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IM Week 5: Competition, firm size and innovation (Explain the underlying…
IM Week 5: Competition, firm size and innovation
Learning objectives
- Refer to differences between managing a service and a product innovation
- Discuss the impacts the different features of competition can have on innovation
- Explain the innovative activities found in small v large firms
- Explain the underlying logic of portfolio matrices
- Refer to differences between managing a service and a product innovation
a. What are the different types of services?
- Business-to-business services (traditional)
- Business-to-business services (KIBS: Knowledge Intensive Business Services)
- Consumer services
- Internal firm services
- Public services
- Not-for-profit services
b. Four main types of service processes
- capability
- simplicity
- complexity
- commodity
c. How are services different to products?
Services as a process
- services are heterogeneous
- services are produced and consumed simultaneously
- services are intangible
- services are perishable
- services are co-produced by the consumer
- Discuss the impacts the different features of competition can have on innovation
a. Protected market
- National oligopoly
- High entry barriers
- Competitive advantage from market power
- Limited price competition
- High profits
Example: Airlines (Air Italia) and Telecommunication companies BT
b.Competitive market
- More fragmented market structures
- Lower entry barriers
- Competition on price and perceived quality
- Lower industry profits
- Competitive advantage from productive efficiency
Examples:
- Airlines since 1990s
- Autos since 1970s (Japanese cars)
- Telephone services since 1990s
c. Hypercompetitive market
- Competitive advantage is unsustainable and transitory
- Creative destruction
- Intense competition on price and quality
- Intense competition on timing and know-how
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- Explain the innovative activities found in small v large firms
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b. Large firms
1.What are large firms’ advantages?
- A certain size to be able to finance a particular R&D project
- Because of the established name and reputation can more easily enter a new market
- Commercial expertise
2. What are their disadvantages?
- A firm already in possession of monopoly power may be less motivated to innovate
- ‘Trap of success’
- Longer chain of command
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- Explain the underlying logic of portfolio matrices
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c.A balanced portfolio
- should contain STARs, FADs, SNOBs, and sometimes FLOPs
- FADs are important because they can remain highly profitable
- SNOBs are equally important - possess the technological know-how of innovations and products that may provide breakthrough platforms for firms.
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- Trends: insights from Here East Innovation Centre
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c. And then, Augmented retail
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