1.

Essentially innovation is simply having a new idea; taking an idea that already exists and
streamlining it to make it work better. This is the most important aspect of a business, its
what makes it stand out among the market place, prevents it from going stagnant, helps it to
grow and drives society, and humanity, forwards. But innovation does not guarantee success.
Innovation has become critical role in business models today to limit competition. In order to
maintain competitive edge, it has become necessary for enterprises to constantly spot and
adjust to developing trends in market demands.
Innovation helps to create limited or no competition designates a high probability of success
and vice versa. Business established alongside existing competition frequently experience
mediocre performance at best. Price wars and marketing battles make selling campaigns
difficult, and the sad products may have already passed the maturity stage of their life cycles.
The trend followers, attempt to emulate industry leaders regarding similar products, and end
up facing competition based difficulties with other trend followers.
For example,
Sony launched its portable cassette player Walk Man on July 1 1979 in Japan. It was first
of its kind. The Walkman created a totally new market for portable stereo systems, and it
became a much-loved product around the world. In June 1989, 10 years after the launch of
the first model, the total number of Walkman units manufactured had exceeded 50 million,
and in 1992 this reached 100 million. In 1995, total production of Walkman units reached 150
million. Including a special 15th anniversary model, over 300 different Walkman models
have been produced to date and although other companies like Philips, Samsung, Aiwa, etc.
were the trend follower, Sony still remained the market leader before replaced by CD player.
On the other hand, innovation must not stop at the conception of business, rather needs to
continue to innovate and to streamline every aspect of its process as it grows. If a company
simply goes on functioning without making any changes to its structure then it will quickly
be replace by younger more innovative companies that perform the same task in a more
efficient way, or adapt to new technologies. Even though there is no threat of competition
then streamlining your business through innovations will earn more profit, generate more
publicity and provide better service for customers.
Companies like Sony, Google, Apple, Microsoft, and so on implement innovation as a
continuous process. For example Google allow their staff to spend around 30% of their time
perusing their own creative interests which has lead to innovations such as Google Maps and
Google Adsense which have genuinely changed the way we live and made Google in
phenomenon more than a search engine. Future projects include digitizing every book ever
published which again will change the industry and benefit customer. This has helped Google
to remain t the top of their game.
Above example clearly justifies how big companies are benefited by continuous innovation.
An innovation should not just apply to big businesses but can be applied to small and medium
scale business too. Limited resource is drawback in small and medium scale business, but it is
the same draw back gives birth to innovative ideas. As they work with fewer resources, are
more agile due to fewer layers and reduced organizational complexity, and are more adaptive
than larger organizations, thus tend to be more innovative.

As mentioned earlier, innovative ideas do not guarantee success. There are times when
excellent ideas fail. Because of following reasons:
-

Unless the culture honours ideas and supports risk taking, innovation will be stifled
before it begins.
Consumers are afraid to try any new product by spending their earning.

Ideas (product or service) being to advance for the generation.

Higher expectations form customers.

Insufficient amount of promotion as well as confusing promotions.

For example,
Apple Newton
Released much ahead of its time in 1993, the Newton was touted as the future of computing.
It would be the first in a new line of Personal Digital Assistants (PDAs). The Message pad
was the first pen based system running on the Newton Intelligence OS. It was powered by a
ARM 610 processor at 20 MHz and 640k RAM / 4 MB ROM. It sported a reflective black
and white touch screen with a resolution of 336 x 240, PCMCIA card slot for expansion and
Infrared port for communication between MP's. The main capability of the device was its
communications and organizational features. It could fax messages, send e-mail, had
applications to organize names, dates, phone numbers, etc, printing, wireless paging and
perhaps the most important of all it could supposedly read and recognize handwritten words
on the screen. The Newton's astronomical $ 1000 price tag, poor handwriting recognition,
large size (did not fit any pocket), insufficient promotional activities (most of the customer
was unaware what Apple Newton was really about.) and so on.
Thus continuous innovation is required in all size of business to survive in this competitive
market but innovation does not mean 100% success. The success of the idea depends upon
other various factors.

Q2.
NIKE is the world's #1 shoemaker in the world. Basketball players still want to be like Mike,
but shoe companies want to be like NIKE. NIKE currently dominates the U.S. footwear
market with about 45% of the total market. NIKE controls more than 20% of the US athletic
shoe market. The company designs and sells shoes for a variety of sports, including baseball,
basketball, cheerleading, golf, volleyball, hiking, tennis, and football. NIKE also sells Cole
Haan dress and casual shoes and a line of athletic apparel and equipment. In addition, it
operates NIKETOWN shoe and sportswear stores, NIKE factory outlets, and NIKE Women
shops. NIKE sells its products throughout the US and in about 160 other countries.

Adidas is the Groups core brand and a leader in the sporting goods market. At the heart of
Adidas is passion: passion for sports, passion for athletes and passion for products. It is a
brand built on leading technology and cutting-edge design. It is a brand identified and
respected by consumers for its innovative, inspirational and authentic values. It is organized
into three consumer-oriented product divisions: Forever Sport, Originals and Equipment. This
structure is unique to the industry and reflects the brands commitment to meet changing
market demands, while remaining anchored to its brand principles and heritage. Performanceoriented footwear, apparel and hardware products will always remain the lifeblood of Adidas.
However, it is also committed to incorporating the growing importance of lifestyle, fashion
and music inspiration into the sports arena and its products. This strategy allows the brand to
create a unique Adidas experience and mean more to more consumers.

Advertising
o Print advertising such as that in programs for events, trade journals,
magazines, newspapers
o

Direct mail

Outdoor advertising, such as billboards and bus boards

Broadcast advertising on radio and TV (or Internet sites)

Marketing
You might choose to produce and distribute materials such as:
o

brochures

newsletters

flyers

posters

Collateral

Also be sure your package design is appropriately informative and catchy. (For a
service business, your "package design" will be the atmosphere of your office, the
design of your company collateral and, most importantly, the appearance of you and
your staff.)

Promotional Activities
o Sponsorships for special events (like fun runs)
o

Participation in community projects and boards of directors

Trade Shows - Your product or service might be one that is suited to exhibiting
at a trade show attended by your target audience. Trade shows are typically
one- or two- day events that allow businesses to set up exhibits or booths
showcasing their products or capabilities.

Fairs (like Health Fairs, Job Fairs)

Give-aways (like baseball caps and mugs with your logo)

Coupons and free samples

Conducting contests

Public Speaking and Conferences.

Making speeches at conferences, professional association meetings and other events
positions you and your company as a leader in your field. Attending conferences is
also an opportunity to make valuable contacts that lead to sales.

Publications such as newsletters, trade journals and books.

Media relations campaigns

A campaign is your overall plan for contacting and staying in touch with targeted
members of the media (reporters). You might want to develop a media relations
campaign if it would benefit your company to bementioned in newspaper, magazine
or TV broadcasts viewed by your target audience. Developing press releases, press
kits and public service announcements could be included in your media relations
campaign.

Q3.
Standard procedure used by a firm to set wholesale and retail prices for its products or
services is called pricing policy.
Pricing objectives or goals give direction to the whole pricing process. Determining what
your objectives are is the first step in pricing. When deciding on pricing objectives you must
consider: 1) the overall financial, marketing, and strategic objectives of the company; 2) the
objectives of your product or brand; 3) consumer price elasticity and price points; and 4) the
resources you have available.
Some of the more common pricing objectives are:

maximize long-run profit

maximize short-run profit

increase sales volume (quantity)

increase monetary sales

increase market share

obtain a target rate of return on investment (ROI)

obtain a target rate of return on sales

stabilize market or stabilize market price: an objective to stabilize price means that the
marketing manager attempts to keep prices stable in the marketplace and to compete on

non-price considerations. Stabilization of margin is basically a cost-plus approach in

which the manager attempts to maintain the same margin regardless of changes in cost.

company growth

maintain price leadership

desensitize customers to price

discourage new entrants into the industry

match competitors prices

encourage the exit of marginal firms from the industry

survival

avoid government investigation or intervention

obtain or maintain the loyalty and enthusiasm of distributors and other sales personnel

enhance the image of the firm, brand, or product

be perceived as fair by customers and potential customers

create interest and excitement about a product

discourage competitors from cutting prices

use price to make the product visible"

build store traffic

help prepare for the sale of the business (harvesting)

social, ethical, or ideological objectives

get competitive advantage

Factors of pricing policy

a. Psychological pricing
Price is the customers most important and highly visible signal of value. It attempts to
increase customers value to price ratio through an optical illusion. In most market s there are
price thresholds r resistance points; some examples are: Rs1, Rs 100, Rs 1000 and so on. In
using this tactics, price are set just below the threshold (for example, Rs99 rather than Rs
100) to make the item seem less expensive than it really is.

Brands like Adidas and Nike should keep their price higher, they are a higher priced sneaker,
consumers will think they are of better quality than other sneakers and this is one of the
psychological effects this pricing strategy has. If consumers are not that knowledgeable in the
sneaker market, they are not going to be able to make comparisons between different
sneakers other than based on the price and that is why the price can have such an impact on
the buying process. In this case, higher price equates to higher quality and they definitely take
advantage and makes use of the psychological pricing strategy.
On the other hand the price should not end at price like Rs. 2999 and so on since customers
may feel they are of cheaper quality product or out dated.
b. Influence of market variables
Competition
If one is not the market leader in the industry, competitive prices will influence the pricing of
the product or service. Market leaders have often created a pricing standard against which
other product prices are compared. So if the product or services is reasonably competitive
with the market leaders offering one can set a price that is near the standard. If one has the
ability to price lower than the competition and still be profitable, one may be able to capure a
ability to price lower than the competition and still be profitable.

The market/Prospect
Understanding the characteristics of the marketplace is an essential factor in establishing a
price for offering. One should first try to identify the general type of market one will be
selling
to.
Type of market
commodity (many buyers/competitors, non-unique products) - minimal pricing
flexibility
uncontrolled (many buyers/competitors, unique products) - maximum pricing
flexibility

controlled (many buyers, few competitors, unique products) - some pricing flexibility

vertical-low (limited # of buyers, many competitors)

vertical-high (limited # of buyers, few competitors)

prospect characters

Prospect's perception of the product (positive perception = higher price)

Prospect's awareness of the product (lack of awareness raises promotion costs)

Whether product is for a captive audience (eg: razor blades, minimizes marketing
costs)

The criticality of the offering to the consumer (more critical = higher price)

The ability of the consumer to pay (greater ability = higher price)

Demand due to seasonal considerations (snow shovels priced lower in the summer)

Demand due to geographic considerations (snow shovels in Tahiti are unlikely to sell
no matter how low the price)

Market trends, fads or changing consumer interests

The product or service

There are, of course, many characteristics of your product or service that will influence the
price.

Does ones offering provide tangible versus intangible benefits/differences? Offerings

with immediate and tangible benefits will usually support higher prices.
The uniqueness of offering versus the competition. Uniqueness usually supports a
higher price if the offering has credibility.

Whether the offering is one of several in a product/service line. Pricing must be

consistent with the rest of the line.

Whether the offering is a complement to another product/service. Sales to existing

customers usually reduces marketing costs thus giving greater pricing flexibility.

Enterprise
A variety of factors within your enterprise will influence the pricing decision. Some examples
are:

Ones cost to produce the offering is clearly the first factor in setting the price.
The potential for learning curve benefits. That is, will sales volume and time result in
lower production costs thus creating the potential for lower prices?

Ability to meet demand. If one has a limited production capacity, he/she should price
high enough to insure that s/he don't create more demand than one can satisfy.

Cost to deliver, including shipping, warehousing and installing.

Cost to promote, including press releases, press tours, ads, literature, demos, etc.

Financial resources, giving ones the ability to sustain a start-up period of losses.

The quality and speed of the product/service delivery. If one can deliver quickly and
"how quick can I get it?" is the most critical factor to the prospect then high pricing is
likely.

The environment
In addition to characteristics of your competitors, your prospects and your enterprise there are
more general, environmental factors that can influence your pricing.

At what point in market life cycle of your offering are you selling? If it is early in the
life cycle you can usually charge a higher price.

What is the availability, quality and cost of channels of distribution?

What is the status of the economy (inflation, deflation, varying interest rates)?

What is the potential for government intervention? Is your enterprise verging on a

monopoly? is your offering important to national stability?

Are market characteristics such that a lower price will generate a higher demand?
(Elasticity of demand)

c. Transfer pricing
Transfer pricing is the rates or prices that are utilized when selling goods or services between
company divisions and departments, or between a parent company and a subsidiary.
The transfer pricing that is set for the exchange may be the original purchase price of the
goods in question, or a rate that is reduced due to internal depreciation. When used
properly, transfer pricing can help to more efficiently manage profit and loss ratios within the
company. Generally,transfer pricing is considered to be a relatively simple method of
moving goods and services among the overall corporate family