Innovation & Markets
Essential idea: Companies and businesses
can utilize a range of different strategies to
develop products, services and systems.
9.1 Corporate Strategies
Nature of design: The success of a company
relies heavily on the strategies it adopts. The
evaluation of products, services and systems can
inform the selection of the most appropriate
strategies to follow that will enable a company
to achieve its objectives.
Pioneering Strategy
first to market with a new innovation
Pioneers often have:
higher profitability
greater market share
and a longer business life.
A pioneering approach
• may be indicative of
the use of new
materials
A pioneering approach
• may be indicative of
new production
processes
A pioneering approach
• may be indicative of
new technology.
A pioneering company requires strong research
and development (R&D) which is expensive.
Good market research can offset some risk, but is
problematic for novel products
advantages:
• owning the positive image and reputation of
being a pioneer
• reduction of total costs through control of
new technology, and supply and distribution
channels
• creation of a base of loyal customers
• having the ability to make imitation by
competitors as difficult as possible
disadvantages:
• free–rider benefits to followers
• market and technological uncertainties
• unforeseen changes in technology or customer
needs
• R&D (research and development) costs involved
in innovation can be so high that they may not be
recovered in revenues.
• difficulty in creating primary demand for a
completely new - and non-branded - product.
Educating customers about a novel product can
be very expensive.
Task
Describe a product that has been produced
that was/is that was pioneering. Also, consider
the relative success of the pioneering strategy.
Imitative Strategy
Developing products that are similar to an
existing new product
Product designer / manufacturer thoroughly researches
existing products within a sector and use a very similar
format for their own product development, using similar
technology, materials and production techniques.
Discuss the benefits of such a strategy
Task
Describe a product that has been produced that
was/is similar to an existing product (other than
a Samsung product) that was imitative. Also,
consider the relative success of a imitative
strategy.
Market Development Strategy
Finding new applications for existing products, thereby
opening up new markets / customers. The product may
require minor adjustment or re-packaging.
Market Development - Oreos
Task
Identify examples of Market Development
Remember: Same Product & Different Market = Market Development.
Product Development Strategy
The creation of new, modified or updated
products aimed mainly at a company’s existing
customers
Product Development Strategy
Product Development Strategy
Market Penetration Strategy
Increasing sales to existing customers or finding
new customers for an existing product
Market Penetration Strategy
Penetrative pricing
pricing strategy where the price of a product
is initially set low to rapidly reach a wide
fraction of the market and initiate word of
mouth
Market Penetration Strategy
Product differentiation
some feature, physical attribute, or substantive
difference exists between a product and all other
possible alternatives
Market Penetration Strategy
Product Development
Product Diversification Strategy
Increasing sales from new products or new
markets
Hybrid Strategy
Using more than one of the above strategies
Task
Identify examples of companies / products using
a hybrid strategy
Product or Market Development
Market Development or Product
Development
• If the target market for Coca-Cola was the US
market for soft drinks, then Coca-Cola took
their products to Russia
Corporate Social Responsibility
the way through which a company achieves a
balance of economic, environmental and social
imperatives (Triple-Bottom-Line- Approach), while
at the same time addressing the expectations of
shareholders and stakeholders.
Key CSR issues
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environmental management
eco-efficiency
responsible sourcing
stakeholder engagement
labour standards and working conditions
employee and community relations
social equity
gender balance
human rights
anti-corruption measures
CSR
Effective CSR of a Multi-National [?]
Effective CSR of a Multi-National [?]
Effective CSR of a Multi-National [?]
Effective CSR of a Multi-National [?]
Effective CSR of a Multi-National [?]
Bank of America fined
$1.3B for bad mortgages
Task
Identify examples of evidence of effective
corporate social responsibility for a major multinational company
A hybrid approach or strategy
involves companies that use a
mixture of pioneering and imitative
strategies in order to:
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A) maximize profit and sales
B) provide for a quick turn around
C) reduce R&D spending
D) all of the above
An imitative strategy requires a
company to ……..
• A) Develop a new product that is innovative and
unseen in the market before
• B) Increase the range of products within a
product family
• C) Increasing the range of products or markets
within your own company
• D) Develop a product that has a similar format to
others in the market place
Market development involves ……
• A) Developing products that are similar to an
existing one
• B) Increasing sales to existing customers or
finding new customers for an existing product
• C) Increasing sales from new products or
markets
• D) Using more than one development strategy
The diagram shows the typical stages in a product cycle. It compares an
innovating firm (green line), which initially develops and sells the
product, with its competitors (red line).
What is true for the innovating firm in Stage 1 of the product cycle?
A. High market awareness and low volume of sales
B. High volume of sales and low market awareness
C. Low research costs and high competition
D. No competition and high research costs
The diagram shows the typical stages in a product cycle. It compares an
innovating firm (green line), which initially develops and sells the
product, with its competitors (red line).
Why do the competitors’ sales continue to increase after the innovating
firm’s sales start to decline?
A. The innovating firm’s product was robust
B. Competitors have effective imitative strategies
C. Competition increases
D. Product cost increases
The diagram shows the typical stages in a product cycle. It compares an
innovating firm (green line), which initially develops and sells the
product, with its competitors (red line).
In Stage 3 the innovating firm creates a range of different products for
existing customers. This is an example of
A. market penetration.
B. market development.
C. product development.
D. diversification.
The figure below shows the “buddi”, a miniaturised GPS (global positioning system)
tracking and GPS personal locator suitable for locating people who are lost or
stranded. It costs GBP 299 plus GBP 240/year to be connected to a 24/7 365 days a
year customer response team. The buddi works in two ways: one, the wearer presses
the emergency button and the response team will contact the wearer or alert the
emergency services; or two, the position of the wearer can be located on an online
map so parents, for example, could locate a lost child
In case of an emergency the wearer can
show the buddi to any person in authority
who is then able to contact the customer
response team via the information printed
on the device.
Another version of the buddi has been
produced called the “petbuddi” which is
very small, lightweight, waterproof pet
tracking device so owners can locate their
lost pet.
• Which marketing strategy is the adaptation of the petbuddi an
example of?
• A. Market penetration
• B. Market development
• C. Product development
• D. Diversification
The figure below shows a family of storage units.
What corporate strategy has been used by the
company?
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A.
B.
C.
D.
Product development
Diversification
Market development
Market penetration
What is an advantage to a company of adopting
a pioneering corporate strategy?
A.It is a costly strategy
B.It requires a strong research and development
capacity
C.It provides access to market research
D. It has the potential for high profits
The figure below shows the Solid Extreme mobile phone
marketed by Samsung, a company which has produced many
different mobile phones. It is designed to withstand extreme
conditions with a heavy-duty waterproof rubber body and
features a camera, FM radio, flashlight and an emergency alert
system with a direct link to a nominated person. The Solid
Extreme phone is an example of which corporate strategies?
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I.
II.
III.
A.
B.
C.
D.
Product development
Market development
Diversification
I and II
II and III
I and III
I, II and III
Explain the benefit of adopting a pioneering
strategy for the Magimix company in relation to
the production of the Le Toaster Vision.