Benefits of Innovation
Business Management and Enterprise (Year 12) - Management (U3)
There are many benefits to innovation:
Rises in productivity
Creation of competitive advantage
Extension of product life cycles
There are three main benefits to consider in the BME syllabus.
There will be financial gain as a result of innovation. There will be an increase in the market size due to more customers. There will also be a rise in diversification, as well as a decrease in the levels of risk. Innovation will provide businesses with a unique selling point. This will lead to a potential rise in revenue, as well as increased profit. This way, the firm is able to subsidise R&D.
The business will see expansion of global market presence. The firms have innovative ways of selling, such as e-commerce. Trade liberalisation (reduction of barriers) has occurred and there is a lower cost of accessing consumers abroad. There could have been ICT and/or transportation advancements too. This will lead to growth of MNC’s, global brands and marketing. It will also decrease political instability.
The firm will have increased market share (proportion of the market held by any product or brand). They will have a larger customer base, which will lead to more sales and profits. This is because they can access overseas consumers in new markets. It will also increase competition, driving efficiency and increasing innovation even further. Economies of scale will also be present, decreasing operating costs. An innovative firm will be able to do all this, leading to a higher market share.