An essay about the supply and demand Example | Topics and Well Written Essays - 1250 words

An about the supply and demand - Essay Example In order to maximize profit, suppliers have to sell their goods and services at high prices but this has to consider the purchasing power of the intended market. This paper is a critical evaluation of supply and demand as principles of economics. Concepts of Supply and Demand The Law of Demand The law of demand states that the higher the price of a commodity, the lower the quantity demanded cateris paribus, while the lower the prices the higher the demand (Fisher 36). Cateris paribus in this case implies that all other factors that influence demand are held at a constant. These are for example weather, taste and preferences, income among others. This is due to the fact that the law of demand is basically dependent on two variables i.e. quantity demanded and price. The following diagram is a demand curve, which is a graphical depiction of the law of demand. Fig 1 From the diagram, it can be noted that the quantity demanded was highest, (Q3), at the lowest price, P1, while it was lowes t at price P3, which was highest. However, it is important to note that not all goods abide by the law of demand. These are for example giffen goods and products that act as status symbols. Giffen goods are defined as inferior commodities whose demand goes up with rising prices while the vice versa is also true (Baye 42). Inferior, in this context, does not necessarily imply that the goods are of poor quality. For example, if the staple food in a family is rice, products such as meat may be perceived as superior. If the price of rice goes up, it would be normal to find people buying more rice and less of meat and when the prices go down, more meat is bought in comparison to rice. The two goods are not substitutes and in this case, it is assumed that the consumer can afford both items therefore eliminating opportunity cost. On the other hand, status symbols are goods whose value creates a perceivable higher social standing in the society (Gorman 29). For example, if the price of a Me rcedes Benz makes it unaffordable for the common market as opposed to that of a Toyota sedan, then, any person owning a Mercedes would be perceived as having an economic advantage over the owner of a sedan. It therefore goes without saying that a reduction in the price of a Mercedes would make it lose its value as a status symbol and that would definitely make it lose its demand to other more expensive and luxurious vehicles. On the other hand, an increase in its price would increase its value as a status symbol thus increasing its demand thereby defying the law of demand. Movements along a Demand Curve versus Shifts in Demand Curve A movement along a demand curve is dependent on one variable only which is price. From the diagram below, DD1and DD2 represents the demand for a commodity, with prices plotted on the Y axis while quantity demanded on the X axis. DD1 will be used to illustrate movement along a demand curve while DD2 illustrates a shift in a demand curve. Fig. 2 On the DD1 curve, it is notable that when the price was at p1, the quantity demanded was highest at Q3. However, after the prices increased to p2 and p3, the quantity demanded moved to the lower side i.e. from Q3 to Q2 and Q1 respectively. However, the demand curve shifted entirely to the right as a result of an increase in income. Notice that prices p1 to p3 remained static but still, the quantity

Organizational Transformation Essay Example | Topics and Well Written Essays - 5250 words

Organizational Transformation - Essay Example The management at Bombardier believes that leading change involves having the ability to deliver the message of change in both words and actions, and in being able to motivate people to change. To lead change, the leaders must first understand the change necessary and then they need to role model the change. This case study evaluates the change leadership adopted by the top management at Bombardier and how the company transformed itself into an employer of choice. Organizational background Canada’s Bombardier, established in 1942, initially started manufacturing snow/winter equipments. In the 1960s, they started making snowmobiles and similar equipment which boosted company revenues to a large extent. During this period the people were all trained, motivated and made to speed up. The growth in sales during that period reached $200 million and they made profits as well (Baghai et al, 1997). Following the energy crisis in 1973 when the demand for snowmobiles declined, Bombardier , led by Laurent Beaudoin gradually diversified into trains and airplanes (Connell, 2007). It entered the aerospace industry in the 1980s and today it is the world’s largest train manufactures and ranks third in civil aircraft (Simpson, 2011). They differentiated themselves in the industry by offering a family of products with capacities of 30 to 70 seats in turbo props and 50 to 70 in jets (Baghai et al, 1997). They could thus match the size of the plane to the needs of a particular route and this strategy helped them save money through standardized training, maintenance and parts. They also entered into joint ventures for business aircrafts in other parts of the... Canada’s Bombardier, established in 1942, initially started manufacturing snow/winter equipment. In the 1960s, they started making snowmobiles and similar equipment which boosted company revenues to a large extent. During this period the people were all trained, motivated and made to speed up. The growth in sales during that period reached $200 million and they made profits as well (Baghai et al, 1997). Following the energy crisis in 1973 when the demand for snowmobiles declined, Bombardier, led by Laurent Beaudoin gradually diversified into trains and airplanes (Connell, 2007). It entered the aerospace industry in the 1980s and today it is the world’s largest train manufactures and ranks third in civil aircraft (Simpson, 2011). They differentiated themselves in the industry by offering a family of products with capacities of 30 to 70 seats in turboprops and 50 to 70 in jets (Baghai et al, 1997). They could thus match the size of the plane to the needs of a particular r oute and this strategy helped them save money through standardized training, maintenance, and parts. They also entered into joint ventures for business aircrafts in other parts of the world. They went in for acquisition when they felt it would strengthen their competitive position. At each stage, they do not sit back and keep assessing the business situations, their growth, and direction. They keep an eye open for new opportunities that may arise, which is a typical entrepreneurial characteristic – OR – opportunity recognition.

MGT 647 Individual Project 5 Assignment Example | Topics and Well Written Essays - 750 words

MGT 647 Individual Project 5 - Assignment Example he departments so that there could be a streamline of work flow and accountability ensured to both the project leaders and management of project done in an efficient manner that conforms to organization requirement. By undertaking the activities, Advance Corporation was achieved and improve in many ways. By training the labors, there was employment of highly qualified workers who could articulate major issues in the company hence there was a smooth flow work and reduced burden on behalf of the managers since quality was guaranteed (Russell, 2007). The departments who were understaffed before could improve work since more workers were allocated to them. Through the adoption of the videoconferencing facility, management of the project and coordination became easier since there was sharing of information at all levels of the project cycle reducing chances of not spreading information from one department to another. Movement was also made easier since the geographical barriers were greatly minimized since the facility enabled the managers to take control and coordinate work at any place without interference as they either travel, away on other company duties or get meeting information at any place (Gido & Clements, 2012). By structuring the duties of the departmental heads, especially the research and development,t and that of sales reduced the problems that had emanated previously caused by either the confusions in responsibilities and disagreements to a more continuous flow of work with distinctive work procedures leading to a more efficient and faster work. Differences in opinions acts as the generation of ideas as to how to articulate issues as alternatives to the best solutions. After a thorough discussion with the two managers, it was easier for them to understand one another and acts with flexibility which provided a good environment to the work process in the organization. By implementing the actions and deeds the company was able to achieve its objectives

Gatorade Sport Drinks Essay Example for Free

Gatorade Sport Drinks Essay Gatorade is a brand of flavored non-carbonated sports drinks manufactured by PepsiCo and distributed in over 80 countries. [1] It was first developed in 1965 by researchers at the University of Florida, as a means of replenishing the fluid, carbohydrates and electrolytes that are divested from the body during physical exertion. Its name was derived from the school’s football team, the Gators. Originally produced and marketed by Stokley-Van Camp, the Gatorade sports drink brand was purchased by the Quaker Oats Company in 1983, which was acquired by PepsiCo in 2001. As of 2009, Gatorade is PepsiCo’s 4th-largest brand, on the basis of worldwide annual retail sales. It primarily competes with Powerade and Vitaminwater worldwide, as well as Lucozade Sport in the United Kingdom. Within the U. S. , Gatorade accounts for approximately 75 percent market share in the sports drink category. [2] PepsiCo Inc. (NYSE:PEP) is a global manufacturer, distributor, and marketer of food and beverages, owning many well-known brands including Pepsi, Frito-Lay, Tropicana, Gatorade, and Quaker Oats. [1] PepsiCo operates in over 200 countries, with its largest markets in North America and the United Kingdom. [2] In 2009, the companys revenues were $43. 23 billion with net income of $5. 95 billion. [3] Unlike its major competitor, the Coca-Cola Company (KO), the majority of PepsiCos revenues do not come from carbonated soft drinks. [4] In fact, beverages account for less than 50% of total revenue. [4] Additionally, over 60% of PepsiCos beverage sales come from its key noncarbonated brands like Gatorade and Tropicana. [5] PepsiCos diverse portfolio can mitigate the impact of poor conditions in any one of its markets. Strong demand growth in international markets the company serves 86% of the worlds population and international sales account for 48% of revenue is helping to offset a sluggish domestic market and provided the company with opportunities for continued expansion. [6] [7] PepsiCo is highly exposed to raw materials costs. Prices for the most important input materials, aluminum, PET plastic, corn, sugar, and juice concentrates fluctuate widely. For example, aluminum prices have fallen nearly 60% from their 2008 highs of $1. 50/pound to less than $0. 90/pound. [8]. PepsiCo has benefitted from lower input prices after the collapse of the commodities super spike of 2008. Contents 1 Company Overview 1. 1 Quarterly Earnings 1. 2 Bottlers 1. 3 Operating Segments 2 Trends Forces 2. 1 PepsiCo Must Survive a US Slowdown While Capturing International Growth 2. 2 Commodity Costs are Pressuring Margins 2. 2. 1 Pepsi Must Face a Declining Demand for Carbonated Soft Drinks 2. 2. 2 The Dollar Affects International Performance 3 Competition 3. 1 Beverages 3. 2 Snacks and Convenient Foods 3. 3 Coke vs. Pepsi 3. 3. 1 Global Footprint 3. 3. 2 Diversified Product Offering 4 References On April 20, 2009, PepsiCo made an offer to acquire its two largest bottlers, Pepsi Bottling Group (PBG) and Whitman (PAS), for $6 billion in a combined cash and stock deal. The deal was turned down, forcing PepsiCo to make a sweetened $7. 8 billion offer on August 4, 2009. PepsiCo hopes to streamline manufacturing and distribution through the acquisitions, allowing it to bring new products to market more quickly and efficiently. The company expects to gain full control of 80% of its North American market and increase pre-tax profit by $300 million, increasing eps by $. 15. [9] The deal adds $4 billion in debt to PepsiCos balance sheet. According to PepsiCo CEO Indra Nooyi, the acquisition is necessary to consolidate profit as there is not enough total profit in the North American beverage industry to support investments in several different companies. [10] The acquisition closed on March 1, 2010. [11] With the purchase of Pepsi Bottling Group (PBG) and Whitman (PAS) in 2010, company executives have said that it will lead to increased joint marketing that will bundle the companys snack and beverage offerings together. [12]. In December 2010, PepsiCo announced the purchase of 66% of Wimm-Bill-Dann Foods, a Russian food and beverage company, for $3. 8 billion. After completing this acquisition, the company is planning to buy the remaining 34%. [13] Wimm-Bill-Dan is the leading producer of dairy products in Russia and they also have a large market share for juice; the purchase significantly expands Pepsis presence in Eastern Europe and Central Asia. The addition of Wimm-Bill-Dann moves Pepsi closer to their goal of creating a global nutrition business worth $20 billion by 2020. [14] The acquisition comes three months after the Coca-Cola Companys purchase of Nidan Juices, a leading Russian juice manufacturer. [15] Company Overview PEP Revenues by Segment[16] PepsiCo is the largest snack and non-alcoholic drink producer in the United States, with 39% and 25% of the respective market shares. [16] Although the carbonated soft drink market in the US has gradually declined since the mid-2000s, PepsiCo has been able to grow revenues and net income through product diversification and international expansion. In 2008, the company posted revenues of $43. 3 billion, a 9. 6% increase from 2007; net income fell by 9% to $5. 1 billion. [17] The increase in revenues was primarily driven by higher sales volumes in the key European and Asian markets as well as company wide price increases. [18] The fall in net income was attributable to two reasons. First, PepsiCo recognized a $346 million mark-to-market loss on derivatives used to hedge its commodity exposure. [19] Next, the company incurred restructuring costs of $543 million in relation to its Productivity for Growth program. [20] PepsiCo expects to record another $30-60 million charge in 2009 to complete the program, which will close six plants in an effort to streamline PepsiCos global supply chain. [20] Quarterly Earnings Q1 2009 In the first quarter of 2009, PepsiCo posted revenues of $8. 263 billion, a 1% decrease from Q1 2008 figures; net income fell less than 1% to $1. 135 billion. [21] Although net pricing across PepsiCos product line increased by 7% during the quarter, the company was negatively impacted by a 7% foreign exchange loss due to the strengthening US dollar, as well as a 2% net decrease in sales volume. [22] Q2 2009 In the second quarter of 2009, PepsiCo posted revenues of $10. 592 billion, a 3% decrease from Q2 2008 figures; net income fell less than 1% to $1. 66 billion. [23] PepsiCos volumes remained roughly constant between the quarters, with snack gaining 1% and beverages losing 1%. The decrease in net revenues was due to a weakening of the companys US beverage operations, which decreased by 9%, in addition to the strengthening dollar, which adversely affected revenues by 8. 5%. Ignoring these changes, revenues would have grown by 5. 5%, driven by gains in the the Latin America Foods and Asia/Middle East/Africa divisions. Net income remained roughly constant as input costs fell in line with net revenues. Ignoring currency fluctuations, Earnings Per Share (EPS) would have grown by 8%. [23] Q3 2009 In the third quarter of 2009, PepsiCo had revenues of $11. 08 billion, a 1. 5% decrease from Q3 2008; net income increased 12% to $2. 23 billion. [24] The increasing value of the US Dollar negatively affected net income by 7% and the company had $9 million in costs associated with its merger with PBG and PAS, its two largest bottlers. [25] Worldwide, beverage volume increased 0. 5% while snack volume increased 2%. Frito-Lay North America, the largest division of PepsiCo, grew net revenue by 5% and increased volume by 3%. [26] Through the first three quarters of 2009, Frito-Lay was the fastest growing consumer goods company in North America. [27] The second largest division, PepsiCo Americas Beverages, saw net revenues decline by 9% and total volume decline of 6%. [28] Both Gatorade and Aquafina had double-digit volume declines; discussing Gatorade, executives attribute the decline to casual consumers budget worries and insist that the core consumer, athletes, are still buying the brand. [29] In Latin America and Europe, net revenue declined 10% and 2% respectively, driven primarily by foreign currency weakness compared to the US Dollar. [30] Q4 2009 In the fourth quarter of 2009, PepsiCo had revenues of $13. 3 billion, a 4. 7% increase from Q4 2008; net income increased 99% to $1. 43 billion. [31] Operating income for the quarter was $2 billion. [32] Pepsi American Foods net revenues increased 4%, with a 5% revenues decrease for Quaker Foods being offset by 2% revenue growth for Frito-Lay and 10% revenue growth for Latin American Foods. Pepsi American Beverages net revenues decreased 2% as a result of a 5% decrease in volume. Pepsi Internationals net revenues increased 5%, supported by 4% revenue growth in Europe and 7% growth in AMEA. Volumes for AMEA increased 13% in the quarter while volumes for Europe decreased 3%. [33] AMEAs strong quarter was based on a 13% increase in snack sales and 5% increase in beverage volumes, with 21% growth in beverage volume in India. [34] However, Chinas beverage volume decreased, which implies a market share loss to Coca-Cola Company (KO), whose China volumes grew 29% during the same period. [35] Q1 2010 In the first quarter of 2010, PepsiCo had revenues of $9. 4 billion, a 13. 4% increase from Q1 2009; net income increased 26% to $1. 4 billion. Operating income for the quarter decreased 47% to $840 million. [36] On February 26, PepsiCo completed the acquisition of its two largest bottlers for approximately $12. 6 billion; charges related to the merger in this quarter were approximately $282 million . [37] Worldwide snack volume for the quarter increased 1% while beverages volume dropped 0. 5%. Frito-Lays operating profit increased 10%, primarily as a result of increased sales of variety product packs and the decreased cost of cooking oil. [38] Quaker Foods revenue decreased 1% because of declines in ready-to-eat cereals and oatmeal, which were partially offset by substantial growth in the Roni brand; operating profit declined by 12% mainly as a result of insurance recoveries related to last years flood at Cedar Rapids. [39] In Latin America, favorable net pricing and a 1% increase in volume resulted in a 13% increase in revenues; however unfavorable currency exchange rates in Venezuela (19% decrease) accounted for a 12% decline in operating profit. [40] In Europe, favorable currency exchange rates offset 4% declines in snack and beverage volumes, for net revenues increase of 5% and operating income increase of 16%. [41] Double-digit growth in snacks and beverages volumes for India and China drove net revenues up 23% and operating income up 17% for the Asia, Middle East, and Africa segment. [42] The companys Americas Beverages segment saw volumes slip 4% (despite a 2% gain from a recent distribution agreement with Dr Pepper Snapple Group (DPS)) with a double-digit decline in Aquafina volume. However, net revenues increased 32% while operating income decreased 83% as a result of the completed merger with PepsiCos two largest bottlers. [43] The merger makes comparisons to previous quarters very challenging, however the Americas Beverages segment is in the process of de-emphasizing less-profitable products in favor of higher end offerings, such as Gatorade, which saw nearly 10% volume gains in the quarter. [44] Q2 2010 In the second quarter of 2010, PepsiCo had revenues of $14. 8 billion, up 40% from Q2 2009; net income decreased 3. 4% to $1. 6 billion. Operating income increased 12. 3% to $2. 46 billion. [45] The primary reason for the discrepancy in revenues and net income was the ongoing costs associated with the companys purchase of its primary bottlers. In Q2 2010 charges related to the restructuring decreased income by $155 million. [46] Worldwide volume increased 7% with an 11% increase in beverages and 1% increase in snacks. Frito-Lay pound volume fell 3% but net income increased 2%. The segment also benefited from lower commodity costs, in particular lower prices for cooking oil. Quaker Foods North Americas revenue fell by 4% with a 2% decline in volume that was primarily attributable to a decrease in cereal volume. [47] Latin America Foods net revenue increased 12% with a 2% increase in volume. However, operating profit fell by 5% after an unfavorable court settlement decreased profits by 5% and unfavorable currency exchange rates added another 5% to the decrease. The companys Americas Beverages increased revenues by 112% as a result of the merger with its major bottlers; volume for the quarter increased 13% with 8% coming from the acquisition of bottling operations in Mexico and 6% from PepsiCos contract with Dr. Pepper Snapple Group. [48] In Europe, net revenues increased 47% with snack volumes growing at 2% and beverage volume growing at 10%. Sales improved in most of Western Europe and Russia but declined slightly in Eastern European countries such as Romania and Ukraine (with the one exception of double-digit beverage growth in Turkey). [49] In Asia, Middle East, and Africa, where the company has recently invested significant funds in increasing manufacturing capabilities, net revenue grew 22%. Snack volume grew 16% and beverage volumes increased by 8%. India saw double-digit growth in both categories, while snack volume in the Middle East and China grew more than 10%. [50] Q3 2010 In the third quarter of 2010, PepsiCo had revenues of $15. 5 billion, up nearly 40% from Q3 2009; net income increased more than 11% to $1. 9 billion. Operating income increased by 25% to $2. 8 billion. [51] The companys volume and revenues increased worldwide for both food (+2. 5%) and beverages (+11%). Quaker Foods was the companys only division that failed to grow its operating income from 2009 with the largest gains posted by North American beverages, Europe, and Latin America Foods. [52] PepsiCo Americas Beverages operating profit grew nearly 80% for the quarter with the majority of this growth related to the companys purchase of its main bottlers in Q1 2010. However, volume grew by 13% during the quarter reflecting 8% growth in Mexico (operations in Mexico were included in the bottling merger), 6% volume growth due to the companys new contract with Dr Pepper Snapple Group (DPS), and a 4% decline in carbonated beverages in North America that was more than offset by a 5% increase in non-carbonated beverages. The success of the latter was due primarily to a double-digit increase in volume for Gatorade; water sales continued to fall during the quarter. [53] In Europe, volume growth related to the bottling merger accounted for a 7% increase, while double-digit growth in Russia, the UK, and Turkey pushed volume up 17% in total. Snack volume for the quarter grew by 3%, again supported by Russia, the UK, Turkey, and France. Both beverages and snack volume fell by more than 10% in Romania during the quarter. [54] Latin America Foods operating profit grew by 22% as a result of a double-digit volume increase in Brazil and nearly 10% increase in volume for the Sabritas brand in Mexico. [55] Operating profit for Quaker Foods decreased by more than 5% as a result of a 1% decline in volume, especially for Roni and Oatmeal brands. For Frito-Lay North America, pound volume declined 2% as a result of overlap with the companys 20% More Free promotion; sales of Sun Chips fell by more than 10% forced the company to abandon its compostable, albeit noisy, packaging. [56] In the Asia, Middle East, and Africa segment snack volume grew by 16% and beverage volume grew by 4%. Snack volumes grew significantly in the Middle East, China, India, and Australia while only China exhibited strong single-digit beverage growth. [57] Bottlers *Note Pepsis acquisition of Pepsi Bottling Group (PBG) and PepsiAmericas (PAS) was completed on March 1, 2010 PepsiCos beverage division manufactures concentrated syrup forms for all of Pepsis beverage brands. PEP sells these concentrates to bottlers for production, packaging, and distribution of the final products. PepsiCo grants bottlers the use of Pepsi trademarks and other brand rights within certain geographic regions. In August 2009, Pepsi made a $7 billion offer to acquire Pepsi Bottling Group (PBG) and PepsiAmericas (PAS). As the US carbonated beverage market shrinks from 60% of all nonalcoholic beverages in 1999 to 35% in 2009 PepsiCo hopes to consolidate the earnings of the three companies for shareholders. [9] Additionally, PepsiCo believes the acquisitions will streamline company-wide distribution through economies of scales. Three companies distribute 60% of PepsiCos North American beverage volume:[58] The Pepsi Bottling Group (PBG) is the largest of PepsiCos bottlers. PepsiCo has a 33% stake in Pepsi Bottling Group (PBG), and claims its share of income under the equity method of accounting. [59] PepsiAmericas (PAS) is the second-largest bottler in the Pepsi system. PepsiCo has a 43% stake in PepsiAmericas (PAS), and claims its share of income under the equity method of accounting. [60] Pepsi Bottling Ventures is the third-largest domestic bottling company within the Pepsi system. The company was formed in 1999 when five of Pepsi’s bottling companies consolidated to form PBV. Operating Segments PepsiCo operates in six divisions: Frito-Lay North America (29% of Revenue, 43% of Operating Income)[61] manufactures, markets and sells branded snacks. Popular products include Lays Potato Chips, Doritos Tortilla Chips, Cheetos, Rold Gold Pretzels, and SunChips. [1] Following the companys purchase of Pepsi Bottling Group (PBG) and Whitman (PAS), company executives have said that it will lead to increased joint marketing, bundling the companys snack and beverage offerings. [62] Quaker Foods North America (4% of Revenue, 8% of Operating Income)[61] manufactures, markets and sells cereals, rice, pasta and other branded products. Popular products include Quaker Oatmeal, Aunt Jemima mixes and syrups, Cap n Crunch cereal, Rice-A-Roni, and Life cereal. [1] Latin America Foods (14% of Revenue, 13% of Operating Income)[61] manufactures, markets and sells a number of leading salty and sweet snack brands. Popular products include Gamesa, Doritos, Cheetos, and Ruffles. [4] PepsiCo Americas Beverages (25% of Revenue, 29% of Operating Income)[61] manufactures, markets and sells beverage concentrates, fountain syrups and finished goods, under various beverage brands. Popular products include Pepsi, Mountain Dew, Gatorade, Tropicana, and Izze. [4] United Kingdom Europe (15% of Revenue, 10% of Operating Income)[61] manufactures, markets and sells a number of leading salty and sweet snack brands. Popular products include Lays, Walkers, Doritos, and Cheetos. [4] Middle East, Africa, and Asia (13% of Revenue, 8% of Operating Income)[61] manufactures, markets and sells a number of leading salty and sweet snack brands. Popular products include Lays, Smiths, Doritos, and Cheetos. [63] Trends Forces PepsiCo Must Survive a US Slowdown While Capturing International Growth Soaring food and energy prices[64], the housing slump[65] and a weakening job market[66] are putting the breaks on consumer spending in North America, even in the typically recession proof drinks and snacks market. Emerging markets such as China, India, Eastern Europe and Latin America present strong growth opportunities for Pepsico. In December 2010, Pepsi announced their purchase of Wimm-Bill-Dann Foods, a Russian food and beverage company, for $5. 4 billion[67]; the purchase followed Coca-Colas purchase of a Russian juice company for $300 million in summer 2010. [68] Wimm-Bill-Dan is the leading producer of dairy products in Russia and they also have a large market share for juice; the purchase significantly expands Pepsis presence in Eastern Europe and Central Asia. The company had sales of $2. 6 billion in 2010 and serves approximately 280 million customers in Eurasia. [69] In addition to making international acquisitions, PepsiCo is investing significant resources in expanding their manufacturing capabilities in developing markets. The company has pledged to invest $3. 5 billion in China through 2013, mainly through the construction of 10 to 12 new manufacturing facilities (in addition to the 27 it currently operates). In China, Pepsi is also pursuing a strategy of buying back stakes in its Chinese operations from local partners. These acquisitions will give the company greater control over its operations while increasing profits. Unlike the saturated North American market, Chinas carbonated drink market is growing at almost 20% annually. [70] In late August 2010, PepsiCo announced its plan to invest $250 million in new manufacturing plants in Vietnam further expanding its footprint in the region. In the past two years, the company invested in two other manufacturing plants in Vietnam, and it currently operates five plants in the country. [71] In Latin America, the company has pledged $3 million over the next three years to create an agriculture research center in Peru, which will focus on the discovery of new potato and other vegetable varieties. [72] Pepsis expects their global nutrition business will be worth $20 billion by 2020. [73] Commodity Costs are Pressuring Margins 2007-2009 PET resin prices, ? /pound [74] PepsiCos profitability can be affected directly and indirectly by the costs of various production inputs. PEP is responsible for purchasing the raw materials used to make its products in all its markets and also acts as an agent for the purchase of its bottlers raw materials. Some of the raw materials used by PEP include grains such as corn, wheat flour, oats and rice; fruit and vegetable products like oranges, potatoes, and juice concentrates; sugar; and vegetable and essential oils. For example, aluminum prices have fallen more than 60% from their 2008 highs of $1. 50/pound to less than $0. 65/pound. [8] Changes in the prices of such raw materials could impact total production costs and the company’s profit margins. Changes in bottlers production input costs can also indirectly impact PEPs profits. If a bottlers raw materials become more expensive, it might pass on the increase to customers, which could lead to a loss of market share as customers switch to more affordable alternatives. The primary raw materials used by bottlers are high fructose corn syrup, which is used as a sweetener, aluminum, used to make cans, and PET Resin, used for plastic bottles. In an effort to insulate itself from market forces, PepsiCo has invested $29. 3 million in five farms in China, making it one of the countrys largest agricultural companies. [75] The farms primarily produce potatoes for the companys potato chip brands and by 2005, the company was the largest private potato grower in the country. [76] In her 2008 visit to China, CEO Indra Nooyi said that the company is planning to invest $1 billion in China by 2012. [77] In addition to its farms in China, Pepsi has 12,000 contract farmers in India growing potatoes on 16,000 acres of land. In addition to potatoes, the company is hoping to expand its contract farming initiative to include oats in the near future. [78] Pepsi Must Face a Declining Demand for Carbonated Soft Drinks Consumer demand for CSD has been negatively affected by concerns about health and wellness. Since 1999, carbonated soft drinks have dropped from 60% to 35% of total US beverage volume. [9] Rising health and wellness concerns can be attributed to increasing concern for obesity as well as education campaigns on the part of the FDA as well as non-profit groups. Public campaigns to ban sales of soft drinks and fatty snacks in schools have also negatively impacted demand for sugary sodas. These factors have driven a shift in consumption away from CSD to healthier alternatives, such as tea, juices, and water. Even within the CSD segment, consumers have been moving away from the sugared drinks, opting instead for diet beverages, which do not generally contain any sugar or calories. In response to this shift in consumer demand, PEP has increased its development of both diet CSD and non-CSD beverages. With its popular Tropicana and Gatorade brands, PepsiCo is much better situated than Coca-Cola Company (KO) to react to these changing trends. Facing lower Gatorade sales in 2010, Pepsi developed a social marketing department to track the brands performance and online reputation. By tracking user discussions online and Gatorade groups on Facebook, the company has been able to quickly respond to consumer demands. The results of Pepsis new marketing initiative is inconclusive because the brand rose 2. 4% during the first half of 2010 but this is compared with low sales in 2009. [79] The Dollar Affects International Performance Changes in the strength of the dollar compared to foreign currency could impact the company by decreasing both costs and revenue in dollars. As the strength of the dollar increases, all sales made in foreign currency end up being worth less because the amount of US dollars the company gets per sale decreases. On the other hand the cost of foreign inputs (food and other commodities that go into PepsiCo products) sold in foreign currencies would decrease with the strengthening dollar. Since over half of PepsiCos sales are in international markets, the increasing value of the dollar could be a significant factor driving revenues down overseas. Specifically the company primarily deals with the British Pound, Euro, Australian dollar, and Canadian dollar. Between July and December 2008, the dollar regained nearly all its 2007 losses against foreign currencies, and has continued this trend through 2009. [23] Competition 2008 U. S. non-alcoholic beverage market by volume[80] Beverages In the domestic beverage market, the Coca-Cola Company (KO) is PepsiCos main competitor. In 2008, Coca-Cola had a 23% share of the U. S. non-alcoholic beverage volume, while PEP held a 25% share. Coca-Cola Company (KO) has a higher worldwide share of carbonated soda beverages, but PepsiCo has a more diverse product line and leads the industry in non-carbonated soft drink innovations. [81] PepsiCos revenues are also substantially higher than Coca-Colas, due to PepsiCos snack and convenient foods business, a market in which KO does not participate. PepsiCos presence in the snack and convenient food industries, as well as its industry-leading innovations in the non-carbonated soft drink segment, gives it a somewhat more balanced portfolio than Coca-Cola and provides the company with some protection against further declining demand for CSD. Pepsi also pays the Dr Pepper Snapple Group (DPS) for the rights to sell its products, along with Coca-Cola Company (KO). In December 2009, Pepsi agreed to pay Dr Pepper Snapple Group (DPS) $900 million for the continued rights to sell Dr. Pepper products following the companys acquisition of its North American bottlers. [82] This deal was similar to a contract signed by Coke and Dr. Pepper in June 2010, worth $$715 million, that gave Coke similar distribution rights following their acquisition of Coca-Cola Enterprises (CCE). [83] Snacks and Convenient Foods 2008 U. S. Snack Market by volume[80] PepsiCos Frito-Lay and Quaker brands compete in various parts of the larger food industry. Its snack foods manufactured by the Frito-Lay segment hold a commanding share of the U. S. market, accounting for around 39% of domestic snack food sales in 2006. PepsiCos main competitor in the food market overall is Kraft Foods (KFT). Krafts products include snacks, cheese, diary, and cereal products, which puts it in competition both with Frito-Lay and Quaker products. Much like the Coca-Cola Company (KO), Kraft does not participate in both the food and soft drink markets, giving PEP the advantage of having a more diverse offering of products. Coke vs. Pepsi For decades now, Coke and Pepsi have battled for our hearts and minds but what about our capital? Which company will add the best flavor to your investment portfolio? Although both companies share powerful brand names and global franchises, there are two important distinctions between Pepsico and Coca-Cola that any investor should consider before choosing between these comestible titans: Global Footprint When it comes to international presence, Coca-Cola easily trumps Pepsico. In 2009, Coca-Cola generated 74% of its revenue overseas compared to 48% revenue for Pepsico. [84][85] Coca-Colas impressive global footprint puts it in a better position to benefit from strong growth across the globe, particularly in the developing world. Furthermore, because Coke generates so much of its revenue abroad, it stands to benefit greatly from the continuing weakening of the dollar as sales denominated in foreign currencies are suddenly worth more dollars back home. At the same time, Pepsicos heavy dependence on North America makes it much more susceptible to a slowing US economy. Diversified Product Offering. Another important distinction between the two companies is their product offering. While KO is essentially a one-product company that focuses on beverages, Pepsico has a much broader product base that includes beverages, foods and snacks. Coca-Colas heavy dependence on beverages, particularly carbonated beverages, makes it more susceptible than Pepsico to a growing aversion to soda which is perceived as fattening and unhealthy. On the other hand, Pepsicos extensive portfolio of beverages, foods and snacks puts it in a better position from the trend to healthier eating.

Innovation for Competitive Advantage in International Market

Innovation for Competitive Advantage in International Market INTRODUCTION Organizations must run fast to keep up with changes taking place all around them. They must modify themselves all the time. Change, rather than stability, is the norm today. Every business is affected by a number of powerful environmental forces such as; technological advances, environmental changes, evolving society and customer desires, and maturation of market, which drive the need to change in todays globalized economy. All of these enviromental forces have created opportunities and threats. Every organization strives to take advantage of opportunities and manage the threats which have arisen during the change process (Daft, 2001). Organizations, to be considered innovative, need to implement technologically new products and processes, or need to make significant technological improvements in existing products and processes. Organizations generate and apply the appropriate knowledge required for producing something new and improving the existing product or process, simply known as â€Å"knowledge creation† (Atmaca, 2006). The rate of innovation and technical change is important to an economys rate of growth. Differences in knowledge creation, diffusion, and use have implications for international competiveness, standards of living, and quality of life (Feldman and Massard, 2002). To remain competitive, established firms must continually seek out opportunities for growth and new methods for strategically renewing their performance. Changes in customer needs, new technologies, and shifts in the competitive landscape require that companies continually innovate and initiate corporate ventures in order to compete effectively (Dess, Lumpkin and Eisner, 2008). The discussion begins with defining the innovation concept focusing on different literatures from professional writers. Innovations can take many forms, including radical breakthrough innovations as well as incremantal innovative improvements, and todays researchers are strongly emphasizing that innovation is one of the most valuable differentiator for sustainable competitive advantage. The concept of innovation is compared to the concept of invention and creativity as they are confused and interchangeably used. Later, the discussion concentrates on the importance of innovation in identifying opportunities and threats coming with change; which are followed by suggestions how to become successful innovators to overcome these threats. The discussion continues by identifying the four types of changes an organization undergoes to achieve advantage in the international environment. These changes can be used to update the products or the services, the technology, the existing strategy and structure, and culture in the organization. Then, focus will be on how organizations can build innovation by applying key elements that create a truly innovative and entrepreneurial one. The next chapter identifies some successful global innovators that have delivered novel benefits to their customers. This thesis reviews the innovation concept and the forms it takes to achieve competitive edge in the market. It identifies the benefits driving from innovation, explains why people and organizations resist change and identifies the appropriate steps to overcome barriers resisting it. It explains the role management has during innovation and the key elements to create an innovative organization. It concludes by explaining why healthcare sector is different and identifies the best practiced innovations in healthcare sector. The later chapter concentrates on how innovation evolves in the service sector. The biggest industries for RD spending for 2009 are identified. The important features of services sector; the concept of service innovation and its four dimensions are compared to the service product concept. To conclude, some suggestions how management in service companies can achieve effective innovation are given. The last chapter concentrates on the healthcare sector. It focuses on the main and best practised innovations in the healthare sector, as healthcare is a part of the service sector. The reasons that make the healthcare sector different from others are underlined. Big structure, complex size, and different government policies are some of the reasons. To sum up, best practised processes and services which are applied by present healthcare service providers are identified. CHAPTER I LITERATURE REVIEW IN INNOVATION 1.1 Defining Innovation According to King (2009) innovation is doing things in new ways in order to achieve significant results and make a huge difference in performance compared to others. Innovations goal is to have a positive change, to make someone or something better. Testing and evaluation of ideas is critical in achieving this goal. The ideas that do not work are identified through testing. Failure is an integral part of the innovation process. Failing means collecting data and evidence about the changes that organizations want to undergo. This view is supported by Mulgan and Albury (2003) who define innovation as new ideas that work and a successful innovation can be achieved through the creation and implementation of new processes, products, services and methods of delivery which will result in significant improvements in the profitability and enhance the growth of an enterprise. Innovation is a special case of planned change and learning that either transforms current products, services, and markets, or creates an entirely new market by introducing a radically new product or service. An organization is considered innovative if it stirs up the marketplace, by creating competitive pressures and new opportunities. It has been recognized that innovation success in an established organization requires balancing the stabilized efficiency of the current market offerings and building new capabilities to create and develop offerings for unknown markets (Bloisi, Cook and Hunsaker, 2003). The changes used to adapt the environment can be evaluated according to the scope and to the extent to which changes are incremental or radical for the organization. Incremental changes maintain the general equilibrium of the organization through a series of continual progressions and affect only one part in organization. On the contrast, radical changes, transform the entire organization. Incremental changes include technology improvements, such as the introduction of computer-integrated manufacturing or product improvements in the established structure and management processes. In radical changes, the technology is likely to be breakthrough, and new products created will establish new markets (Daft, 2001). Importance of innovation seems to be the most talked management issue these days. Knowledge plays a crucial role in the economic processes because within the knowledge-based economy, innovation plays a central role and stands at the heart of economic change. Firms innovate to defend their competitive position as well as to achieve competitive advantage. Organizations possessing more knowledge outperform those with less. It was believed that an enterprise can maintain competitive advantage through quality and price. While todays different researches have revealed that innovation is one of the most valuable differentiator for sustainable competitive advantage (Tyagi, 2008). 1.1.1 Invention Tyagi (2008) has made a distinction between invention and innovation. Invention is discovering of things never existed before while innovation is discovering how to introduce and commercialize new products, processes and new ways of adding customer value through innovative business models and management systems. This point of view is supported by King (2009) who defines invention as the generation of new ideas which have the potential to make someone or something better. New ideas can drawn from scanning other industries, by having conversations and meetings, or accessing information which is not usual in your business. All innovations starting point is invention of creative ideas. The distinction between them is; invention is having an idea about a service, product, technology or device, while innovation is the successfull application of those ideas. Another author who has discussed about the difference existing among invention and creativity is Sloane (2010). Invention is the creation of a product, device or method that has never been made and existed before. So, every invention is an innovation. But every innovation is not an invention. When a company first publishes its website this is a major innovation for the company even though many other websites may already exist. 1.1.2 Creativity Creativity is defined as the process of thinking and generating new things, new concepts, and new ideas. Converting these thoughts into tangible things, bringing these ideas to life is innovation. Creativity is like dreaming up new things and innovation is making those dreams come true. Expressed in other words, creativity is the capability of conceiving something unusual or original while innovation is the implementation of those unusual or original things (Difference Between, n.d.). 1.2 Benefits and Barriers of Innovation In the last years change has occured incrementally and infrequently. A globalized economy is creating both opportunities and hazards to everyone. Firms are forced to make dramatic improvements not only to compete and prosper but also to survive. People who have been through difficult, and not successful change efforts end up drawing pesimistic and angry conclusions. They become suspicious of the motives of those pushing for transformation (Kotter, 1996). This section will focus on the discussion of benefits and barriers that come with innovation. The advantages supporting a strong leadership and the factors causing resistance toward change will be identified. In addition, this section will also explain some methods that managers can use to implement change successfully within the organization. 1.2.1 Benefits of Innovation Bhatt (2007) states the reasons that make companies innovate, those are listed below: To advance in technology. To change the environment. The evolving of the society. The evolving of the customer desires. Competitors improve their products and services. Customers stop buying your old products so you need to replace them and add new products. Innovation opportunities can arise due to environmental changes in technology, science, and data analysis. Environmental changes may result in creation of new customer needs or may enable the organization to develop better solutions to current customer needs. Service or product innovations have to fulfill four benefit aspects listed below: Unique. The target group should perceive the new benefits generated from the new service or product as unique. Important. The customers should perceive the new benefits as important. Sustainable. The new benefits should be protected against followers by measures such as patents, time to market and brand management. Marketable. The organization should have the resources, capabilities and competencies to market the product which also includes an effective and ready to market version of the product (Anon., 2008). Stark (n.d.) has identified the benefits of good innovation, those are listed below: First to market. Premium prices. Best customers. Large market share. Increased shareholder return. Increased employee motivation and morale. 1.2.2 Barriers to Innovation Beer and Nohria (2000) state that one research team concluded that ‘The brutal fact is that about 70 per cent of all change initiatives fail. These researchers conclude that there are two primary reasons why organizations undergo change: one is based on ‘hard economic value (e.g. financial return to shareholders); the other is based ‘soft organizational capabilities. The organizational approach develops corporate culture, human capabilities, feedback, measurements and reflections on evolutionary progress. Both people and organizations frequently resist change, even if it is in their best interests, especially in large and established organizations. Bloisi, Cook and Hunsaker (2003) suggest five main reasons why individuals resist change: Selective perception. People sometimes perceive the same thing differently. When changes are initiated, individuals tend to focus on how they will be personally affected rather than seeing the big picture for the entire organization. Lack of information.People will resist change if they are not informed about what is expected from them or what benefits change will bring. If the reasons for change are not clearly presented, people tend to fill in the missing pieces with speculation, which often assumes the worst in terms of initiator intentions and personal impact. In addition, if people do not have enough information about how to change, they may fear making mistakes, so they will not try. Fear of the unknown. Individuals resist change when they are uncertain about how it will affect their well-being. They fear downsizing, uncertainties about not knowing how to change, not being able to perform as well as before the change, losing position, income, and status or power. Habit. Many people prefer familiar actions and events, even if they are not optimal. Breaking a habit is difficult because it takes hard work and involves giving up perceived benefits from the habit, even if the new behavior has more desirable consequences. Resentment toward the initiator.If a change seems arbitrary or unreasonable, resentment and anger are directed towards those initiating the change. People resent being controlled and losing autonomy over their works and lives, when their thoughts and feelings are not considered by change initiators. Finally, without trust in the initiators inventions, people may resist the change out of resentment or fear of possible unknown consequences. Bloisi, Cook and Hunsaker (2003) state that organizations resist change for many of the same reasons individuals do. There are also many forces inside an organization that create resistance to changes initiated by environmental conditions. Some of the main ones are summarized below: Power Maintenance. Changes in decision-making authority and control of resource allocations threaten the balance of power in organizations. Units benefiting from the change will welcome it, but those losing power will resist it. Structural stability. Organizations create hierarchies, subgroups, rules and procedures to promote order, consistent and predicable behaviors. People who ‘fit these desired behavioral criteria are hired and shaped to confirm further through the socialization process and organizational conditioning. Functional sub-optimization.Differences in functional orientation, goals and resource dependencies can cause changes that are seen as beneficial to one functional unit and as threatening to another. Functional units usually think of themselves first when evaluating potential changes and support those that enhance their own welfare, but resist the one that reduce it. Organizational culture. Organizational culture promotes predicable ways of thinking and behaving. Organizational members will resist changes that force them to abandon established assumptions and approved ways of doing things. Group norms. Groups develop their own norms to promote desirable behaviors. Many members conform these norms. Consequently, any change that disrupts group norms, tasks or role relationships will probably be resisted. Strategos conducted a survey of innovation practices of more than 550 large companies, where majority of respondents in every industry rated innovation as critical and said that the importance of innovation would grow in the future. According to Loewe and Dominiquini (2006) the top six obstacles to innovation identified by respondents across industries are: Short-term focus. Lack of time, resources or staff. Leadership expects payoff sooner than is realistic. Management incentives do not reward innovation. Lack of a systematic innovation process. Belief that innovation is inherently risky. Below is a list of suggestions how to become successful innovators about overcoming the barriers to innovation: Have a vision for change. Innovation has to have a purpose, a statement which defines the direction for the business and which people will readily understand and remember. Your team needs to know the direction they are headed in order to be innovative. Illustrate the goals and explain to people how their role is decisive in meeting the goals to fulfill the organizational vision. Fight the fear of change. Innovative leaders constantly explain the need for change. They must paint a picture that shows an attractive future that is worth taking risks to achieve. Have a dynamic suggestions scheme. Great suggestion schemes are focused and open to all. Leaders do not need to offer huge rewards. Sometimes, recognition and response are generally more important. Break the rules. To achieve radical innovation leaders need to challenge all the assumptions related to how things should look in your environment. Business is like Art, with no well-defined rules and referees. Innovation is filled with opportunities for people who can take advantage in creating new ways to provide the goods and services that customers want. Give everyone two jobs. Ask your people to run their current jobs in the most effective way possible and at the same time to find completely new ways to do the job. Encourage them to identify the purpose of their role, the outcomes delivered through this role and if there is a better way to deliver that purpose. Collaborate. CEOs must see collaboration as key to their success during innovation. Success can not only be achieved by using internal resources, but also by looking outside of the organization for people to partner with. Welcome failure. The innovative leader encourages a culture where people feel free to innovate and experiment. Innovative leaders tell people that each unsuccessful attempt is a step along the road to success. When innovative leaders welcome innovation and create a culture of experimentation, means that they except failure and welcome it. Build prototypes. Innovative leaders are suggested to try the new ideas at low cost by building prototypes and see what the customer reaction is. You will learn more in the real world than you will in the test laboratories. Be passionate. Leaders must concentrate on the things they want to change, on the challenges they want to face and be passionate about overcoming them. Organizations need passionate supporters, who are inspired to innovate and change the way they do things to come up with extraordinary results. Be passionate about what you believe, communicate that passion every time you speak and explain why reaching the destination is really worthwhile (ArticleSnatch, n.d.). 1.3 Types of Innovation There exist four types of changes to achieve strategic edge within an organization. Managers can use these four types of changes to achieve competitive advantage in the international environment. Each company can have maximum impact upon the chosen market through its own unique configuration of technology, product and services, strategy and structure, and culture as explained below (Daft, 2001). 1.3.1 Technological Innovation Technological innovations refer to changes in an organizations production process to enable distinctive competence. Changes in an organizations production process, including its knowledge and skills base, are designed to produce greater in volume or to have a more efficient production. Changes in technology involve the work methods, equipment, and work flow techniques for making products or services. For example, in a university, technology changes are about changes in methods for teaching the courses. Tyagi (2008) suggests that traditionally innovation has been associated with the use of technological knowledge, and research and development activities. A technological innovation is any innovation due to an industrial application of scientific knowledge. Dess, Lumpkin and Eisner (2008) suggest that innovation involves the usage of new knowledge to transform organizational processes or create commercially viable products and services. The latest technology, results of experiments, creative insights, or competitive information may be the sources of new knowledge. However it comes about, innovation occurs when new combinations of ideas and information bring about positive change. Among the most important sources of new ideas is new technology. Technology creates new possibilities and provides the raw material that firms use to make innovative new products and services. But technology is not the only source of innovation. There can be innovations in human resources, firm infrastructure, marketing, service, or in many other value-adding areas that have little to do with anything â€Å"high-tech.† 1.3.2 Product and Service Innovation Product and service innovations refer to the product or service outputs of an organization. New products may be in the form of entirely new product lines or small adaptions of existing products. New products are designed to develop new markets, or customers, or to increase the market share. Tyagi (2008) states that product innovation is about the introduction of new goods and services which have improvements in terms of design excellence, core characteristics, technical specifications etc. and are derived from customer or industry insight, or strategic alignment of the organization. Godin (2005) suggests that the old rule was to create safe and ordinary products that were combined with great marketing. The new rule is to create remarkable products and figure out a great theory by looking at whats working in the real world and what the various successes have in common. Identify what the successful companies have in common and do something to be remarkable. Roberts (2002) has made a distinction when discussing if innovation is between product/service innovation and process innovation. Product/Service innovation refers to efforts to develop new products or services for end users. Product/Service innovations tend to be more radical and are more common during the earlier stages of an industrys life cycle. As an industry matures, there are fewer opportunities for newness, so the innovations tend to be more incremental. Process innovation, by contrast, is associated with improving the efficiency of an organizational process, especially manufacturing systems and operations. Process innovations occur in the later stages of an industrys life cycle as companies seek ways to remain viable in markets where demand has flattened out and competition is more intensive. As a result, process innovations are often associated with overall cost leader strategies because the aim of many process improvements is to lower the cost of operations. There are several problems with seeking competitive advantage through investments in process technology. Firstly, the people who sell you robots or point-of-sale terminals, software to analyze production or service delivery will sell the robots, terminals, and software to your competitors. Your ability to obtain the benefits of this technology depends on your ability to implement it more rapidly and more effectively. Secondly, investment in specialized technology is not a substitute for skill in managing the work force. This is because more skills may be required to operate the more sophisticated and advanced equipments. Having a higher level of investment per employee will result in increasingly expensive interruptions in the process which means that the ability to operate, maintain, and repair equipment effectively becomes even more critical (Pfeffer, 1996). 1.3.3 Strategy and Structural Innovation Strategy and structural innovation refers to the administrative section in an organization. It is related to the management and supervision in the organization, including changes in an organizations strategic management and structure, policies, accounting and budgeting systems, reward systems, labor relations, coordination devices, management information and control systems. Strategy and structure changes in an organization are mandated by top management. They usually have a top-down structure. An example may be if the corporate goes downsizing. On the other hand, product and technology changes may come from the bottom up. 1.3.4 Cultural Innovation Cultural innovation refers to changes that may occur in an employees attitudes, beliefs, values, expectations, abilities, and behavior. Culture innovation tends to change the way employees think. These are changes in mindset rather than the technology, structure, or products and services. Culture can be a powerful force undermining or shoring up the effectiveness of a nation, a business, and a manager. Recognizing the presence and power of culture will help in better navigating through the rough seas of international business. Discovering how to harness the power of culture in an organization will help the organization gain competitive advantage (Schneider and Barsoux, 2003). To conclude, it can be said that successful innovation in an organization occurs when technological and product or process innovations in the value chain are implemented through effective strategy and structure innovation. Innovation in an organization, which includes people, leadership, creativity, process and organizational culture, is the driver to grow, to achieve high profits and to succeed in the market. Innovation in an organization should be approached in a systematic way and not a piecemeal manner and should be initiated even at the lowest levels (Tyagi, 2008). 1.4 Leadership in Practice of Innovation Many organizations are resistant to changes and continue operating the way they had been operating in the past. To remain competitive, they work harder, improve efficiency, reduce cost and implement best practices. But, this is not enough. Instead of getting stuck in their standard mode of operations, organizations need to adopt innovative ways to change the strategies. The best way to create a competitive edge and be in the head of the competition is to innovate by drawing advantage from the creative power of your people. Turn your greatest assets into opportunistic entrepreneurs who discover new ways and improve the way they do business. Management innovation involves total transformation of existing culture to enhance organizational performance in an integrated manner involving technological innovation, product and service innovation, and strategy and structural innovation (Tyagi, 2008). Sloane (2003) suggests that every organization needs to have a vision, a culture and a process of innovation to build a truly innovative environment. There are eight key elements that create a truly innovative and entrepreneurial organization as below: Painting the vision. The first step is to paint a desirable, challenging and believable vision. Innovative leaders must be sure that people share a common goal and embarke on a journey all together. Being all together means they accept easier the changes, all the challenges and difficulties that show up during the journey. Innovative leaders should delegate more responsibility, and empower the staff with control over their work. Once staff is aware of the goal and direction headed, they contribute the best creative ways to solve challenges and obstacles that lie ahead. Build an open and questioning culture. The painted picture quickly fades away from view, so great leaders should take time to meet staff and illustrate the goals to be achieved and the challenges to overcome. Leaders inspire the staff to become entrepreneurs finding innovative routes to success and constantly remind them how their role is decisive in fulfilling the vision and meeting the challenges. Empowering. The purpose of empowering your people is to turn them into entrepreneurs looking for new opportunities. By empowering, leaders enable them to develop the skills for the task and achieve the change through their own efforts to come up with radical innovations. People need freedom to succeed and need to understand and agree on what management expects of them. People and management must agree on the scope of freedom and responsibility. Empowering means trusting your people, supporting and believing that they will achieve great things. Set goals, deadlines and measurements for innovation. Change is uncomfortable, resulting in anxiously people fearing an embarrassing or costly failure. Leaders should spend time with people encouraging them to undertake risks and come out from their safety zones. Leaders should reassure them that risks are necessary and worth taking and no one will be punished if their initiatives do not succeed. Use creativity techniques to generate a large number of ideas. Innovative leaders should build a culture where everyone can come up with creative solutions and crazy ideas through techniques, methods, and workshops. The goal is to change the people within the organization; from people who do routine jobs into highly energized entrepreneurs who constantly search for new and better ways of making the vision a reality. People need to be trained to learn the skills and to develop the confidence to try new methods, and use creative techniques to come up with new solutions. Review, filter and select ideas. In the innovation process many ideas are generated in response to a given issue or challenge. At the end, the most promising idea is selected. Prototype the promising proposals. After the idea is selected, then the move is to rapidly prototype it. Analyze the results and the successful projects. New product is tested for its feasibility, attractiveness and payback. Those that pass these criteria are given more funding. King (2009) suggests that the most effective, efficient and leading edge organizations are those that innovate and encourage innovation. Innovative organizations require a strong leadership team to approve the importance of innovation and create a culture for it. A development of strong capabilities for innovation leadership need to be started early in the career development process. In an innovative culture, the staff is given freedom to innovate and experiment. In an innovative culture, risks are managed and the organization understands and accepts that future success is built on a series of learning from unsuccessful attempts. Collaboration with outside parties to generate and adopt innovations is encouraged. Success will depend on strong leadership. We can take learning from market leaders to help us identify key leadership behaviors to promote innovation as explained below: Lead continuous innovation and improvement. Develop and communicate an encouraging story. Encourage partnerships and collaboration. Staff should be exposed to new viewpoints and ideas that can be adapted in the organization. To do this, the organization should create partnerships and collaboration with different parts within or outside the organization. Promote innovation. Organization should consider innovation as a core part of its role, and time is allocated for its employees to innovate. Different organizations have created bespoke Innovation for Competitive Advantage in International Market Innovation for Competitive Advantage in International Market INTRODUCTION Organizations must run fast to keep up with changes taking place all around them. They must modify themselves all the time. Change, rather than stability, is the norm today. Every business is affected by a number of powerful environmental forces such as; technological advances, environmental changes, evolving society and customer desires, and maturation of market, which drive the need to change in todays globalized economy. All of these enviromental forces have created opportunities and threats. Every organization strives to take advantage of opportunities and manage the threats which have arisen during the change process (Daft, 2001). Organizations, to be considered innovative, need to implement technologically new products and processes, or need to make significant technological improvements in existing products and processes. Organizations generate and apply the appropriate knowledge required for producing something new and improving the existing product or process, simply known as â€Å"knowledge creation† (Atmaca, 2006). The rate of innovation and technical change is important to an economys rate of growth. Differences in knowledge creation, diffusion, and use have implications for international competiveness, standards of living, and quality of life (Feldman and Massard, 2002). To remain competitive, established firms must continually seek out opportunities for growth and new methods for strategically renewing their performance. Changes in customer needs, new technologies, and shifts in the competitive landscape require that companies continually innovate and initiate corporate ventures in order to compete effectively (Dess, Lumpkin and Eisner, 2008). The discussion begins with defining the innovation concept focusing on different literatures from professional writers. Innovations can take many forms, including radical breakthrough innovations as well as incremantal innovative improvements, and todays researchers are strongly emphasizing that innovation is one of the most valuable differentiator for sustainable competitive advantage. The concept of innovation is compared to the concept of invention and creativity as they are confused and interchangeably used. Later, the discussion concentrates on the importance of innovation in identifying opportunities and threats coming with change; which are followed by suggestions how to become successful innovators to overcome these threats. The discussion continues by identifying the four types of changes an organization undergoes to achieve advantage in the international environment. These changes can be used to update the products or the services, the technology, the existing strategy and structure, and culture in the organization. Then, focus will be on how organizations can build innovation by applying key elements that create a truly innovative and entrepreneurial one. The next chapter identifies some successful global innovators that have delivered novel benefits to their customers. This thesis reviews the innovation concept and the forms it takes to achieve competitive edge in the market. It identifies the benefits driving from innovation, explains why people and organizations resist change and identifies the appropriate steps to overcome barriers resisting it. It explains the role management has during innovation and the key elements to create an innovative organization. It concludes by explaining why healthcare sector is different and identifies the best practiced innovations in healthcare sector. The later chapter concentrates on how innovation evolves in the service sector. The biggest industries for RD spending for 2009 are identified. The important features of services sector; the concept of service innovation and its four dimensions are compared to the service product concept. To conclude, some suggestions how management in service companies can achieve effective innovation are given. The last chapter concentrates on the healthcare sector. It focuses on the main and best practised innovations in the healthare sector, as healthcare is a part of the service sector. The reasons that make the healthcare sector different from others are underlined. Big structure, complex size, and different government policies are some of the reasons. To sum up, best practised processes and services which are applied by present healthcare service providers are identified. CHAPTER I LITERATURE REVIEW IN INNOVATION 1.1 Defining Innovation According to King (2009) innovation is doing things in new ways in order to achieve significant results and make a huge difference in performance compared to others. Innovations goal is to have a positive change, to make someone or something better. Testing and evaluation of ideas is critical in achieving this goal. The ideas that do not work are identified through testing. Failure is an integral part of the innovation process. Failing means collecting data and evidence about the changes that organizations want to undergo. This view is supported by Mulgan and Albury (2003) who define innovation as new ideas that work and a successful innovation can be achieved through the creation and implementation of new processes, products, services and methods of delivery which will result in significant improvements in the profitability and enhance the growth of an enterprise. Innovation is a special case of planned change and learning that either transforms current products, services, and markets, or creates an entirely new market by introducing a radically new product or service. An organization is considered innovative if it stirs up the marketplace, by creating competitive pressures and new opportunities. It has been recognized that innovation success in an established organization requires balancing the stabilized efficiency of the current market offerings and building new capabilities to create and develop offerings for unknown markets (Bloisi, Cook and Hunsaker, 2003). The changes used to adapt the environment can be evaluated according to the scope and to the extent to which changes are incremental or radical for the organization. Incremental changes maintain the general equilibrium of the organization through a series of continual progressions and affect only one part in organization. On the contrast, radical changes, transform the entire organization. Incremental changes include technology improvements, such as the introduction of computer-integrated manufacturing or product improvements in the established structure and management processes. In radical changes, the technology is likely to be breakthrough, and new products created will establish new markets (Daft, 2001). Importance of innovation seems to be the most talked management issue these days. Knowledge plays a crucial role in the economic processes because within the knowledge-based economy, innovation plays a central role and stands at the heart of economic change. Firms innovate to defend their competitive position as well as to achieve competitive advantage. Organizations possessing more knowledge outperform those with less. It was believed that an enterprise can maintain competitive advantage through quality and price. While todays different researches have revealed that innovation is one of the most valuable differentiator for sustainable competitive advantage (Tyagi, 2008). 1.1.1 Invention Tyagi (2008) has made a distinction between invention and innovation. Invention is discovering of things never existed before while innovation is discovering how to introduce and commercialize new products, processes and new ways of adding customer value through innovative business models and management systems. This point of view is supported by King (2009) who defines invention as the generation of new ideas which have the potential to make someone or something better. New ideas can drawn from scanning other industries, by having conversations and meetings, or accessing information which is not usual in your business. All innovations starting point is invention of creative ideas. The distinction between them is; invention is having an idea about a service, product, technology or device, while innovation is the successfull application of those ideas. Another author who has discussed about the difference existing among invention and creativity is Sloane (2010). Invention is the creation of a product, device or method that has never been made and existed before. So, every invention is an innovation. But every innovation is not an invention. When a company first publishes its website this is a major innovation for the company even though many other websites may already exist. 1.1.2 Creativity Creativity is defined as the process of thinking and generating new things, new concepts, and new ideas. Converting these thoughts into tangible things, bringing these ideas to life is innovation. Creativity is like dreaming up new things and innovation is making those dreams come true. Expressed in other words, creativity is the capability of conceiving something unusual or original while innovation is the implementation of those unusual or original things (Difference Between, n.d.). 1.2 Benefits and Barriers of Innovation In the last years change has occured incrementally and infrequently. A globalized economy is creating both opportunities and hazards to everyone. Firms are forced to make dramatic improvements not only to compete and prosper but also to survive. People who have been through difficult, and not successful change efforts end up drawing pesimistic and angry conclusions. They become suspicious of the motives of those pushing for transformation (Kotter, 1996). This section will focus on the discussion of benefits and barriers that come with innovation. The advantages supporting a strong leadership and the factors causing resistance toward change will be identified. In addition, this section will also explain some methods that managers can use to implement change successfully within the organization. 1.2.1 Benefits of Innovation Bhatt (2007) states the reasons that make companies innovate, those are listed below: To advance in technology. To change the environment. The evolving of the society. The evolving of the customer desires. Competitors improve their products and services. Customers stop buying your old products so you need to replace them and add new products. Innovation opportunities can arise due to environmental changes in technology, science, and data analysis. Environmental changes may result in creation of new customer needs or may enable the organization to develop better solutions to current customer needs. Service or product innovations have to fulfill four benefit aspects listed below: Unique. The target group should perceive the new benefits generated from the new service or product as unique. Important. The customers should perceive the new benefits as important. Sustainable. The new benefits should be protected against followers by measures such as patents, time to market and brand management. Marketable. The organization should have the resources, capabilities and competencies to market the product which also includes an effective and ready to market version of the product (Anon., 2008). Stark (n.d.) has identified the benefits of good innovation, those are listed below: First to market. Premium prices. Best customers. Large market share. Increased shareholder return. Increased employee motivation and morale. 1.2.2 Barriers to Innovation Beer and Nohria (2000) state that one research team concluded that ‘The brutal fact is that about 70 per cent of all change initiatives fail. These researchers conclude that there are two primary reasons why organizations undergo change: one is based on ‘hard economic value (e.g. financial return to shareholders); the other is based ‘soft organizational capabilities. The organizational approach develops corporate culture, human capabilities, feedback, measurements and reflections on evolutionary progress. Both people and organizations frequently resist change, even if it is in their best interests, especially in large and established organizations. Bloisi, Cook and Hunsaker (2003) suggest five main reasons why individuals resist change: Selective perception. People sometimes perceive the same thing differently. When changes are initiated, individuals tend to focus on how they will be personally affected rather than seeing the big picture for the entire organization. Lack of information.People will resist change if they are not informed about what is expected from them or what benefits change will bring. If the reasons for change are not clearly presented, people tend to fill in the missing pieces with speculation, which often assumes the worst in terms of initiator intentions and personal impact. In addition, if people do not have enough information about how to change, they may fear making mistakes, so they will not try. Fear of the unknown. Individuals resist change when they are uncertain about how it will affect their well-being. They fear downsizing, uncertainties about not knowing how to change, not being able to perform as well as before the change, losing position, income, and status or power. Habit. Many people prefer familiar actions and events, even if they are not optimal. Breaking a habit is difficult because it takes hard work and involves giving up perceived benefits from the habit, even if the new behavior has more desirable consequences. Resentment toward the initiator.If a change seems arbitrary or unreasonable, resentment and anger are directed towards those initiating the change. People resent being controlled and losing autonomy over their works and lives, when their thoughts and feelings are not considered by change initiators. Finally, without trust in the initiators inventions, people may resist the change out of resentment or fear of possible unknown consequences. Bloisi, Cook and Hunsaker (2003) state that organizations resist change for many of the same reasons individuals do. There are also many forces inside an organization that create resistance to changes initiated by environmental conditions. Some of the main ones are summarized below: Power Maintenance. Changes in decision-making authority and control of resource allocations threaten the balance of power in organizations. Units benefiting from the change will welcome it, but those losing power will resist it. Structural stability. Organizations create hierarchies, subgroups, rules and procedures to promote order, consistent and predicable behaviors. People who ‘fit these desired behavioral criteria are hired and shaped to confirm further through the socialization process and organizational conditioning. Functional sub-optimization.Differences in functional orientation, goals and resource dependencies can cause changes that are seen as beneficial to one functional unit and as threatening to another. Functional units usually think of themselves first when evaluating potential changes and support those that enhance their own welfare, but resist the one that reduce it. Organizational culture. Organizational culture promotes predicable ways of thinking and behaving. Organizational members will resist changes that force them to abandon established assumptions and approved ways of doing things. Group norms. Groups develop their own norms to promote desirable behaviors. Many members conform these norms. Consequently, any change that disrupts group norms, tasks or role relationships will probably be resisted. Strategos conducted a survey of innovation practices of more than 550 large companies, where majority of respondents in every industry rated innovation as critical and said that the importance of innovation would grow in the future. According to Loewe and Dominiquini (2006) the top six obstacles to innovation identified by respondents across industries are: Short-term focus. Lack of time, resources or staff. Leadership expects payoff sooner than is realistic. Management incentives do not reward innovation. Lack of a systematic innovation process. Belief that innovation is inherently risky. Below is a list of suggestions how to become successful innovators about overcoming the barriers to innovation: Have a vision for change. Innovation has to have a purpose, a statement which defines the direction for the business and which people will readily understand and remember. Your team needs to know the direction they are headed in order to be innovative. Illustrate the goals and explain to people how their role is decisive in meeting the goals to fulfill the organizational vision. Fight the fear of change. Innovative leaders constantly explain the need for change. They must paint a picture that shows an attractive future that is worth taking risks to achieve. Have a dynamic suggestions scheme. Great suggestion schemes are focused and open to all. Leaders do not need to offer huge rewards. Sometimes, recognition and response are generally more important. Break the rules. To achieve radical innovation leaders need to challenge all the assumptions related to how things should look in your environment. Business is like Art, with no well-defined rules and referees. Innovation is filled with opportunities for people who can take advantage in creating new ways to provide the goods and services that customers want. Give everyone two jobs. Ask your people to run their current jobs in the most effective way possible and at the same time to find completely new ways to do the job. Encourage them to identify the purpose of their role, the outcomes delivered through this role and if there is a better way to deliver that purpose. Collaborate. CEOs must see collaboration as key to their success during innovation. Success can not only be achieved by using internal resources, but also by looking outside of the organization for people to partner with. Welcome failure. The innovative leader encourages a culture where people feel free to innovate and experiment. Innovative leaders tell people that each unsuccessful attempt is a step along the road to success. When innovative leaders welcome innovation and create a culture of experimentation, means that they except failure and welcome it. Build prototypes. Innovative leaders are suggested to try the new ideas at low cost by building prototypes and see what the customer reaction is. You will learn more in the real world than you will in the test laboratories. Be passionate. Leaders must concentrate on the things they want to change, on the challenges they want to face and be passionate about overcoming them. Organizations need passionate supporters, who are inspired to innovate and change the way they do things to come up with extraordinary results. Be passionate about what you believe, communicate that passion every time you speak and explain why reaching the destination is really worthwhile (ArticleSnatch, n.d.). 1.3 Types of Innovation There exist four types of changes to achieve strategic edge within an organization. Managers can use these four types of changes to achieve competitive advantage in the international environment. Each company can have maximum impact upon the chosen market through its own unique configuration of technology, product and services, strategy and structure, and culture as explained below (Daft, 2001). 1.3.1 Technological Innovation Technological innovations refer to changes in an organizations production process to enable distinctive competence. Changes in an organizations production process, including its knowledge and skills base, are designed to produce greater in volume or to have a more efficient production. Changes in technology involve the work methods, equipment, and work flow techniques for making products or services. For example, in a university, technology changes are about changes in methods for teaching the courses. Tyagi (2008) suggests that traditionally innovation has been associated with the use of technological knowledge, and research and development activities. A technological innovation is any innovation due to an industrial application of scientific knowledge. Dess, Lumpkin and Eisner (2008) suggest that innovation involves the usage of new knowledge to transform organizational processes or create commercially viable products and services. The latest technology, results of experiments, creative insights, or competitive information may be the sources of new knowledge. However it comes about, innovation occurs when new combinations of ideas and information bring about positive change. Among the most important sources of new ideas is new technology. Technology creates new possibilities and provides the raw material that firms use to make innovative new products and services. But technology is not the only source of innovation. There can be innovations in human resources, firm infrastructure, marketing, service, or in many other value-adding areas that have little to do with anything â€Å"high-tech.† 1.3.2 Product and Service Innovation Product and service innovations refer to the product or service outputs of an organization. New products may be in the form of entirely new product lines or small adaptions of existing products. New products are designed to develop new markets, or customers, or to increase the market share. Tyagi (2008) states that product innovation is about the introduction of new goods and services which have improvements in terms of design excellence, core characteristics, technical specifications etc. and are derived from customer or industry insight, or strategic alignment of the organization. Godin (2005) suggests that the old rule was to create safe and ordinary products that were combined with great marketing. The new rule is to create remarkable products and figure out a great theory by looking at whats working in the real world and what the various successes have in common. Identify what the successful companies have in common and do something to be remarkable. Roberts (2002) has made a distinction when discussing if innovation is between product/service innovation and process innovation. Product/Service innovation refers to efforts to develop new products or services for end users. Product/Service innovations tend to be more radical and are more common during the earlier stages of an industrys life cycle. As an industry matures, there are fewer opportunities for newness, so the innovations tend to be more incremental. Process innovation, by contrast, is associated with improving the efficiency of an organizational process, especially manufacturing systems and operations. Process innovations occur in the later stages of an industrys life cycle as companies seek ways to remain viable in markets where demand has flattened out and competition is more intensive. As a result, process innovations are often associated with overall cost leader strategies because the aim of many process improvements is to lower the cost of operations. There are several problems with seeking competitive advantage through investments in process technology. Firstly, the people who sell you robots or point-of-sale terminals, software to analyze production or service delivery will sell the robots, terminals, and software to your competitors. Your ability to obtain the benefits of this technology depends on your ability to implement it more rapidly and more effectively. Secondly, investment in specialized technology is not a substitute for skill in managing the work force. This is because more skills may be required to operate the more sophisticated and advanced equipments. Having a higher level of investment per employee will result in increasingly expensive interruptions in the process which means that the ability to operate, maintain, and repair equipment effectively becomes even more critical (Pfeffer, 1996). 1.3.3 Strategy and Structural Innovation Strategy and structural innovation refers to the administrative section in an organization. It is related to the management and supervision in the organization, including changes in an organizations strategic management and structure, policies, accounting and budgeting systems, reward systems, labor relations, coordination devices, management information and control systems. Strategy and structure changes in an organization are mandated by top management. They usually have a top-down structure. An example may be if the corporate goes downsizing. On the other hand, product and technology changes may come from the bottom up. 1.3.4 Cultural Innovation Cultural innovation refers to changes that may occur in an employees attitudes, beliefs, values, expectations, abilities, and behavior. Culture innovation tends to change the way employees think. These are changes in mindset rather than the technology, structure, or products and services. Culture can be a powerful force undermining or shoring up the effectiveness of a nation, a business, and a manager. Recognizing the presence and power of culture will help in better navigating through the rough seas of international business. Discovering how to harness the power of culture in an organization will help the organization gain competitive advantage (Schneider and Barsoux, 2003). To conclude, it can be said that successful innovation in an organization occurs when technological and product or process innovations in the value chain are implemented through effective strategy and structure innovation. Innovation in an organization, which includes people, leadership, creativity, process and organizational culture, is the driver to grow, to achieve high profits and to succeed in the market. Innovation in an organization should be approached in a systematic way and not a piecemeal manner and should be initiated even at the lowest levels (Tyagi, 2008). 1.4 Leadership in Practice of Innovation Many organizations are resistant to changes and continue operating the way they had been operating in the past. To remain competitive, they work harder, improve efficiency, reduce cost and implement best practices. But, this is not enough. Instead of getting stuck in their standard mode of operations, organizations need to adopt innovative ways to change the strategies. The best way to create a competitive edge and be in the head of the competition is to innovate by drawing advantage from the creative power of your people. Turn your greatest assets into opportunistic entrepreneurs who discover new ways and improve the way they do business. Management innovation involves total transformation of existing culture to enhance organizational performance in an integrated manner involving technological innovation, product and service innovation, and strategy and structural innovation (Tyagi, 2008). Sloane (2003) suggests that every organization needs to have a vision, a culture and a process of innovation to build a truly innovative environment. There are eight key elements that create a truly innovative and entrepreneurial organization as below: Painting the vision. The first step is to paint a desirable, challenging and believable vision. Innovative leaders must be sure that people share a common goal and embarke on a journey all together. Being all together means they accept easier the changes, all the challenges and difficulties that show up during the journey. Innovative leaders should delegate more responsibility, and empower the staff with control over their work. Once staff is aware of the goal and direction headed, they contribute the best creative ways to solve challenges and obstacles that lie ahead. Build an open and questioning culture. The painted picture quickly fades away from view, so great leaders should take time to meet staff and illustrate the goals to be achieved and the challenges to overcome. Leaders inspire the staff to become entrepreneurs finding innovative routes to success and constantly remind them how their role is decisive in fulfilling the vision and meeting the challenges. Empowering. The purpose of empowering your people is to turn them into entrepreneurs looking for new opportunities. By empowering, leaders enable them to develop the skills for the task and achieve the change through their own efforts to come up with radical innovations. People need freedom to succeed and need to understand and agree on what management expects of them. People and management must agree on the scope of freedom and responsibility. Empowering means trusting your people, supporting and believing that they will achieve great things. Set goals, deadlines and measurements for innovation. Change is uncomfortable, resulting in anxiously people fearing an embarrassing or costly failure. Leaders should spend time with people encouraging them to undertake risks and come out from their safety zones. Leaders should reassure them that risks are necessary and worth taking and no one will be punished if their initiatives do not succeed. Use creativity techniques to generate a large number of ideas. Innovative leaders should build a culture where everyone can come up with creative solutions and crazy ideas through techniques, methods, and workshops. The goal is to change the people within the organization; from people who do routine jobs into highly energized entrepreneurs who constantly search for new and better ways of making the vision a reality. People need to be trained to learn the skills and to develop the confidence to try new methods, and use creative techniques to come up with new solutions. Review, filter and select ideas. In the innovation process many ideas are generated in response to a given issue or challenge. At the end, the most promising idea is selected. Prototype the promising proposals. After the idea is selected, then the move is to rapidly prototype it. Analyze the results and the successful projects. New product is tested for its feasibility, attractiveness and payback. Those that pass these criteria are given more funding. King (2009) suggests that the most effective, efficient and leading edge organizations are those that innovate and encourage innovation. Innovative organizations require a strong leadership team to approve the importance of innovation and create a culture for it. A development of strong capabilities for innovation leadership need to be started early in the career development process. In an innovative culture, the staff is given freedom to innovate and experiment. In an innovative culture, risks are managed and the organization understands and accepts that future success is built on a series of learning from unsuccessful attempts. Collaboration with outside parties to generate and adopt innovations is encouraged. Success will depend on strong leadership. We can take learning from market leaders to help us identify key leadership behaviors to promote innovation as explained below: Lead continuous innovation and improvement. Develop and communicate an encouraging story. Encourage partnerships and collaboration. Staff should be exposed to new viewpoints and ideas that can be adapted in the organization. To do this, the organization should create partnerships and collaboration with different parts within or outside the organization. Promote innovation. Organization should consider innovation as a core part of its role, and time is allocated for its employees to innovate. Different organizations have created bespoke