3.9

• Innovation is when something is done in a way that it hasn't been done before

  2 types are product and process innovation

  Product - a product new to us or new to market or something made by someone else but we have added something different

  Process - changing the way we do things, changing the inputs in order to increase efficiency and quality
• Why we should innovate 


  Competitive advantage

  Adding value

  Improving business processes
• Methods of internationalisation 


  Quota - a numerical limit to the amount of imports allowed

  Tariff - a tax on imports

  Domestic subsidy - a subsidy to support businesses to grow within the country
• Quality assurance is checking the quality at stages throughout production and quality control is checking quality only at the end of production
• Evaluating Exporting 


  + wider range of customers

  +allows internationalisation

  -more competition

  -higher transportation costs

  -customer services process needs to be enhanced
• Selling via international agents/distributors where they negotiate price and act as a go between for you
• Types of internationalisation

  International agents/distributors

  Opening overseas

  Joint ventures/overseas takeovers
• What drives businesses to internationalise

  Deeper specialisation of labour

  Global supply chains

  Expansion of financial capital flows

  Foreign direct investment

  Increased connectivity between businesses and people
• Retrenchment

  When a business who diversified too much may need to refocus on a narrower range of products

  May be looking to follow a cost minimisation strategy

  Last resort strategy
• Types of growth

  Organic: internal growth, grow steadily in a managed way, highly technical products where the firm needs to gain experience, costs spread overtime

  External: via integration, mergers or takeovers, faster and riskier than organic
• Types of integration

  Vertical - 2 businesses at different stages of production in a single supply chain

  Horizontal - 2 businesses in same industry offering very similiar or identical products

  Conglomerate - 2 businesses in unrelated business activities
• Why businesses grow

  If market is developing

  To develop new products and hire more staff to do so

  If you've seen an increase in demand
• Why businesses retrench

  If you've introduced a technology so staff can be make redundant

  To become more efficient and centralised and get rid of unneeded departments
• The experience curve

  As a business becomes more experienced, they should be able to do things better, faster and cheaper

  Suggests that we become more experienced, our volume of production and direct unit costs decrease
• 


  Overtrading is when you expand too quickly with no financial resources to support the quick expansion
• Overtrading most likely occurs when sales are made on credit and customers take too long to pay, when significant growth in inventories is required in order to trade from expanding capacity, if they need to pay long term contracts
• Symptoms of overtrading

  Increased revenue growth but decreased GPM/OPM

  Increase in bank loans

  Increase in payable days and decrease in receivable days

  Increased current ratio

  Decreased inventory turnover and capacity utilisation
• Intellectual property 


  Ideas that you have or created are your property. Something that is sufficiently unique and unlike anybody else's intellectual property.
• Ways of protecting intellectual property

  Patents - designs and inventions and manufacturing processes Copyright - text, images, creative work Trademark - names, logos, phrases
• Benchmarking

  Assessing our performance in an area by a certain standard

  Could be internal or external

  Either inter or Intra comparison
• Problems with innovation

  Uncertainty as there's no guarantee

  Operational difficulties

  Being equalnto competition rather than having an advantage on them
• Why is it critical to innovate

  Direct benefits like efficiency and cuts on costs

  Knock on benefits like becoming more flexible

  Organisational culture shifts
• The objective of benchmarking is to understand and evaluate the current position of a business or organisation in relation to best practice

  To identify areas where performance can improve

  Analysing our performance against others and implement strategies (essentially copying)
• Synergy is when something is greater than the sum of its parts. Benchmarking has synergistic benefits
• A going concern is a business worth investing in
• External benchmarking

  Strategic benchmarking - looking at other companies and comparing

  Process benchmarking - looking at how others follow processes

  Competitive benchmarking - looking at our direct competitors

  International benchmarking - all of above but on an international level