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EIM-Chapter Summaries

Enterprise Innovation and markets (Western Sydney University)

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CHAPTER TWO: Creativity,

innovation and entrepreneurship
 2.1 USE A SERIES OF CREATIVITY TECHNIQUES

CREATIVE THINKING KNOWLEDGE MOTIVATION

 Refers to how people  Encompasses everything  Extrinsic vs Intrinsic

respond to problems and
solutions
 Their ability to combine
existing ideas and
knowledge into new
formations
a person knows and can  E = comes from
do outside a person
 Acquired through formal (rewards etc)
education, experience, or  I = A persons internal
interaction with other desire to do something
people

 CREATIVE TECHNIQUES
The action of viewing a problem from an opposite angle
PROBLEM
REVERSAL

The action of making an association between two unlike things

FORCED ANALOGY to obtain new insights

The identification and listing of all major characteristics of a

ATTRIBUTE product, object or idea
LISTING

A visual method of mapping information to stimulate the

MIND MAP generation and analysis of it

A conference technique by which a group tries to find a specific

BRAINSTORMING solution for a specific problem by amassing spontaneous ideas

 2.2 DEFINE AND EXPLAIN THE RESOURCES OF INNOVATION AND

DIFFERENT INNOVATION TYPES

 innovation is the successful implementation of creative ideas within an organization

 innovation is a multidimensional concept

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 TYPES OF INNOVATION
INCREMENTAL
 Is the improvement of existing products
that enhance performance in dimensions
traditionally valued by mainstream
customers
 Extension: Improvement or new use of
an existing product, service or process,
such as the development of desktop,
notebook and laptop computers based
on the mainframe.
 Duplication Creative replication or
adaptation of an existing product,
service or concept. Duplication can take
place across different markets or
industries, e.g. fast-food chicken outlets
such as Chicken Treat or Red Rooster in
Australia were adapted from the
Kentucky Fried Chicken model from the
USA;
 Synthesis Combination: of an existing
product, service or process into a new
formulation or use, such as the fax
(telephone + photocopier) or the multi-
purpose smartphone (telephone +
camera + organiser + internet + music
player + GPS).
DISRUPTIVE
 Change the value proposition, e.g.
personal computers, that underperform
existing products but are simpler, less
expensive, more convenient, adequate
and easier to use
The bottleneck buster: democratise a limited
market
What it is: Expand a market by removing a barrier to
consumption
When it works best: When some customers are
locked out of a market because they lack skills,
access or wealth. Competitors ignore initial
developments because they take place in
seemingly unpromising markets.
Historical examples: Personal computers, Sony
Walkman, eBay
Current examples: Blogs, home diagnostics, social
networks such as Facebook or Twitte

COST INNOVATION
 Innovation that considers the ‘value for money’ segment
 Cost innovation can be delivered in three ways:
o Selling high end products at mass-market prices
o Offering choice or customisation to value customers
o Turning niches into mass markets

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 NEW PRODUCT DEVELOPMENT

 When the organisation develops the idea, undertakes research, prepares prototypes,
pre-test the product, makes modifications before the product launch

 2.3 LINKING CREATIVITY, INNOVATION AND ENTREPRENEURSHIP

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CHAPTER 4: Identifying
customers
 4.1 EXPLAIN THE BROAD CONCEPT OF MARKET
 A market is a group of people with a heterogeneous needs and wants (broad )
 The market then can be broken down into two segments, business and consumer
 As it is impossible for organisations to appeal to each segment, they tend to focus,
identify and understand the market segment in which they can offer the most value, by
tailoring the marketing mix to appeal to these segments

 4.2 UNDERSTANDING THE TARGET MARKETING CONCEPT

 Is identifying, understanding and developing an offering for those market segments of
the total market that the organisation can best serve it is based on 3 premises:
1. Buyers can be identified
2. Sellers understand the needs of buyers
3. Sellers will design their offering to meets target market needs
 The decision to identify them through target marketing reflects the difference between
a market orientation and a product orientation
 Production orientated: organisations see everyone as basically similar and practise
mass marketing
 Market orientation: organisations see everyone as different and practise target
marketing

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 THREE MARKET STRATEGIES

MASS
 Mass marketer sees consumers as
having similar needs and wants
 Due to this the marketer can take
advantage of economies of scale
(producing large volumes so the cost per
unit goes down)
Undifferentiated
ONE TO ONE MARKETING
 Seeks to appeal to each individual
customer by providing a unique,
customised offering that will meet their
individual needs
 Seller seeks to develop a relationship
which will develop loyalty and repeat
sales
Differentiated

TARGET MARKET BASED ON SEGMENTS

 Most buyers or consumers can be grouped into segments the segment has distinctive
needs, but the members of the segment have similar needs
 This is the logical and common choice for many organisations that want to meet the
needs of large number of customers more closely but lack the resources to each each
customer as an individual

 PRODUCT AND MARKET SPECIALISATION

PRODUCT MARKET
 In which all efforts are focused on a  All efforts are concentrated on meeting
single product range offered to a number a wide range of needs within one
of market segments segment
PRODUCT-MARKET SPECIALISATION
 Approaches are combined to offer a single product to a single market segment, micro,
business commonly adopt this approach
 Organisations that adopt this approach aim to dominate in their chosen market niche
(however risk putting all their eggs into one basket)

 4.4 SELECT SPECIFIC TARGET MARKETS BASED ON EVALUATION OF

MARKET SEGMENTATION
 This stage involves a systematic examination of the possible market segments, their
potential sales value and revenues, and the relevant ability of the organisation to satisfy
the expectations of members of the market segment
 The choice of the appropriate target marketing depends upon:
o An understanding of the size and attractiveness of the market segments that
have been identified
o An assessment of the organisations ability to service and compete for the
chosen market segments

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 EVALUATE POTENTIAL SEGMENTS

SALES POTENTIAL COMPETITIVE SITUATION

 Market Potential: is the total volume of  Any estimate of a sales potential must
sales of product category that all be conducted in context of a thorough
organisations are expected to sell, in a investigation of the organisations
specific period of time, assuming a competitive situation (activities of
specific level of marketing activity. competitors already in the market place
 Sales revenue: is equal to its total and their market share)
volume of sales multiplied by the  Without a competitive assessment, sales
average selling price (the total volume estimates can be misleadingly
of sales is determined by its market optimistic, especially when an
share) organisation is entering an already
 A company’s sales potential is an established segment
estimate of the maximum sales revenue
and market share that an organisation
can expect to chieve for a specific
product
COST STRUCTURE
 Organisation needs to consider the costs
involved in creating, communicating ,
and delivering an offering to meet the
needs of each potential market segment
 Costs will affect the amount they will
charge for their product, its price
competitiveness, and its profitably given
any particular

 SELECT TARGET MARKETS

 With a detailed evaluation of potential market segments based on the above, an
organisation can determine which segments to target and which to disregard
 It is the heart of the marketing concept

 4.5 UNDERSTAND HOW TO EFFECTIVELY POSITION AN OFFERING TO A

TARGET MARKET IN RELATION TO COMPETITORS, AND DEVELOP AN
APPROPIATE MARKETING MIX
 The organisation must decide how its offer is positioned in the minds of its target
market segment and how the organisation wants to be perceived by its segment
 Positioning: the way in which the market perceives, an organisation , its products and
its brands in relation to competing offers
 Positioning is all about perceptions, it describes how consumers make sense of a
crowded and complex market place and make their brand choice decisions in an
efficient way.
 Positions should not change continuously, they need to be created, nurtured and
consistently reinforced

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 DETERMINE THE MARKETING MIX FOR EACH SEGMENT

 The marketing mix describes the overall offer the organisation makes to its target
market
 Marketing mix should:
o Be consistent with the desired position
o Be internally consistent (each element of the mix should be coordinated
and supportive of other elements)
o Be sustainable and long term

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CHAPTER 5: Elements of the

Marketing Mix and Framework
 5.1 EXPLAIN THE ELEMENTS OF THE MARKETING MIX
 The marketing mix is the term given to a set of variable that a marketer can exercise
control over in creating an offering for exchange
 Frameworks:
o 4 P’s (product, price, promotion, place/distribution)
o 5 P’s (adding people)
o 6 P’s (adding process)
o 7 P’s (adding Physical evidence)
 Organisations are governed by the cost of implementing their marketing mix

 5.2 DEFINE PRODUCT AND UNDERSTAD DIFFERENT WAYS TO VIEW AND

ANALYSE PRODUCTS AND PRODUCT
 Product is defined as a good, service or idea offered to the market for exchange
 Potential customers require products to satisfy functional, social and psychological
needs, wants and demands
 Goods are physical, tangible offerings
 Services are intangible (experience)
 Ideas can be offered as a concept, issue or philosophy

 THE TOTAL PRODUCT CONCEPT

CORE PRODUCT THE EXPECTED PRODUCT
 Comprises of the fundamental benefit  Describes those attributes that actually
that responds to the customer’s deliver the benefit that forms the core
problems of an unsatisfied need or want. product
 Attributes that fulfil the customers most
basic expectations
AUGMENTED PRODUCT POTENTIAL PRODUCT
 At this level the product deliver a  Comprises of all possibilities that
bundle of benefits that the buyer may become part of the expected or
not require as part of the basic augmented product
fulfilment of their needs
 Allows for differentiation

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 PRODUCT RELATIONSHIPS
PRODUCT ITEM PRODUCT LINE
 Particular version of the product that can  A set of closely related product items
be differentiated from the organisations (e.g. bonds mens underwear trunks, y
other products fronts etc )

PRODUCT MIX
 The set of all products that an
organisation males available to its
customers

 PRODUCT CLASSIFICATION
CONSUMER PRODUCTS
Those products purchased by the households and individuals for their own private use
SHOPPING PRODUCTS CONVENIENCE PRODUCTS
 Are irregularly purchased items that  Inexpensive frequently bought
involve moderate to high engagement consumer products consists of:
with the decision making process o Staple products
 Longevity, infrequently bought, stocked o Impulse products
by a small number of shops, low o Emergency products
volumes, large profit margins
SPECIALTY PRODUCTS UNSOUGHT PRODUCTS
 Have unique characteristics that are  Goods/ services that consumer’s either
highly desired by buyers, consists of : o Knows about but doesn’t normally
o Preselected consider purchasing
o No close substitutes o Doesn’t even know about
o Infrequent
o Sell in low volumes
o High profit margins
BUSINESS TO BUSINESS PRODUCTS
PARTS AND MARTERIALS EQUIPMENT
 Raw materials (unprocessed natural  Capital equipment ( installations such as
materials) buildings and machinery)
 Components ( processed items that form  Accessory equipment (support the
part of the businesses product) production of the product drills etc)
SERVICES AND SUPPLIES
 Business services (such as financial,
legal, market research)
 Maintenance, repair and operating
supplies ( engine oil, rivets and paper)

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 PRODUCT DIFFERENTIATION
The creation of products and product attributes that distinguish one product from another
 Warranties, installation, in-home training and free help-line services are points of
differentiation
 After and pre-sale care

 5.5 EXPLAIN PROMOTION AND ITS ROLE IN THE MARKETING MIC

PROMOTION MARKETING COMMUNICATION
 The marketing activities (e.g.  A term for promotion that refers to
advertising, PR, sales promotion, communicating a message to the
personal selling, digital marketing, marketplace.
sponsorship) that make potential
customers, partners and society aware of
and attracted to the business’s offerings
OBJECTIVE
 Is to support the organisations overall marketing objectives
 Encourage repeat purchases
 Create demand
 Increase general awareness and goodwill
 Cause related marketing

 5.7 UNDERSTAND THE INTEGRATED MARKETING COMMUNICATIONS

APPROACH TO MARKETING PROMOTION AND THE MAJOR ELEMENTS
OF THE PROMOTION MIX

INTEGRATED MARKETING COMMMUNICATIONS

 The coordination of promotional efforts to maximise the communication effect.

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ELEMENTS OF THE PROMOTION MIX -

ADVERTISING- PERSONAL SELLING- RELATIONSHIP
 A paid non personal  sales consultant direct MARKETING-
message at a consumer  Development of long
communicated through  Advantages: term cost effective and
a mass medium 1. Modified to suit strong relationship
 Advantages: reaching the individual with individual
extremely large 2. Long term customers.
audiences, or they can relationship =  Ultimate aim = create
focus on a small repeat sales customer loyalty
market segment 3. HR provide after
 e.g. mass, direct sales service
(catalogue), tele, e-
marketing, social
media, bill boards
SALES PROMOTION- PUBLICITY- PUBLIC RELATIONS-
 Activities or materials  Free news story about  Maintenance of a
that are an incentive a businesses product favourable relation
for customers helps create a positive between a business and
 Aims: entice new or negative image consumer (e.g.
customers, encourage donations and
trial purchase of new giveaways)
product, increase sales,  4 ways helps a
repeat puchases business increase
sales:
1. enhance an image
2. raise awareness
3. highlights favourable
features
4. reduce any negative
images

 5.9 DESCRIBE HOW TO DEVELOP AND MANAGE AN EFFECTIVR

MARKETING MIX BSED ON THE UNIQUE CHARACTERISTICS OF
SERVICES
PEOPLE- PROCESSES- PHYSICAL EVIDENCE-
 Are the front line of  Manner in which a  Environment in
a business product is efficiently which the service
 Quality of the provided to a will be delivered
interaction with the customer (appearance or
customer maybe vital  Efficient operations impression)
to the success of the = loyal customer,  The better the
business willing to promote presentation the
the business (word better the image of
of mouth) the business within a
consumer

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CHAPTER 7 : Competitive
strategy and decision making
 7.1 OUTLINE THE DIFFERENT TYPES OF COSTS A FIRM FACES, AND THE
RELATIONSHIP BETWEEN THE MARGINAL COSTS
profits = revenue – costs
COSTS RELATIONSHIP
 Inputs are costs  Principle of substitution = when a
 The increase in output corresponding to number of different inputs can be varied,
a unit increase in any input is the and the price of one input increases, the
marginal production of the input change in relative prices of inputs will
encourage a firm to substitute relatively
less expensive inputs
 The marginal revenue it revenue it
receives from selling an additional unit
of output is the price of that unit

 EXPLAIN HOW COSTS DIFFER IN THE SHORT TERM AND LONG TERM
SHORT LONG
 Short run costs are usually U shaped or  As production grows, it will pay to build
upward shaping, the marginal and a second factory, then third etc this is
average cost curve will intersect at the due to the fact as the levels of
minimum point of the average cost production increases it becomes more
curve costly to run production out of one
 Economist say short term organisations factory and so forth
are not able to change its capitol stock

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CHAPTER 8: Market Structures

 8.1 DESCRIBE THE CONCEPT OF MARKET STRUCTURE AND THIS
ENABLES US TO UNDERSTAND THOSE MARKETS WHCH DIVERGE FROM
PERFECT COMPETITION AND WHICH THERE IS LIMITED OR NO
COMPETITION BETWEEN FIRMS
 Market structure refers to the framework within which a firm undertakes the production
and supply of the product it produces
 Three principles:
o The number of producers
o Extent to which the products of producers are different
o The eases with which firms begin production in competition with existing firms
 Perfectly competitive market: large number of sellers, each producing a standardised
product subject of other firms into the market competition with them (all firms have to
accept the equilibrium price)
 Monopoly: single firm supplies the entire market (imperfectly competitive)
 Imperfect competition: any market structure in which there is some competition but
organisations face downward sloping demand curves
 Oligopoly: imperfect competition in which the market has a number of firms,
sufficiently few that each one must take into account the reactions of rivals to what it
does

 THE DEGREE OF COMPETITION

NUMBER OF FIRMS PRODUCT
 Commonly used DIFFERENTIATION
measure is the four-firm  Degree to which a
concentration measure, product is differentiated
which measures the to its competitors
percentage of the total  Firms in imperfect
production of a product competition attempt to
in a market accounted by create brand loyalty
the four largest firms  Perfect = no product
differentiation
consumers can buy same
product from any firm
BARRIERS TO ENTRY
 Any force that prevents
any firms from entering
the market
 Easier it is for firms to
enter the market the
harder it is for existing
firms to maintain prices
 Barriers also include
patents

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 WHY MONOPOLY AND LIMITED COMPETTION OCCURS

ECONOMIES OF SCALE PRODUCT DIFFERENTIATION
 Firms take advantage of economies of  When one firm’s product is regarded as
scale by merging or taking over other superior compared to the other
firms producing the product  By creating a ‘brand’ consumers will
prefer to buy more of the firms products

BARRIERS TO ENTRY RESTRICTIVE PRACTICES

 A firm may limited the completion by
being the only one who can create and
sell a product (through patents and
legislations)
 Or by purchasing all of the input needed
to create a product
NETWORK EFFECT
 Occurs when a product becomes more
valuable to a consumer the larger its
network of users
 E.g. Microsoft
 Exclusive dealing: restrictions imposed
on a firm by another firm that restricts
its freedom to choose the terms under
which they deal
 Third line forcing: involves the supply
of the product under the terms that the
purchaser buy goods from a particular
third party
IMPERFECT COMPETITION
 Firms whose products have an
established reputation have an
advantage
 Information or lack of can create a
barrier

 8.4 DETERMINE THE CHARCTERISTICS AND IMPLICATIONS OF

MONOPOLY THAT APPLY TO ALL MARKETS THAT DIVERF FROM
PERFECT COMPETITION
 Imperfect competition consists of monopolistic and oligopoly
 Monopoly = a downward facing demand curve for the product itself slopes downwards,
the firms demand curve is identical to the market demand
 Imperfectly competitive firms, the slope of the demand curve depends also on the
elasticity of demand for the individual firms product

 8.5 EXPLAIN THE MODEL OF MONOPOLISTIC COMPETITION AND HOW

IT HELPS TO EXPLAIN THE OPERATION OF IMPERFECTLY
COMPETITIVE MARKETS WHERE THER IS A LARGE NUMBER OF FIRMS

 illustrates a market in which there is monopolistic competition. If one firm sets a lower
price it will steal some customers from other businesses, and if it were to raise prices
visa versa (read chapter 8.5 to gain a better understanding)

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 8.6 UNDERSTAND THE MODEL OF OLIGOPOLY AND HOW IT HELPS TO

EXPLAIN THE OPERATION OF IMPERFECTLY COMPETIVE MARKETS
WHEN THERE ARE ONLY A FEW FIRMS
 A firm that is part of an oligopolist market must think strategically and answer the 4
questions it faces:
1. Should it co-operate or compete
2. If it cannot collude explicitly, how can it reduce the effectiveness of competition
through restrictive practices
3. How can it deter entry?
4. How will the rivals react to whatever it does?

 COLLUSION AND REACTION

 Collusion: when firms act jointly to increase profits
 Cartel: a group of producers who agree to collude in setting the prices of the output
 As this is illegal firms now have to rely on tactic collusion
Game Theory
 Designed to understand strategic choices that is to understand how people or
organisations behave when they expect their actions to influence others (chapter 8.6 to
further understanding

 ENTRY DETERENCE
 Intended to limit the number of firms
 Strategies include:
o Predatory pricing
o Build more production facilities then needed ( sends a single they are willing
and able to engage in fierce competition)

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CHAPTER 9: Entrepreneurs,
business, markets and ethics
 9.1 DEFINE BUSINESS

Consists of all profit seeking activities and enterprises that provide goods and services
necessary to the economic system

(also includes non-for profit organizations)

 9.2 IDENTIFY AND DESCRIBE THE FACTORS OF PRODUCTION

 factors of production
o natural resources = rent
o capital = interest
o human resources = wages
o entrepreneurship = profit

 9.3 THE PRIVATE ENTERPRISE SYSTEM

 Often referred to as capitalism = reward firms on their ability to perceive and serve the
demands of their consumers
 Competition regulates most of the economic life
 To Compete each firm must find a competitive differentiation
BASIC RIGHTS IN THE PRIVATE THE ENTREPRENEURSHIP
ENTERPRISE SYSTEM ALTERNATIVE
 Right to own private property, profits,  Individuals who recognize marketplace
freedom of choice and competition opportunities are free to use their
capitol, time and talents to pursue those
opportunities for profit

 9.8 DEFINE ETHICAL BEHAVIOUR

 is that which is accepted to be good, right and proper as opposed to bad, wrong or
improper in the context of the governing moral code

 9.9 UNDERSTAND HOW ETHICAL DILEMMAS COMPLICATE THE

WORKPLACE
 CSR = obligation of the organization to act in a way that serves both its interests and
the interests of its external stakeholders
 Conflicting interests etc

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CHAPTER 10: The

entrepreneurial process
 10.1 DEFINE ENTREPRENEURSHIP

Is a process of creating a new enterprise, opportunities and business ventures

 10.2 EXPLAIN WHAT IS SPECIAL ABOUT SMALL BUSINESSES

 over 90% of all businesses in Australia and New Zealand are small businesses
 60% are non-employing
 only 50% survive
 account for 40% of offline economy
 fail because:
o lack of experience
o expertise
o financial control
o ethical failure

 10.3 UNDERSTAND THE BASICS ON HOW TO START A NEW VENTURE

 Understanding the business lifecycle (birth stage, breakthrough stage, maturity stage)
 Have a business plan (describes the details needed to obtain start up financing and
operate a new business
 Choosing the form of ownership (sole proprietorship, partnership, or a company)
 Types of financing (debt finance, equity finance)

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CHAPTER 11: Starting an

enterprise, the entrepreneurship
alternative
 11.1 EXPLAIN THE THREE MAJOR ISSUES THAT ALL PROSPECTIVE
ENTREPRENEURS AND SMALL BUSINESS OWNERS MUST CONSIDER
BEFORE GOING INTO BUSINESS
OWNER/ ENTREPRENEUR RESOURCE AVAILABLE
 Includes personal goals and abilities  Finance availability (entry and exit
 Self-awareness is important costs)
 Personal goals of:  Personal (employees)
o A certain level of personal income  Time (needed to reach fruition)
o A specified return on investment
o Personal freedom
o Providing job opportunities
o Making the business grow into a
larger enterprise
THE OPPORTUINITY
 Franchise agreements
 New product = start up business

 11.2 COMPARE AND CONTRAST THE ADVANTAGE AND DISADVANTAGES

OF STARTING A NEW BUSINESS
ADVANTAGES DISADVANTAGES
 Determine business direction  Raising capitol
 Flexibility  Lack of an established customer base
 Cost minimization  Cash flow shortages
 Lifestyle goals

 11.6 PROCEDURAL STEPS WHEN STARTING A BUSINESS VENTURE

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