UNIT IV STUDY GUIDE

Business Strategies and Innovation

Course Learning Outcomes for Unit IV

Upon completion of this unit, students should be able to:

1. Compare global strategic business models.

1.1 Examine multiple business strategies to solving issues within an organization.

4. Summarize the role of innovation and risk management in strategic business planning.
4.1 Examine the role of innovation in establishing business strategies.

6. Assess the ethical parameters of strategic business models.

6.1 Evaluate potential ethical issues within organizational solutions.

Course/Unit Learning Activity

Learning Outcomes
Unit Lesson
Chapter 6
Chapter 7
1.1 MiniCase 5: Business Model Innovation: How Dollar Shave Club Disrupted
Gillette, pp. 487–488
Case Study: IBM at the Crossroads
Unit IV Case Study
Unit Lesson
Chapter 7
MiniCase 5: Business Model Innovation: How Dollar Shave Club Disrupted
4.1
Gillette, pp. 487–488
Case Study: IBM at the Crossroads
Unit IV Case Study
Unit Lesson
Chapter 6
Chapter 7
6.1 MiniCase 5: Business Model Innovation: How Dollar Shave Club Disrupted
Gillette, pp. 487–488
Case Study: IBM at the Crossroads
Unit IV Case Study

Required Unit Resources

Chapter 6: Business Strategy: Differentiation, Cost Leadership, and Blue Oceans

Chapter 7: Business Strategy: Innovation, Entrepreneurship, and Platforms

MiniCase 5: Business Model Innovation: How Dollar Shave Club Disrupted Gillette, pp. 487–488

Case Study: IBM at the Crossroads

BUS 6320, Global Strategic Management 1

Unit Lesson UNIT x STUDY GUIDE
Title
Business-level strategy includes the goal-directed actions that managers take toward achieving competitive
advantage (Rothaermel, 2019). In review, competitive advantage is derived by a combination of industry and
company effects. When considering business strategies, managers need to determine whether they will focus
on differentiation or cost-leadership strategies. Differentiation works to create a product/service with higher
quality or unique features. The cost leadership strategy is more focused on a lower price point.

Rothaermel (2019) presents the Blue Ocean Strategy that combines differentiation and cost leadership
through value innovation, which utilizes a system of trade-offs between the two strategies. The concept of
value innovation aligns innovation with perceived consumer benefits and the price. This suggests that the
company is truly concerned with the value of the innovation to the consumer. The value proposition should be
considered one of the most important elements of a business as it essentially is the promise of value to be
delivered to the customer. This is aligned directly with the differentiated qualities and competitive advantage
leading to a solid brand identity.

Innovation, as defined by Rothaermel (2019) is “the successful introduction of a new product, process, or
business model” into an organization (p. 220). In order for innovation to be financially prudent, it needs to
translate into a product or service that creates value for the customer and is marketable. Innovation is also
looked at as finding a new way of doing something or the application of better solutions that meet new
customer requirements. This is accomplished through positive changes in efficiency, productivity, quality,
competitiveness, and/or market share. A formative example of innovation is Procter & Gamble’s Tide PODS
innovation. Before the successful introduction of the Tide PODS, Procter & Gamble experimented with Tide
Tabs, which failed. Fortunately, the culture tolerated failure as they moved forward in looking for solutions
leading to the introduction of the successful Tide PODS. Another example of innovation is in how we listen to
music (see image below). Each of these innovations was due to advancements in technology and customer
interest in better and more convenient music listening methods.

In 1980, a Walkman was used to listen to music. This has changed drastically over the years.

Satell (2013) presented the innovation management matrix, which explains the four basic types of innovation.
The alternative format for this activity is also available.

Netflix and Starbucks are excellent examples of companies engaging in disruptive innovation through
necessity of technological advancement and change. Ideas such as Think Big, Start Small, Fail Quickly, and
Scale Fast demonstrate a disruptive theme. Netflix has adopted a policy of Think Big with their streaming
video idea. This idea was embraced in spite of the fact that their past DVD rental business would be rendered
obsolete. The idea of Start Small suggests that a company should begin a new product roll-out on a smaller
scale instead of worldwide. Instead of following this idea, Howard Schultz at Starbucks introduced a new
product, Sorbetto, globally. He quickly realized it actually was not a consumer favorite and the financial
ramifications of this mistake were significant. Fail Quickly suggests that an organization should understand
that failure is part of the risk of an innovative culture. Learning from the failure and moving forward is the key
to this segment of disruptive innovation. Starbucks demonstrated this Fail Fast premise by quickly moving on
from the Sorbetto failure to their next innovative coffee drink. Finally, Scale Fast indicates that being at the
forefront of a new innovation affords certain profit advantages of being the first to market. Once an innovation
is successful, competitors will quickly try to emulate the innovation in an attempt to capture some of the
market share on that product innovation.

BUS 6320, Global Strategic Management 2

Innovation within an organization is driven by those who have an entrepreneurial UNIT mindset.
x STUDY Characteristics
GUIDE of
individuals that have this entrepreneurial mindset are committed, determined ,Title
motivated to excel, creative,
self-reliant, adaptable, opportunity-driven, risk-tolerant, hard-working, confident, optimistic, and opportunity-
oriented problem-solvers. They are tolerant of ambiguity, visionary, passionate, team builders and
independent-thinkers who have a high-energy level. Think about these characteristics from the standpoint of
someone on your team in the workplace. Would you prefer to have someone on your team with these
characteristics? This is the premise of corporate entrepreneurship.

Kuratko (2017) defines corporate entrepreneurship as creating entrepreneurial action within an established
organization. With the rapid growth of new and sophisticated domestic and international competitors and the
drive toward differentiation and competitive advantage, corporate entrepreneurship has become a need in
most corporations. Generally speaking, corporations have been downsized with the motivation of improved
efficiency and productivity. Additionally, mergers, partnerships, and buyouts are a common, everyday event in
the business world, providing additional rationale for the need of corporate entrepreneurship. In order for an
organization to truly establish a culture of corporate entrepreneurship, risk-taking needs to be encouraged
and failure/mistakes tolerated. Support from upper management is crucial, along with the allocation of
resources.

Once corporate entrepreneurship has been adopted within the strategic plan, idea sharing needs to be
encouraged. Ideas can originate from unexpected occurrences, incongruities, process needs, industry/market
changes, demographic changes, perceptual changes, and/or knowledge-based concepts. An example of a
change from demographic changes was the influx of retirement communities. Innovative ideas could come
from consumers, distribution channels, government, and/or research/development.

Including innovation goals within the business strategy of an organization is of top importance to most
multinational firms today. Boone et al. (2018) reinforce this with their study of 165 manufacturing companies
in 20 countries. Furthermore, the study indicated that upper management’s strategic role in encouraging
entrepreneurship and innovation practices within these multinational corporations was paramount. The study
also provided conclusive support to the necessity of corporate headquarters in providing the strategic
leadership necessary to leverage corporate resources across the global divisions in order to ensure
innovative practices.

Within the concept of strategy development, ethical considerations and social responsibility enter into the
domain. Firms need to be cognizant of ethical issues in business operations such as income and expense
reporting (tax fraud), customer bribery and rigging bids (pyramid schemes, bait-and-switch schemes), and
ethical treatment of employees. Additionally, social responsibility addresses the firm’s ethical obligations as a
good citizen to its community. Social responsibility manifests itself in many areas such as the following:

• environmental protection,
• consumerism,
• education support,
• compliance with government regulations, and
• community support.

Building a business strategy shrouded with business integrity and ethics and instilling a culture of integrity
within the organization is key to ensuring an ethically sound organization. The ideal situation is one where the
leadership team embraces this idea through ethical decision-making. Ensuring this culture builds trust and
integrity leading to improved financial performance, increased sales/customer loyalty, higher quality
recruitment, reduced turnover, and improved productivity. This results in an overall enhanced brand image
and reputation for the organization. Many firms adopt a code of ethics, which is a written code that includes
the official standards of employee behavior including a definition of behavioral expectations. Many
corporations ask employees to acknowledge this code of conduct as a condition of employment. Furthermore,
many times this code is published on the company website providing a vision of the ethical integrity of the
organization (Longenecker, 2013).

BUS 6320, Global Strategic Management 3

With the advent of innovation being everywhere, the concept of innovative management has emerged.
UNIT x STUDY GUIDE This
concept suggests that organizations need to have a systematic method of planning,
Title organizing, managing,
and controlling the innovations within an organization. The development of processes that review new ideas
and manage them through review, development, and evaluation ensuring their alignment with corporate
strategies is imperative. Additionally, once the innovation is adopted, a process of change management and
implementation as well as measurement should be put into place.

The implications for strategic leaders are significant as innovation drives the competitive process. In order for
an organization to compete in today’s very competitive business world, innovation needs to not only be
embraced, but required. Innovative ideas need to be useful, but also scalable with an eye on profitability as
well as provide a value proposition to the customer. From a global standpoint, connections can be made to
developing markets, which could lead to additional opportunities.

References

Boone, C., Lokshin, B., Guenter, H., & Belderbos, R. (2018). Top management team nationality diversity,
corporate entrepreneurship, and innovation in multinational firms. Strategic Management Journal,
40(2), 277–302.
https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc
t=true&db=bsu&AN=134022175&site=ehost-live&scope=site

Kuratko, D. (2017). Entrepreneurship: Theory, process and practice (10th ed.). Cengage Learning.

Longenecker, J. G., Petty, J. W., Palich, L. E., Hoy, F. (2014). Small business management: Launching and
growing entrepreneurial ventures (17th ed.). Cengage Learning.

Rothaermel, F. T. (2019). Strategic management: Concepts (4th ed.). McGraw-Hill Education.

Satell, G. (2013, May 7). How to manage innovation. Forbes.

https://www.forbes.com/sites/gregsatell/2013/03/07/how-to-manage-innovation-2/#769f439d4785

BUS 6320, Global Strategic Management 4