Discussing The Theoretical Concepts Of A Firm Commerce Essay

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In this essay, I will be discussing the theoretical concepts of a firm that have used innovation and strategy to sustain competitive advantage and how this strategy has helped them to achieve their objectives. I will be referring to suitable examples from two-innovator companies (iRobot and Dyson)

Innovation means bringing new ideas into being within the market-place (product innovation) or workplace innovation (process innovation). Product innovation is of major competitive significant because consumers tend to fall into the patterns of purchasing behaviour which change little over time. Therefore the market shares of the rivals' products may be quite static. Product innovation can change that to considerable advantage of the innovator. The sources of the innovation may be based on new technology, new design or a completely new invention. In recent years James Dyson has been among British's leading innovators with his cyclone floor cleaner which was a huge success worldwide and the latest one which he called the bladeless fan.

Process innovation is also of great significance as it can lead to major cost advantage over competitors. When the British firm Pilkington PLC invented a new way of making glass more cheaply and far higher quality standard(the float glass process), it provide not only a direct competitive advantage, but also earned considerable sums in licensing fees from overseas manufacturers.

Strategy on the other hand is a medium to long-term plan for how to achieve an objective. This plan itself would include not only what is to be done but also the financial; production and personnel resources required which helps organisation to survive competition over long period of time.

In order to achieve sustainable competitive advantage, firm needs to become better than its competitors so that the competitive advantage can be sustained. This can be achieve through doing new things or doing existing things differently in a way that make it difficult for other competitors to copy. 'Companies achieve competitive advantage through acts of innovation. They approach innovation in its broadest sense, including both new technologies and new ways of doing things' (Porter, 1985).

iRobot produced innovative robots that are making a difference in people's lives. Some of the amazing products they produced do all sort of different things such as cleanouts floors to disarming explosives. They provide a big help to the world. Their creativities ideas has helped to create a new industry is in their continually innovations, they collaborate and create highly integrated multi-disciplinary teams to solve problems no one has undertaken before them. As doing things differently they imagine, debate, share, explore, develop and test new ideas and concepts. At iRobot, to reach to the best ideas are what matter to people then a new product will be, to solve people's problems; they deliver highly trusted product, high performance robots and exceed their customer's expectations in support and service. Moreover, they are one of the leaders in robot technology. They build very strong company image and have talented co-workers, they add value to the business and they become trusted business since they are excelling at what they do, Company's success and by expertise across business units. Their robots are used by people every day. Their home robots clean the houses and their mobile tactical robots help keep military troops and first responders out of harm's way. They have sold more than 5 million iRobot Roomba Vacuuming Robots, and more than 1,500 iRobot PackBot Tactical Mobile Robots.( http://www.irobot.com/uk/ ), accessed on 22 January, 2010).

The industry approach to strategy focuses on how the degree of rivalry affects a firm's strategy and performance. 'By examining the main structural features and their interactions for any particular industry, it is possible to predict the type of competitive behavior likely to emerge and the resulting level of profitability'. (Grant, 1998).

In view of the above organisation (iRobot), they have used innovation as a strategy to competition by being distinctive in what they produce and their strategy to achieving their objectives includes experience, dedicated workforce, excellent product and customers' support and services. This has enabled them to have high market share due to the number of volume sold worldwide.

At iRobot, they have used innovation strategy to sustain competitive advantage firstly by being the first mover. Market driven by brand identification may offer important first-mover cost advantages. At iRobot, being a first-mover enable them to gain committed customers before competitors are actively engaged, also, timing introduce a meaningful source of uniqueness or effective cost leadership (Teece,1987). It also enables them to gain valuable experience before their competitors therefore being in good position to compete against their rivals and have upper hand in competing without any fear of being pushed out of the business by their competitors.

Innovations that are hard to imitate are more likely to lead to sustainable competitive advantage (Porter, 1985). iRobot protect their design by patents which can also be seen as a barrier to entry according to porter's five forces. The more difficult it is for rivals to imitate iRobot the easy is it for them to compete as they are in good position to compete as their designs are unique to them therefore competition will not be a threat to them. If they produce SWOT analysis, this will be strength to them as they are confident that competition will favour them greatly because they original, has won potential consumers' trust and can be relied on.

Their innovation that relies on their capabilities and the development of technologies which are readily available to them has been to their advantage by positioning them in financial position to compete well with their rivals and therefore gaining more market shares.

In the case of Dyson Company, the role of innovation had very important effect on the achievement of competitive advantage in the electrical cleaners industry.

The team at Dyson are dedicated to creating daily good work. Dyson RDD based in Wiltshire, England is home to over 350 engineers, scientists, expertise and technicians who propose and expand each Dyson invention.

James Dyson was the first person whom actually does something new about the vacuums cleaners. His invention was occurring after many of his products. The essential hose seen on most upright vacuum cleaners is a Dyson invention. James Dyson spent 15 years in developing his work and produced 5,127 prototypes. The world's first Dual Cyclone™ vacuum cleaner from Dyson arrived.

Dyson's scientists were strong-minded to produce new type of cyclone system with higher suction. So they developed a way of getting increased suction power and the result they got was the Root Cyclone™ which is more efficient than the Dual Cyclone™. This continuous improvement assisted them in gaining customers' trust and building trust with their potential customers and in a way paving way for building competitive strategy. Their vacuum models are too many because of their continuous innovation and response to market needs rather than product push; this led them to not just existing but differentiating themselves than other competitors. And get a good market share and achieve competitive advantage as an aim. In spite of what happened with Dyson and other competitors which was about Dyson`s patent and legal costs issues. During the development years when James had no profits, he was almost bankrupted. He risked everything, and the risk paid off when in 1999 Hoover tried to copy a Dyson and James Dyson was forced to take them to court to guard his invention. After 18 months Dyson won against Hoover for patent contravention also on the 27th of January 2010, the guardian reported that Dyson sue its rival Vax over vacuum cleaner design (http://www.guardian.co.uk/business/2010/jan/27/dyson-sues-vax). Dyson competitive strategy is based not only on price rather with his continuous creativities and improvement by researching on ways to increase efficiency.

Key to Dyson's success has been his identification of intellectual property, and especially patents, as a means of safeguarding his interests. Patents are government granted rights which allow an individual or a company to prevent someone from using technology they have developed without their permission. And in ensuring that he filed for patent protection whilst developing the Dual Cyclone, Dyson was able to fight off Hoover's attempt to muscle in on the bag less vacuum cleaner market when it launched the Vortex in 1999 and another case with Vax which is still in court. The patent serves as a strategy for competition as he used patents as a barrier for new entrants or even prevents existing big company like Hoover from using his invention to compete against his firm.

Part of strategy he used is by his decision to switch production to the Far East. The reason however, is that his initial vacuum cleaner patents was going to expire, if this happen without him moving there, he will lose his ability to shut competitors out and will instead be more reliant on his follow up patents and price in order to maintain market share. Knowledge of how patents work is again allowing Dyson to make important decisions about the future of his company and being in good position to compete.

Dyson had position its company strongly against competition by protecting his innovation to its own advantage in building a business around innovation and being first to market in term of improving was has being in existence.

One of the strengths at Dyson is the numbers of scientist he has whom on a regular basis carry out research in improving the efficiency of their products for example, the bladeless fan which took everybody by surprise has added to the image of Dyson whereby strong image can help in competing with rivals as consumers will have faith and trust in their products therefore building a strong relationship with consumers which can lead to loyalty and increase the market share of such product or firm and put them in better position to compete or make competition more acceptable for Dyson.

Having seen how the two firms made use of innovation to increase or create competitive advantage against their rivals, the question to each firm will be when is it important for a firm to focus on doing existing things better and when is it important for it to focus on doing radically different things will depends on the context in which the firm is situated.

A firm's internal culture and ability to question the status quo is central to the innovation process and will enable them to be in better position to compete.

As Porter's five forces of competition's framework (Porter, 1980) illustrate the S-C-P approach. In his view, the ability of a firm to earn a higher than normal profit rate, depends on its ability to defend itself from competitive forces. At the introductory phase, many firms face competing designs for products. However, as industries mature, they progress toward the adoption of a dominant design or technical standard that is common to all products or services in an industry. The tendency of firm to meet on a dominant design or technical standard is important to a new organisation's performance because new organisation tend to perform much better before the adoption of a dominant design or technical standard than after it.

Moreover, the nature of competition changes after a dominant design has emerged in a firm because designs tend to become standardized, what separates one firm from another after a dominant design emerges changes from the design itself to the production process. After a dominant design or technical standard has emerged, competition shifts to production efficiency. The experience and size of established firm allows them to produce the standard design more efficiently than new firms and hinders new firm performance once the dominant design or technical standard has emerged. Firm distinctive capabilities or the characteristics of a firm which cannot be replicated by competitors or can only be replicated with great difficulty are the basis of sustainable competitive advantage which both iRobot and Dyson had shown. Distinctive capabilities can be of many kinds: patents, exclusive licenses, strong brands, effective leadership, teamwork, or tacit knowledge.

A firm's ability to innovate successfully is important to its ability to achieve strategic competitiveness, the need for innovation is critical for all firm because of the rapid speed and unpredictability of technological changes as well as the increasing speed with which competitors often are able to bring new products, services and processes to market. Innovation is important because it can result in competitive advantage if the innovation is difficult for competitors to imitate, provides value to customers and can be successfully exploited commercially which will empower firm and give them an edge over their rivals.

Both Dyson and iRobot had used innovation and strategy in competing against their rivals and this has reflected in their profit and market share. Also reflect on market dominants and their firm's reputation which is very vital to all firms.