3.9.2 Flashcards
What is the difference between product innovation and process innovation?
Product innovation is when you either improve existing products or making new ones where process innovation is when putting in place new or improved production or delivery methods.
Why is innovation risky?
-very costly and time consuming, and even risk losing money if they invest too much.
-waste of resources by developing something that consumers do not want.
-no guarantee on return of investment as they may not be able to produce on a large scale and a low cost.
How does innovation affect the functional areas?
Finance: expensive finance department may need to raise extra working capital to pay for it.
Operations: operation department has to get some of its budget aside to spend on new machinery.
Marketing: more market research will need to be done therefore customer must be interested in buying the product. And also there will need to be changes in the marketing mix.
Six stages of new product development?
1) idea
2) analysis and screening
3) development
4) value analysis
5) test marketing
6) launch
3 Reasons why a business might enter an international market and reasons for not?
1) size of the market: large populations and developing markets are attractive as markets will be bigger however need to consider the demographic
2) political and economic factors: businesses need to take into account the laws of the country’s market they are entering. Exchange rates are fluctuations can make the cost of international trade unpredictable.
3) ethical: some countries have cheap labour however this can be seen as unethical and can make customers boycott
3 methods for entering international markets
1)Importing and exporting
2) licensing (eg when another firm makes the product but original company name is on product.
3) direct investments (when a business takes over or mergers with an company in a foreign country)
How can entering international affect the functional areas?
1)HR may recruit people who can speak multiple languages to avoid language breaches.
2) finance department will have to put methods in place for dealing with exchange rates.
3) marketing may have to split into separate international and national departments as prices and promotion will be different.
Advantages of locating abroad?
- reduce costs eg . Lower wages and land tends to be cheaper abroad.
-targeting a new international markets can allow businesses to gain local knowledge therefore less likely to make expensive marketing errors. It also allows for distribution to be cheaper
What is offshoring ?.
Moving parts of a business to cheaper countries eg moving some of their departments like a call centre.
What is Reshoring?
When a business moves departments back to its country of origin eg could be a reaction to changing of customers attitudes.
What is a multinational?
A business that has branches or departments in more than one country.
