Enterpreneurship & innovation - Innovation Essay Example

Entrepreneurship & Innovation

 

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I.         Introduction

Within management development meetings, it is rarely heard about specialized discussions on innovation and how innovation could vitally influence company’s performance. While attending the day-to-day operations, managers often neglected the care of their own skills and mindset in the direction of innovation (Bean and Radford, 2002).

Dean and Mary Tjosvold (1995) in their book, Psychology for Leaders: Using Motivation, Conflict, and Power to Manage More Effectively, point out that “Top management sets policies; managers make decisions and solve problems; and employees do their assigned tasks”. Based on the above statement, it is obvious that top managements are responsible to create a healthy working environment. It means that a company needs spirit of corporate entrepreneurship in order to improve the company’s performance through innovation.

Therefore, theories of how important innovation is for a corporation are constantly growing. Economic observers believed that there should be a harmonized effort to develop awareness and knowledge among managers of the importance of innovation. Furthermore, people consider that innovation becomes the linchpin of economic growth and becomes the engine that lies behind improvements in every aspect of modern life (Tushman & Anderson, 1996).

Concerning the entrepreneurship issue, as a consultant with experience in innovation management, I will elaborate and discuss the innovation strategy for a company named Mozzo that compete in coffee retail industry. The company specializes in providing quality coffee for customers that is 100% Organic, 100% Fairtrade, and 100% Arabica.

 

II.        Aims and Objectives

1.                  This paper intends to discuss about theories of innovation that should be taken into account by Mozzo in order to continuously bear innovative products that are competitive and attractive in the market they serve

2.                  Using the non-participant observation method, collecting data and analyzing qualitative information from journal, books, magazine and other online materials, this paper is to the analysis of a company named Mozzo that compete in retail coffee business.

3.                  In addition, the paper aims at discussing the current business analysis using SWOT analysis to see current external forces that surround Mozzo in coffee business

4.                  This paper also suggests the strategy development for Mozzo in expanding market across the west Midlands region.
III.      Research Question

Understanding consumer behavior becomes keyword for any companies in order to suitably win a fierce competition by delivering products or services that are exactly fit the consumers’ needs that are different from competitors have. The reason of incorporating consumer behavior in marketing strategy is to attain a competitive advantage by creating a product (good or service) that is perceived by customers to be unique in some important way.

The research statements or questions are therefore”…as retail coffee industry continues bearing new players, How the adoption of theories of innovation helps Mozzo to innovate and win the market?”
IV.      Literature Review

Nowadays, we witness that anything under the retail coffee industry strives for enhancing their products and services in order to take benefits of increasing trends of coffee shop as a place to hang out. Since the basic needs of coffee lovers are to have delicious products, therefore, Mezzo should differentiate them from their rivals to stand out the crowd in the industry. Concerning the issue Mezzo is to adopt innovation theories to guide them what aspects needing improving to win the market.

 

IV.1    Theories of Innovation: Three Aspects of Innovation

Every aspect of the corporation influence innovation, from the smallest member of the company until the largest and most abstract factors. Each factor requires proper comprehension in order to produce a working environment where each condition harmonically leads toward the creation of new and productive ideas. The three factors of innovation are unlocking personal creativity, managing innovative managers, and environment for innovation.

 

IV.1.1 Unlocking Personal Creativity

The smallest building blocks of corporations are individuals working for the company. Prior to making organizational efforts to increase corporation’s innovation abilities, it is important to understand common knowledge on the aspects influencing personal creativity.

¨      Imagination bears creativity. Trainers believe that if employees are suppressed from imagining or wondering to find new perspectives, then managers might as well prohibits creativity. Collective brainstorming activities are a good example of encouraging creativity (Kyle, 2005)

¨      Practicality is the enemy of creativity. Often, due to the consideration of time and efforts to save it, practicality is the popular choice among managers. However, researchers believed that practicality would tie us to the here and now, the tried and true, while innovation requires active imagination, people who could see beyond the reality which is present.

¨      Fear of rejection kills creativity. Management who appreciate ideas tend to achieve more valuable inputs compare to those who do not. Managers must understand that fear of being rejected and being made ridicule is preventing employees from communicating their ideas.

¨      Routine activities weaken creative mindsets. Changing work routine, changing the decoration, or any other effort for creating a new working condition is important for nurturing innovation within a company

(Stansburry, 2005)

 

IV.1.2        Managing Innovative Managers

Organizational efforts of nurturing innovation are lead by managers and team leaders. There are several managerial aspects that influence the process of promoting and nurturing innovation:

¨      Understanding of the process of innovation

Managers should ask themselves these questions: How does innovation come about? Can it be structured? Can it be pursued periodically? Managers should learn about what real innovators do, how they do it and how it contributes to the performance of the team.

¨      Continuous learning.

Great leaders do not stop learning. Managers who remain valuable contributors are usually those who sharpen their skills continuously.

¨      Curiosity, Openness and Leadership

Managers should be genuinely interested in possibilities of innovation. Managers must be receptive and open to learn about everyone and anyone. Managers must also have passionate interest for progress and the development of new ideas.

(Bean and Radford 2002)

 

IV.1.3 Environment for Innovation

Individuals and organizational level efforts should be combined with the proper understanding of what kind of environment that would support innovation. To determine and design a supportive environment, we must pay attention to these four dimensions of measurements:

§  Generally perceived Level of Control

A low level of control means that the company is rather flexible in making and implementing their decisions, while high level of control symbolized a bureaucratized type of an organization. The key is to find a good balance between control and flexibility to encourage innovation within bounds determined by organizational goals (Ginsberg, 2005).

 

§  Operational Structure of an Organization

Organizational structure and the structure of operational system within a corporation are seldom neutral. They usually encourage or discourage innovations. For example, structures that unaware for unhealthy competition inside the organization usually less supportive of cooperation and innovation. On the other hand strict structures might unintentionally discourage new ideas and experimentation (Bean & Radford, 2002).

 

§  Access to and Quality of Corporate Strategy.

Sound corporation strategies, communications to employees in clear and relevant manners are the foundations for individual contributions to those strategies. Often, we found corporations with employees who knows little of corporate strategy, but are being criticized for being slow to innovate (Bean & Radford, 2002).

 

§  The Overall Level of Organizational Focus

Efforts of innovating need proper directions. Organizational focus provides employees with the greatest stimulus to innovate because it orients attention to serve new customer needs or solve new customers’ problems, and thus creates value (Karlsberg and Adler, 2005).

 

IV.2           Sources of Innovation

After defining the three aspects that describe innovation efforts of different level of organizational component, we would display several activities that trigger the chain reaction of innovation. Some of the activities are:

 

§  Opportunity Identification

Company can design an active system to support innovation. Despite depending on researches to discover improvement possibilities, management must realize that most innovation opportunities are found by individuals who are closely tied to products and consumers (Hale, 1996).

 

§  Management Support

Innovation support could be in tangible and intangible forms. Tangible forms are financial, personnel, space and equipment while intangible forms are philosophical supports. In order to constantly supportive, managers must be committed to the principle that the company must change and innovate. Managers must also realized that in larger companies, management has less role than in small ones, thus required more actions of promotions and discussion with members of the corporations (Markgraf, 2000).

 

V.        Discussion: Analysis of Mozzo in UK Market

Prior to the submission of suggestions for Mozzo in expanding into West Midlands region, the company should analysis current position in UK market. In order to give insight about current position of Mozzo, it is imperative to conduct SWOT analysis as following:

 

V.1      SWOT Analysis

SWOT analysis represents the internal and external environments that influence a business situation. As the name implies, SWOT analysis composes of strengths (S) and weakness (W) as internal factors while the external factors composes of opportunities (O) and Threats (T).

 

V.1.1   Strengths

Strengths are the one component of internal analysis. The component describes any resources and capabilities that support a company to achieve its competitive advantage such as patents, excellent reputation, low cost structure and many more.

The key strengths of Mozzo that differentiate the company from the rest of players in the industry is the focus of Mozzo to offer high quality coffee, only Arabica. The company spells three key magic strategies that can be considered as the company’s strengths as following:

§  Mozzo Magic 1: The COFFEE FARMER

Mozzo says that they have Coffee Masters™ that become the source of their coffee beans from certified Fairtrade coffee farmers. In these circumstances, Mozzo has appropriately built direct and interactive relationships with coffee farmers that mutually benefit both parties.

Mozzo becomes one of UK brands that carry the Fairtrade mark, which represents the situation that farmers in developing countries receive a fair price for their crops. In UK, the Fairtrade mark is essential since majority of buyers would not but coffee that has no Fairtrade mark due to social concerns (Cafédirect, 2006).

 

§  Mozzo Magic 2: The SOIL

Mozzo reveals that they grow beans just the way nature intended. Therefore, they insist that coffee taste is natural.

 

§  Mozzo Magic 3: The BEAN

The Mozzo’ focus to only offer Arabica coffee beans add strengths to the company as they naturally create delicious Mozzo Fairtrade organic espresso coffee.

 

V.1.2   Weaknesses

The second internal factor is Weaknesses. This is simply in contrast to the strength in which the absence of specific strength might be considered as the weaknesses of the company. It includes a lack of patent protection, high-cost structure and many more.

Concerning the Mozzo, I see that the decision to use only Arabica beans could be the weakness of the company. This is because the decision put Mozzo to have highly segmented market, coffee lovers that only take Arabica Coffee. This is far different from their competitors like Starbucks that offer various coffees from places all over the world.

In addition, Mozzo will face fierce challenges from the top 5 companies (Nestle, Kraft, Sara Lee, Procter & Gamble and Tchibo). This is because these 5 companies hold the largest share in coffee purchase. In Oxfam report (2002), Mugged: Poverty in Your Coffee Cup Report, the five companies buy roughly half the world’s coffee beans each year. The situation suggests that Mozzo has little power to obtain best price from farmers in the world since the five companies have strong buyer power including the negotiated price.

 

V.1.3   Opportunities

The first external factor in SWOT analysis is Opportunities. These elements provide specific opportunities that may help a company to gain more profit and achieve sustainable growth. They include unfulfilled customer need, new technologies, elimination of trade barriers and so on.

Regarding the Mozzo’ opportunities, the decision to expand into market across the west Midlands region provides opportunities for Mozzo to generate new revenue and strengthen the company’s brand equity that will benefit Mozzo to be a nationwide and even a multinational coffee retailers.
V.1.4   Threats

In addition, Threats describe any changes in the external factors that may put any company in unsafe position in the market. They include a change in consumer tastes, new substitute products, new regulations and many more.

In Mozzo case, it is found that the existence if multinational coffee retailers such as Starbucks really threaten the Mozzo business. This is because Starbucks has earned powerful brand awareness in coffee lovers’ minds.

The Starbucks Coffee Company is the world’s leading retailer, roaster and brand of specialty coffee with coffee houses in North America, Europe, Middle East, Latin America and the Pacific Rim, with 40 million customers visit weekly. The company provides what they call ‘the Starbucks Experience’, which is a combination of comfort gained from the finest coffees, great services, first rate music and comfortable and upbeat meeting places.

In addition, Mozzo faces another serious threat since competitors like Cafédirect already has wide distribution network in the UK alone. Currently, Cafédirect products are available at more than 320 Higher Education Centres and more than 800 business and industry offices (Cafédirect, 2006).

 

V.2      Suggestion to Expand into West Midlands region

V.2.1   Product Innovation

As discussed above, Mozzo faces fierce challenge from multinational coffee retailers like Starbuck if they want to expand into new market. The situation suggests that Mozzo should encourage innovation in delivering their products to customers as mentioned in the theories of innovation.

However, this is also not an easy task since Starbucks and other giant coffee retailer also conduct many innovations in coffee retailers business. For example, Starbucks offers coffee lovers with a selection of coffees from around the world. The company took their ingredients from coffee-growing regions of Latin America, Africa/Arabia and Asia/Pacific in order to obtain their famous Arabica beans. Afterwards, the Starbucks’ roaster facilities perform their function and produce the Starbucks Roast. Besides coffees, Starbucks also offers a variety of hand-crafted beverages baked pastries, sandwiches and salads, and also blended coffees with various flavours.

Moreover, in order to gain acceptable market share in West Midlands region, I see that Mozzo should increase their brand equity since competitor like Cafédirect has strong brand equity in the UK market. According to Fairtrade Foundation, in the UK coffee market, Cafédirect became the first brand that carries the Fairtrade mark (Fairtrade Foundation). Currently, Cafédirect is ranked as the 3rd most trusted brand in the UK (Cafédirect, 2006).

This situation really threatening Mozzo, since according to marketing theory, consumer would prefer well known brand to unknown ones (“Developing.” 2003). in marketing, this issue is underlined as very important since brand awareness is the thing driving people to buy a product or a brand over another. In a more intense sense, it even drives people to pay more for a product that they already have ‘faith’ in.

However, Mozzo should not over-emphasize the matter and create lack of confidence to our new products/brands. Instead, we should take lessons from the fact that the statement indicates a direct connection between sales volume and product’s or brand’s “image”.

 

V.2.2   Management Support: Encouraging Innovative Ways to Boost Coffee Sales

As mentioned in theories of innovation, management of Mezzo should provide suitable support to encourage innovation in the company. In order to compete with multinational coffee retailer like Starbuck, managements of Mezzo must constantly supportive, managers must be committed to the principle that the company must change and innovate.

If managements of Mezzo are not supportive, it seems that the expansion into west Midlands’s regional will be slow and low impact to the coffee retail industry. The managements should also realize that multinational retailers become the strongest competitors they might have. For example, Starbucks will soon expand in European market as easy as it did in the US market.

In addition, the fact that the five managements have diverse hobbies and three of them (Gary, Steve and Matt) also have their own business should add strengths to Mozzo. The following is the diverse hobbies of Mozzo’s managements:

§  Grant (Director) – sport, reading, travelling, skiing, politics and society, geography

§  Gary – music, family time, DJing, organising music and entertainment parties

§  Steve (Grant’s Father) – gardening, sport, skiing, travel, birds

§  Matt (Web Designer) – sport, internet, reading, property

§  Andrea (Administrator) – travel, slow food, cooking, reading, films, gardening, dancing

 

The fact should encourage managements of Mezzo to take benefits of the diversity in personnel in Mozzo. For example, since there are some managements of Mezzo are skiing lovers, it is nice to ask them what kind of coffee the skiers love the most or managements of Mezzo can ask them to promote Mozzo products in any ski meeting.

In addition, Mozzo should realize that Café-style coffee shop become current trends for young entrepreneurs and executives as places to hang out and have million-dollar business. This situation should encourage managements to Mozzo to make over Mozzo coffee shop to convey this situation. For example, it is nice to partner with internet service providers (ISP) in providing Wi-Fi (Wireless Fidelity/ hot spots) Internet connection since most of guests in Café need uninterrupted internet connection to retrieve e-mail, browsing for critical information or merely download some music.

Another partnership that Mozzo can conduct is with bookstores or online library like Questia. Once, the strategic partnership is available, Mozzo can offer their guests/visitors wide range of books that can be read or bought in the Mozzo’s Café.

Another innovative way is to dig deeply into customers’ wallets by diversifying the offering in addition to Arabica coffee. For example, Mozzo also offers foods like pizza, hamburgers or bread. This is due to Mozzo’s competitors like Starbucks also make large revenue from this kind of diversification in which Starbucks’s revenue composition is 78% beverages, 12% food items, 5% whole beans coffees and 5% coffee making equipment and accessory.

 

VI.      Conclusion

In this fast changing business environment, a company should encourage innovation in order to stand out the crowd. Every aspect of the corporation influence innovation, from the smallest member of the company until the largest and most abstract factors. Each factor requires proper comprehension in order to produce a working environment where each condition harmonically leads toward the creation of new and productive ideas.

Concerning the issue of innovation in Mezzo, a coffee retailer, this paper has discussed theories of innovation to help Mozzo continuously bears innovative products that are competitive and attractive in the market they serve.

This paper has also provided current situation of Mezzo using SWOT analysis to see current internal and external forces that surround Mozzo in coffee business. In the end, there are two suggestions for Mezzo in expanding into the west Midlands region.
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