Innovation & Markets

Essential idea: Companies and businesses can utilize a range of different strategies to

develop products, services and systems.

9.1 Corporate Strategies

Nature of design: The success of a company relies heavily on the strategies it adopts. The evaluation of products, services and systems can inform the selection of the most appropriate strategies to follow that will enable a company to achieve its objectives.

Pioneering Strategyfirst to market with a new innovation

Pioneers often have: higher profitability greater market shareand a longer business life.

A pioneering approach

• may be indicative of the use of new materials

A pioneering approach

• may be indicative of new production processes

A pioneering approach

• may be indicative of new technology.

A pioneering company requires strong research and development (R&D) which is expensive. Good market research can offset some risk, but is problematic for novel products

advantages:

• owning the positive image and reputation of being a pioneer

• reduction of total costs through control of new technology, and supply and distribution channels

• creation of a base of loyal customers• having the ability to make imitation by

competitors as difficult as possible

disadvantages:

• free–rider benefits to followers• market and technological uncertainties• unforeseen changes in technology or customer needs• R&D (research and development) costs involved in

innovation can be so high that they may not be recovered in revenues.

• difficulty in creating primary demand for a completely new - and non-branded - product. Educating customers about a novel product can be very expensive.

Task

Describe a product that has been produced that was/is that was pioneering. Also, consider the relative success of the pioneering strategy.

Imitative Strategy

Developing products that are similar to an existing new product

Product designer / manufacturer thoroughly researches existing products within a sector and use a very similar format for their own product development, using similar technology, materials and production techniques.

Discuss the benefits of such a strategy

Task

Describe a product that has been produced that was/is similar to an existing product (other than a Samsung product) that was imitative. Also, consider the relative success of a imitative strategy.

Market Development StrategyFinding new applications for existing products, thereby opening up new markets / customers. The product may require minor adjustment or re-packaging.

Market Development - Oreos

Task

Remember: Same Product & Different Market = Market Development.

Identify examples of Market Development

Product Development Strategy

The creation of new, modified or updated products aimed mainly at a company’s existing customers

Product Development Strategy

Product Development Strategy

Market Penetration StrategyIncreasing sales to existing customers or finding new customers for an existing product

Market Penetration Strategy

Penetrative pricing pricing strategy where the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth

Market Penetration Strategy

Product differentiation some feature, physical attribute, or substantive difference exists between a product and all other possible alternatives

Market Penetration Strategy

Product Development

Product Diversification Strategy

Increasing sales from new products or new markets

Hybrid Strategy

Using more than one of the above strategies

TaskIdentify examples of companies / products using a hybrid strategy

Product or Market Development

Market Development or Product Development

• If the target market for Coca-Cola was the US market for soft drinks, then Coca-Cola took their products to Russia

Corporate Social Responsibility

the way through which a company achieves a balance of economic, environmental and social imperatives (Triple-Bottom-Line- Approach), while at the same time addressing the expectations of shareholders and stakeholders.

Key CSR issues

• environmental management• eco-efficiency• responsible sourcing • stakeholder engagement• labour standards and working conditions• employee and community relations• social equity• gender balance• human rights• anti-corruption measures

CSR

Effective CSR of a Multi-National [?]

Effective CSR of a Multi-National [?]

Effective CSR of a Multi-National [?]

Effective CSR of a Multi-National [?]

Effective CSR of a Multi-National [?]

Bank of America fined $1.3B for bad mortgages

Task

Identify examples of evidence of effective corporate social responsibility for a major multi-national company

A hybrid approach or strategy involves companies that use a mixture of pioneering and imitative strategies in order to:

• A) maximize profit and sales • B) provide for a quick turn around • C) reduce R&D spending • D) all of the above

An imitative strategy requires a company to ……..

• A) Develop a new product that is innovative and unseen in the market before

• B) Increase the range of products within a product family

• C) Increasing the range of products or markets within your own company

• D) Develop a product that has a similar format to others in the market place

Market development involves ……

• A) Developing products that are similar to an existing one

• B) Increasing sales to existing customers or finding new customers for an existing product

• C) Increasing sales from new products or markets

• D) Using more than one development strategy

The diagram shows the typical stages in a product cycle. It compares an innovating firm (green line), which initially develops and sells the product, with its competitors (red line).

What is true for the innovating firm in Stage 1 of the product cycle?A. High market awareness and low volume of salesB. High volume of sales and low market awarenessC. Low research costs and high competitionD. No competition and high research costs

The diagram shows the typical stages in a product cycle. It compares an innovating firm (green line), which initially develops and sells the product, with its competitors (red line).

Why do the competitors’ sales continue to increase after the innovating firm’s sales start to decline?A. The innovating firm’s product was robustB. Competitors have effective imitative strategiesC. Competition increasesD. Product cost increases

The diagram shows the typical stages in a product cycle. It compares an innovating firm (green line), which initially develops and sells the product, with its competitors (red line).

In Stage 3 the innovating firm creates a range of different products for existing customers. This is an example ofA. market penetration.B. market development.C. product development.D. diversification.

The figure below shows the “buddi”, a miniaturised GPS (global positioning system) tracking and GPS personal locator suitable for locating people who are lost or stranded. It costs GBP 299 plus GBP 240/year to be connected to a 24/7 365 days a year customer response team. The buddi works in two ways: one, the wearer presses the emergency button and the response team will contact the wearer or alert the emergency services; or two, the position of the wearer can be located on an online map so parents, for example, could locate a lost child

In case of an emergency the wearer can show the buddi to any person in authority who is then able to contact the customer response team via the information printed on the device. Another version of the buddi has been produced called the “petbuddi” which is very small, lightweight, waterproof pet tracking device so owners can locate their lost pet.

• Which marketing strategy is the adaptation of the petbuddi an example of?• A. Market penetration• B. Market development• C. Product development• D. Diversification

The figure below shows a family of storage units. What corporate strategy has been used by the company?

• A. Product development• B. Diversification• C. Market development• D. Market penetration

What is an advantage to a company of adopting a pioneering corporate strategy?

A.It is a costly strategyB.It requires a strong research and development

capacityC.It provides access to market researchD. It has the potential for high profits

The figure below shows the Solid Extreme mobile phone marketed by Samsung, a company which has produced many different mobile phones. It is designed to withstand extreme conditions with a heavy-duty waterproof rubber body and features a camera, FM radio, flashlight and an emergency alert system with a direct link to a nominated person. The Solid Extreme phone is an example of which corporate strategies?

• I. Product development• II. Market development• III. Diversification• A. I and II• B. II and III• C. I and III• D. I, II and III

Explain the benefit of adopting a pioneering strategy for the Magimix company in relation to the production of the Le Toaster Vision.