3.5: The Role, Impact and Benefits of Innovation Flashcards
Covers dot points 19-28 on the Course Outline.
What is the definition of Innovation?
Innovation is described as the process of developing and implementing new ideas, methods, processes and products to facilitate business and profitability growth.
What are the 3 main forms of Innovation?
- process innovation
- product innovation
- cost reduction innovation
What is Process Innovation?
The changing and improving of the effectiveness and efficiency of the business operations, manufacturing, distribution and marketing of its goods and services. This is done through the adoption of new technology and procedures.
What is Product Innovation?
The changing and improving of features, materials and/or functions of a good or service by developing in accordance to the evolving needs of customers.
What is Cost Reduction Innovation?
Deals with improving efficiency and effectiveness of processes by reducing the costs of production for a business.
What are the 3 Benefits of Innovation?
- financial gain
- expansion of global market presence
- increased market share
Explain the benefit of Innovation “Financial Gain”
Businesses can achieve financial gain through innovation, which can increase revenue while simultaneously decreasing expenses. The creation of unique selling points (USPs), subsidisation by the government and access to markets through e-commerce results in businesses experiencing less competition and financial pressure, leading to increased revenue. Through the improvement of production efficiency, reduced wastage, automation and reduced production costs, expenses are as a result decreased as a whole, further leading to overall financial gain.
Explain the benefit of Innovation “Expansion of Global Market Presence”
The use of innovation internally in business operations can assist a business in developing a competitive advantage in the global market leading to increased global market presence. This can then further lead to competitiveness with existing multinational firms, shortened cost of delivery to customers and unique social networking opportunities to increase brand image.
Explain the benefit of Innovation “Increased Market Share”
Innovation may result in a new product/service being commercialised. Businesses competing within an industry need to investigate drivers to increase market share with the current customer demands and be responsive to market trends to enhance their public image. To do this a business must ensure their competitive advantage will provide an edge over competitors, expand into new markets and create more brand recognition.
What are the 4 factors that Impact the Success of Innovation?
- timing
- cost
- marketing strategy
- technology
Explain the factor impacting Innovation “timing”
The timing of when a product launches can determine its success or failure; more likely to succeed during times of optimism and higher level of economic activity and the placement in the product life cycle compared to potential competitors. Consumers are more likely to try a new product or service if they have more discretionary income and consumer confidence is higher.
Explain the factor impacting Innovation “cost”
Research and development costs are associated to tasks that companies accept to innovate and introduce new products and services. It is often the first stage in the development process and it requires appropriate financial resources and appropriate human resources in terms of skill and volume.
Explain the factor impacting Innovation “marketing strategy”
Marketing strategy relates to the provision of the right information regarding innovative products, services, or processes and how the strategy will inform existing markets and develop new markets. Key elements of the marketing strategy include; pricing, product differentiation, promotion and cultural consideration.
Explain the factor impacting Innovation “technology”
The capabilities and advancements of technology determine the costs of innovation as well as the rapidity of innovating. Too slow and/or inefficient technologies can result in innovations being slow to produce and costly. Training staff in technology skills will assist in the area of innovation, whereas the absence of these could have negative impacts.
