Discuss the significance of innovation for the competitive position of the firm. Why is innovation important for business organisations? In what areas of the business might innovation be significant? Todd McLerie
Innovation is an essential part of business and making the world go around; it is the basis of economic growth worldwide and can allow a firm to overcome limitations in inputs, maximise their resources, and gain an advantage over their competitors (Popa, Preda, & Boldea, 2010). The capacity for an organisation to innovate is represented by its ability to continuously and regularly respond to the changing market and transform knowledge and ideas into new products, processes and systems to benefit both the organisation and the shareholders (Popa et al., 2010). Innovation can allow a firm to reduce their waste, reduce the amount of labour needed to complete tasks and reduce the need for costly or slow machinery, therefore running the organisation more smoothly (Damanpour, 1991). By being innovative and striving to be better, grow more rapidly, and be more profitable than other firms an organisation can build itself up to be the best competitor in their field and therefore a sustainable business in their market (Markatou, 2012). This can be done by identifying and producing new and improved products that competitors do not have, by streamlining work processes and using the best practise, and by engaging in cost leadership and differentiation (Damanpour, 1991). Markets around the globe are frequently changing and rearranging themselves, organisations should always be continually innovating and improving or they risk getting left behind by their competitors (Lyus, Rogers, & Simms, 2011). Best practise firms are able to respond quickly and efficiently to the constantly changing market and then use this rapid response to their advantage (Alonso-Pauli, & Perez-Castrillo, 2012). In order to be the best competitor in a selected area and achieve a competitive advantage, an organisation needs to be aware of their market and be able to respond to changes within their segment (Lyus et al., 2011). This can be accomplished by constantly gathering information on a specific market and then interpreting and using this information when designing innovation strategy (Lyus et al., 2011). Having this advantage can provide superior value to an organisations customers by offering them a distinguished product with expert service at a lower price and can also provide a direction for the whole organisation to follow; by being the best, people will strive to stay the best (Alonso-Pauli, & Perez-Castrillo, 2012). In today’s business market Apple is a key model for other companies on how to maximise innovation for brand design, customer loyalty and product retailing (Capozzi, Kellen, & Smit, 2012). For an organisation such as Apple, keeping in touch with market trends would be essential to continue their successful innovation efforts (Arend, 2009). A study by Capozzi et al. (2012) found that from 1999 to 2008, Apple was the only global incumbent to frequently develop entire new markets from disruptive innovation, innovation which resulted in up to 5% of Apple’s company-wide growth. By using innovation to their advantage, Apple has been able to consistently grow and outperform competitors. Competitive advantage can also be reached by engaging in cost leadership and product differentiation, which can be achieved by successful innovation (Davis, Aquilano & Chase, 1999). The ability of a company to put forward an idea of a higher value at a lower price can be a source of competitive advantage and represents the reason for which a customer may opt for one company to the disadvantage of another (Davis et al., 1999). If an organisation such as Apple can run their business at a lower cost and/or show how their product is different or superior to competitors such as Microsoft or Samsung, they can gain a positive reputation for...
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