Slides 19 Flashcards
(45 cards)
What creates new industries?
Radical Innovations
Radical innovations are entrepreneurial ideas that solve unique problems or render existing technologies obsolete.
What is the Industry Life Cycle?
The stages through which industries are born, grow, mature, and decline
The lifecycle is categorized based on the number of customers in a market.
What impacts the stage of an industry in its life cycle?
The type of innovation, the type of investors/investment, the number of competitors
The stage of a lifecycle affects all these factors.
Define innovation.
Innovation is the multi-stage process whereby organizations transform ideas into new/improved products, services, or processes
This definition is from Baregheh, Rowley, & Sambrook (2009).
What are the types of innovation?
- Architectural Innovation
- Radical Innovation
- Incremental Innovation
- Disruptive Innovation
These types vary in their impact and the level of technological innovativeness.
What is Architectural Innovation?
Reconfiguring existing technology and components in new ways
This can create new markets or applications.
What is Radical Innovation?
A fundamentally new technology or process leading to the creation of entirely new markets
This type of innovation has a significant impact on existing markets.
What is Incremental Innovation?
Small, gradual improvements or adjustments to existing products
It is the most common type of innovation.
What defines Disruptive Innovation?
Innovations that disrupt an existing market with a radically better product
These products are often more affordable or of better quality.
What are the types of investors in an industry?
- Angel Investors
- Venture Capital Funds
- Hedge Funds
- Private Equity Funds
Each type of investor focuses on different stages of company growth and risk levels.
What characterizes Angel Investors?
Wealthy individuals who invest in very early stage, small startups
These investments are considered extremely risky.
What do Venture Capital Funds focus on?
Investing in the most promising startups with growth potential
These funds are high-risk investments.
What is the startup stage of an industry?
An industry is born with the introduction of a new product or technology
Technology is new and few understand how to commercialize it.
What defines the growth stage of an industry?
Customers become interested and market size increases significantly
Companies focus on scaling and gaining market share.
What happens during the maturity stage of an industry?
Market size reaches its maximum; all potential customers have been reached
Top firms become established, and smaller firms begin to exit.
What leads to the decline stage of an industry?
Changing customer preferences lead to a decline in market size
Some firms may exit the market through diversification.
What are contestable markets?
Industries with low barriers to entry where unmet customer demand exists
These markets allow new entrants to gain market share easily.
What is a common example of contestable markets?
Airline routes
Established airlines can easily open new routes if they find them underserved.
What are the ways firms enter markets?
- Internal Development
- Mergers and Acquisitions
- Strategic Alliances
Each method has its own risks and benefits.
How do firms enter markets through Internal Development?
Investing in R&D to create a new product
This method is time-consuming and risky.
What is the easiest way for a firm to enter a market?
Mergers and Acquisitions
This approach allows firms to skip the R&D phase.
Give an example of a successful acquisition.
Google’s acquisition of DeepMind for $500 million
This acquisition made Google a leader in AI and machine learning.
What are strategic alliances?
Partnerships formed to enter new markets in a low-risk way
This can include joint ventures or franchises.
Why do firms exit a market?
- Declining profitability
- Financial constraints or liquidity problems
These factors may force firms to sell or exit less profitable markets.
