IB Business and Management OPERATIONS MANAGEMENT 5.6 Innovation – Flashcards

The scientific research and technical development of new products and processes

The formulation or discovery of new ideas for products or processes

The practical application of new inventions into marketable products

New, marketable products such as the Apple iPad

New methods of manufacturing or service provision that offers important benefits

1. Competitive advantage 2. Customer loyalty 3. Premium prices 4. Publicity 5. Lower costs

1. R&D does not always lead to innovation 2. R&D is expensive and has an opportunity cost 3. Inventions do not always lead to successful innovative products 4. Competing R&D spending may result in even more successful products 5. Ethical issues can sometime outweigh the potential commercial benefits

Refers to creations of the mind such as inventions, literary and artistic works and symbols, names, images and designs used in business

Legal property rights over the possession and use of intellectual property

Legal righ of an invention for a certain period of timet to be the sole producer and seller

Legal right to protect and be the sole beneficiary from artistic and literary works

A distinctive name, symbol, motto or design that identifies a business or its products - can be legally registered and cannot be copied

1. Sets a business apart from its competitors and encourages increased sales as a result of this distinctiveness. 2. Be sold or licensed to provide an important revenue stream. 3. Form a key part of the branding process and assist in the marketing of the firm's products. 4. Can be given a financial value on a firm's balance sheet which increases net assets.

1. *The nature of the industry*. Rapidly changing technologies - consumer expectations - in pharmaceutical products, defence, computer and software products and motor vehicles lead to the need for substantial investment in R&D by leading firms. Other businesses such as hotels and hairdressing would need to spend far less as the scope for innovation is more limited. 2. *The R&D and innovation spending plans of competitors*. In most markets, it is essential to innovate as much as or more than competitors if market share and technical leadership is to be maintained. However, a monopoly may limit R&D spending if it believes that the risk of a more technically advanced competitor entering the market is limited. On the other hand, profits from a monopoly could be used to finance research and development into innovative products if the risk of competitor entry into an industry is high. 3. *The risk profile or culture of the business*. The attitude of the management to risk and whether shareholders are prepared to invest for the long term will have a significant effect on the sums that businesses can inject into R&D programmes. 4. *Government policy* towards grants to businesses and universities for R&D programmes and the range and scope of tax allowances for such expenditure will influence decisions by businesses. 5. *Finance* is needed for effective R&D. In many firms this many be limited and will restrict the number of new innovations that could be made.