and speculators and avoid the drop in prices at the farm. Iran dates due to the variety and uniqueness of different species and some of its types in world-class, which from the experts' perspective is of high quality, after processing and export marketing, due to the failure of the distribution tool and shortcomings in presentation, packaging and advertising, marketing efficiency is low. Thus, rival countries in the region that are major producers of palm get the upper hand in exports and gaining 31

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