Competition drives innovation

International Business Essay about agreeing with “Competition drives innovation. Innovation, in turn, drives competition. Globalization has increased both competition and innovation.”

No more than 400 words and research and citation is required.

Explain why you agree and provide reasons/examples to back up your position

Technology,
Competition, Innovation
and Productivity
1
Technology, competition, innovation –
impacts and importance
Industry structure
Value creation
MNE structures and strategy
Context video
Overvi
Competition: when 2 or more entities
(companies, countries, etc.) vie for limited
resources or markets
Competition drives innovation
Innovation drives competition
Impact of globalization on competition
Impact of government and lobbying
Competition and Innovati
Some sources:
◦ Public and private sector
◦ Domestic and international competitors
◦ New entrants and established companies
◦ Developed and emerging competitors
Factors affecting degree of competition:
◦ Barriers to entry
◦ Barriers to exit
◦ Product life-cycle forces
Competition
Innovation: something new or different
introduced
◦ Can be a product, a process or management
Technology: application of practical sciences
to industry or commerce
◦ Not necessarily about invention or gadgetry
Productivity: the level of output from a given
level of resources
◦ Innovation leads to improved productivity
Innovation and Technology
Role of Intellectual Property
◦ Importance of strong legal protections
Driven by R&D
◦ or develop technology?
Innovations can be game changers or simple
improvements
◦ Containerization
◦ Internet
◦ Zara (clothing)
Competition, Innovation and
Technology
“If I’d asked my customers what they wanted,
they’d have said a faster horse.”
▪ Henry Ford
“A lot of times, people don’t know what they want
until you show it to them.”
▪ Steve Jobs
Innovate or perish!
◦ RIM
◦ Kodak & Polaroid
Product life-cycles becoming shorter
Change today is rapid and constant
Competition, Innovation and
Technology
Strategies are how managers achieve the
company’s goals and objectives
How company decides to conduct business
dependent on numerous factors
◦ Industry structure
◦ Political factors
◦ Economic factors
◦ What rivals are doing – likely biggest factor
Going international is one way to conduct
business and achieve company’s goals
Critical that companies/managers plan their
international moves and consider pros & cons
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Company Structure and
Stra
9
10
5 forces model
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Industry Structure – Factors
rivalry
Potential new
entrants
Suppliers
Substitute
products
buyers
• helps managers assess attractiveness of an industry
• firm performance is function of strategy, which is determined by
industry factors that shape corresponding pattern of competition
Factors creating industry change
◦ Changes in long-term industry growth rate
◦ New technologies
◦ New consumer preferences
◦ Innovation
◦ Technology and expertise transfer between
countries
◦ Government policies
◦ Entry or exit of firms
◦ Competitor moves (mergers, new products, etc.)
◦ Destabilizing economic factors
◦ And so on…
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Industry chang
2 primary ways
◦ Cost leadership
● Low-cost producer for given level of quality
● focus on standardization and maximizing efficiency
◦ Differentiation
● Create market share and profit by offering branded
product innovations to distinguish from competitors
● usually requires continual innovation
● also requires strong knowledge of customer and trends
and addressing those
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Value creatio
Cost Leader or
Differentiator?
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Key consideration – global integration or local
responsiveness?
Global integration: standardize value chain to
create economies of scale
◦ Driven by globalization of markets and efficiency
gains from standardization
Local responsiveness: customize activities to
circumstances in each country
◦ Driven by consumer divergence and
host-government policies
These are company-level strategies re their
international approach
15
MNE Strate
Global integration: low,
Local responsiveness: low
Leverage core competencies and home country
innovations into competitive positions abroad
Limited local customization
Local subsidiaries; value chain set by
headquarters
Transfer of core competencies and unique
products to foreign markets creates value
Few (or no) rivals offering a competitive product
Example: Harley Davidson, Airbus
16
International S
Also known as a “Localization Strategy”
Global integration: low
Local responsiveness: high
Tailor product to local tastes, industry
characteristics or government regulation
Local managers have freedom
Tends to be more fragmented (and potential
duplication): dispersed operations and
decision-making
Strength: can minimize risk
Example: Unilever, McDonald’s (to an extent)
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Multidomestic S
Global integration: high
Local responsiveness: low
Consistent across all countries
Emphasize volume, cost minimization and
efficiency
Look to turn global efficiency into price
competitiveness
Much power and strategy concentrated at
headquarters
Example: IKEA, luxury products
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Global St
Global integration: high
Local responsiveness: high
Leverages specialized knowledge
Encourages “global learning”
Rise of technology makes this strategy more
feasible
Very difficult to do well
Example: GE, Zara, IBM
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Transnational St
Competition, innovation and technology all
inter-linked
Globalization drives and is driven by these
phenomena
Competition coming from more sources than
ever 🡪 drives ever faster change
Importance of R&D and IP to a company’s
bottom line and competitive advantages
Opposition to globalization in many ways
expression of opposition to effects of
increased competition
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Key Concluding P
Competition and globalization key considerations for
managers in devising their company strategies
◦ Consider your method of value creation and your industry
structure
◦ Impact of government policy and lobbying becoming more
important
Going international can be profitable, but not guaranteed 🡪
requires forethought and company commitment
Can internationalize entire business or just one component
Level to which you want to centralize operations (global
integration) or customize to meet local tastes and standards
(local responsiveness) will largely determine your choice of
global structure
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Key Concluding Po