MODULE 1 INTRODUCTION TO ENTREPRENEURSHIP
IN TOURISM AND HOSPITALITY
Lesson 1: Nature and Scope of Entrepreneurship
Entrepreneurship comes from the French word
`Entrependre’ and the German word `Uternehmen’
both meaning individuals who are `undertakers’
which means “those who took the risk of a new
enterprise”.
An entrepreneur is an economic change agent with
knowledge, skills, initiative, drive and spirit of
innovation to achieve goals. He identifies and seizes
opportunity for economic benefits. He is a risk
bearer, an organizer and an innovator. An
entrepreneur is a person who organizes a venture to
benefit from an opportunity, rather than working as
an employee. Entrepreneurs play a key role in any
economy.
NATURE OF ENTREPRENEURSHIP
1. Creation of an enterprise.
It involves the creation and operation of an
enterprise. Instead of becoming an employee, an
entrepreneur ventures to make his own business.
2. Organizing function.
It brings together various factors of
production for economic use. Utilizing the factors of
production to make profitable goods and services.
3. Innovation.
is an automatic, spontaneous and creative
response to changes in the environment. Making his
venture unique which makes it very saleable from
others.
4. Risk-bearing capacity.
It assumes uncertainty of future. A risk-
taker, planning the future as well as assumes
fortuitous events.
5. Managerial and leadership function.
It is responsible for controlling and
coordinating the human resource and giving
direction to an enterprise. Leads his team to success.
6. Gap filing.
It fills the gap between human needs and
available products and services. Innovates to attend
to the needs that available goods and services was
not able to attend to.
SCOPE OF ENTREPRENEURSHIP
The scope of entrepreneurship differs
specifically in every area. The scope of entrepreneurs
in the Philippines will be mostly different from India,
or Malaysia, or Japan, and for the rest of the world.
This is because each area have varied needs and
wants which entrepreneurs might attend to.
Nevertheless, in a much broader sense,
small-scale business provides good scope for the
growth of entrepreneurial activities. In this context,
an entrepreneur has good opportunity and vast
scope in providing services than manufacturing a
product. The business may start small but it can
achieve better results than starting a large business
right away. This is because small firms have higher
productivity, more efficient, and low labor turnover.
ROLE OF ENTREPRENEURSHIP
1. Economy
In a market economy, entrepreneurs play a
crucial role. Entrepreneurs, after all, are the spark
plugs in the economy's engine, igniting and boosting
all economic activity. The encouragement and
reward of the entrepreneurial urge has resulted in
the economic success of nations all over the world.
2. Growth and Opportunities
Because entrepreneurs and their actions are
the main driver of the level of success, wealth,
growth, and opportunity in any economy, a society is
prosperous only to the extent that it rewards and
encourages entrepreneurial activity. The most
dynamic cultures on the planet are those with the
greatest number of, as well as the economic and
legal structures to stimulate and inspire them to
expand their operations.
3. Risk Assumption
It is the entrepreneur who takes on the risk
of starting a business in order to make money, and
who looks for ways to make money by filling unmet
needs. Entrepreneurs seek disequilibrium, or a gap
between client demands and needs and already
offered products and services. The entrepreneur
then gathers together the production factors
required to manufacture, offer, and sell the desired
goods and services.
4. Business Decision-Making Function
They put their money—and the money of
others—into creating a product or service that can
be marketed for a profit. Entrepreneurs are upbeat
and focused on the future; they trust in their ability
to succeed and are prepared to put their resources at
risk in the search of profit. They're quick to react and
eager to explore a variety of techniques to attain
their profit objectives. They're also adaptable, eager
to shift rapidly as new knowledge becomes available.
5. Managerial Function
Entrepreneurs are competent at selling
against the competition by instilling in their products
and services a sense of distinctiveness and
uniqueness. They are constantly on the lookout for
client wants that the competition is failing to meet
and devise strategies to offer their products and
services in such a way that they are more appealing
than anything else on the market.
6. Innovation
Entrepreneurs are a national treasure that
should be protected, nurtured, supported, and
rewarded to the greatest extent feasible. They are
the source of all income, jobs, opportunity, and
prosperity in the country. In a market system, they
are the most important people, and there are never
enough of them.
TYPES OF ENTREPRENEURS
1. Innovative Entrepreneur.
These are the people who come up with
new ideas, new products, new manufacturing
methods or processes, identify potential markets,
and restructure the company's structure. These are
the industry leaders who make a substantial
contribution to the country's economic
development. Entrepreneurs with extraordinary
foresight are able to predict demand for goods and
services.
2. Imitating Entrepreneurs.
Imitating entrepreneurs are those that
promptly replicate the innovative entrepreneurs'
new inventions. These do not create any new ideas;
rather, they imitate the technology, processes, and
methods pioneered by others.
3. Fabian Entrepreneurs.
These entrepreneurs are skeptical of the
adjustments that need to be made in the company.
They do not invent anything; instead, they follow
after they are happy with the success rate. They wait
until the innovation has been thoroughly tried by
others and does not result in a significant loss as a
result of its failure.
4. Drone Entrepreneurs.
These business owners are resistant to
change because they are conservative and do not
want to make any organizational adjustments. They
are content with their current business model and
refuse to change, even if they suffer from losses.
CHARACTERISTICS OF ENTREPRENEUR
a. Vision – He is able to visualize market demand,
socio-economic environment and the future of
business venture.
b. Knowledge – He has sound conceptual knowledge
about all the technicalities of his business.
c. Desire to succeed – He has multiple goals and
seeks opportunities to be productive.
d. Independence – He is independent in work and
decision making.
e. Optimism – He knows how to exploit
opportunities.
f. Value addition – He does not follow the
conventional rule of thumb, they have a desire to
create, innovate and add value.
g. Initiative – He takes the initiative to make an
action plan from limited resources.
h. Goal setting – He sets realistic goals.
i. Problem solver – He is creative in problem solving.
j. Good human relations – He is a good leader,
motivator and team builder.
k. Communication skills – He has the ability to
persuade others.
QUALITIES OF AN ENTREPRENEUR
1. Discipline. These individuals are focused on
making their businesses work, and eliminate any
hindrances or distractions to their goals.
2. Confidence. They are confident with the
knowledge that they will make their businesses
succeed.
3. Open Minded. They have the ability to look at
everything around them and focus it toward their
goals.
4. Self-Starter. They are proactive, not waiting for
someone to give them permission.
5. Competitive. They need to win at the sports they
play and need to win at the businesses that they
create.
6. Creativity. They will repurpose products to market
them to new industries.
7. Determination. They are determined to make all
of their endeavors succeed, so will try and try again
until it does.
8. Strong people skills. Most successful
entrepreneurs know how to motivate their
employees so the business grows overall.
9. Strong work ethic. The successful entrepreneur
will often be the first person to arrive at the office
and the last one to leave.
10. Passion. They genuinely love their work. The
successful entrepreneur will always be reading and
researching ways to make the business better.
LESSON 2: ROLE OF ENTREPRENEURSHIP IN
TOURISM AND HOSPITALITY INDUSTRY
Tourism entrepreneurship has been identified as a
fundamental means of providing strategic support
for business development, particularly in rural areas.
The importance of entrepreneurs in tourism
development has been identified, and it has been
claimed that the birth of a touristic business is not an
act of nature, but rather an act of the tourism
entrepreneur.
 Individual rationality and entrepreneurial creativity
are the primary concerns in the modern era, both in
developed and developing countries.
 The tourism industry is seen as an agent of change
in economic and social changes.
 Tourism entrepreneurship not only solves societal
problems, but it also boosts a country's fiscal growth
and development, resulting in an increase in GDP.
 A tourism entrepreneur is a person or group of
people who create and manage tourism products.
According to Koh and Hatten (2014), a society's
environment, landforms, flora and fauna, historic
artifacts, and cultural heritage enclaves become
tourism resources that can be renovated and
transformed into tourist attractions and destinations
only when tourism entrepreneurs exist. Tourism
generates a lot of money and is the world's fastest
growing industry.
Conrad Hilton
-One of the best know hotel entrepreneurs
-who brought his first hotel in Cisco, Texas in 1919.
- 1946- He subsequently expanded throughout US
and formed the Hilton Hotels Corporation.
- 1948- name was changed to the Hilton
International Company which became the world’s
first international hotel chain with 540 hotels in 78
countries and 6 countries.
Disneyland
-One of the world’s most famous visitor attractions
-This theme park would not have been opened
without the efforts of the entrepreneur Walt Disney,
best known as an animator and film maker.
=The entrepreneur first envisaged the idea for a
theme park in the late 1940s as a place where his
employees could spend time with their children.
-With funding from the bank of America, Disneyland,
one of the world’s first theme parks, opened on July
17, 1955 in California and attracted visitors from
around the globe. Disney theme parks were later
opened in Florida, Orlando, Japan, France, Hong
Kong, China, and Hawaii.
In addition to these well-known hospitality and
tourism entrepreneurs, there are countless others
who form the industry's backbone and run a variety
of small to medium-sized businesses (SMEs). These
individuals identified opportunities that could be
realized by establishing a hospitality or tourism
business.
As a result, it appears that entrepreneurship drives
both innovation and economic growth. Furthermore,
entrepreneurs play a critical role in the hospitality
and tourism industries, whether through the
development of SMEs or through the subsequent
creation of global, multi-sector industries.
CHARACTERISTICS OF TOURISM MARKET
1. Tourism is an intangible product. Tourism is under
the service-sector.
2. Perishability. Tourism service cannot be stored like
tangible goods for future use. For an instance, spare
seats on an airplane cannot be transferred to the
next flight.
3. Variability. Due to extensive involvement of
people in the tourism service resulted for variability
in the outcome. The same employee may hence
render service of varying standard, depending on his
mood, the time of the day, or the type of customer.
4. Seasonality of Demand. Most tourist destination
areas are characterised by fluctuating periods of
demand called:
 Peak – time of the year during which
demand is highest
 Shoulder – an abbreviated season that falls
between the peak and low troughs
 Troughs – off season, time of the year which
demand is very low.
5. Interdependence. This occurs when tourists visit a
destination and their experience is made up of
different services: accommodation, transportation,
attractions, etc.
6. Inseparability. Tourism service cannot be
separated from its provider. The hotel guest cannot
experience counter service if the receptionist is not
available, nor can the receptionist render service if
there is no guest.
MODULE 2. UNDERSTANDING ENTREPRENEURSHIP
Lesson 1: Entrepreneurial Venture Opportunities
Entrepreneurs excel at applied creativity, thrive in
the face of adversity, and seek out unconventional
solutions. They face challenges, envision solutions,
create stories to explain their visions, and then act to
be a part of the solution. They forge new paths, risk
failure, and persevere in their pursuit of success.
Entrepreneurs seek to achieve a specific goal by
establishing a company that will address societal and
market needs. When confronted with difficult
situations, they are willing to go above and beyond
to overcome these obstacles and succeed, building a
business. Entrepreneurs, instead of giving up from
obstacles, sees these challenges as opportunities
instead.
An opportunity is a favorable confluence of
circumstances with a high probability of success or
advancement. Entrepreneurs respond to
opportunities by capitalizing on changes, needs, or
new skills or knowledge in their industry. Thus,
entrepreneurship can be defined as the discovery
and utilization of previously untapped opportunities.
Regardless of whether the right opportunity has
presented itself, a person can learn to act as an
entrepreneur by engaging in a low-cost activity. If at
all possible, the would-be entrepreneur should
follow this sequence: do it, then reflect on it. To stay
out of the realm of daydreams and fantasy, one must
begin the practice of experimenting, testing, and 1.Observing changes in the environment. Changes in
learning about one's entrepreneurial self. The first the environment create new needs, desires, and/or
step is to design small experiments with problems, and an opportunity arises. Important
entrepreneurial teams or small ventures in new environment forces needs to be observed:
activities. The entrepreneur makes new contacts and
a. Economic forces
mentors as a result of these small experiments. He or
b. Social Forces
she may also come across a
c. Technological advances
challenge that serves as a springboard for a new d. Political and regulatory statues
venture.
Examples of how changes in the environment
Four types on Entrepreneurial Venture provides new product and service opportunities.
1. Incremental Venture. The establishment and
management of a routine business with a small
amount of novelty.

2. Innovative venture. The initiation and operation

of a business based on an innovation.

3. Imitative venture. The identification and imitation

of a novel business or venture
4. Rent-seeking venture. The establishment of a
business that makes use of standards, regulations,
and laws in order to share in some of the value of an
existing enterprise.
2. Recognize needs and wants. When there is a need
and a desire to fulfill it, opportunity arises. The term
"needs" refers to the basic needs that the consumer
must have in order to survive, whereas the term
"wants" refers to a personal desire for something
other than a basic need.

ENTREPRENEURIAL OPPORTUNITIES 3. Recognize problem and find solution. Due to

constant changes, problem arises and so does
Any concept for a new product, service, raw opportunities.
material, market, or manufacturing process that can
be successfully commercialized and generate Ability to search and discover business
economic benefits for stakeholders. This is a opportunities
situation that enables an entrepreneur to offer new
 Experience
marketable products or services to interested buyer
 Knowledge and skills
or end users.
 Special alertness on recognizing needs and
Opportunity are situations in which new goods, wants
services, raw materials, and organizing methods can  Social network
be introduced and sold at a price that is greater than  Creativity in finding solutions to problem
their cost of production (Casson, 1982).  Vigilant on recognizing problems

Opportunity is a situation in which an individual Mechanism to identify opportunities

identifies a venture that is attractive, durable, timely,
and grounded in a product or service that delivers  Customers
value to a customer (Armstrong).  Retailers and distributors
 Business associates
Types of Situational Factors  Bankers
 Consultants
 When product or service is still not in
 Employees
existence.
 Others
 When product or service is already in the
market but failed to satisfy the customers; Criteria for evaluation and selection of
when it needs improvement. entrepreneurial opportunity
Sources 1. Provides profit and has potential for growth
 Technological innovations 2. Should be with less competition
 Regulatory changes
 Discovery of new uses for “old” materials 3. Must be a good fit between entrepreneur and
 Changes in industry or market structure opportunity
 Demographics 4. Possess competitive advantage
 Changes in perception, mood, or meaning
 New knowledge, both scientific and non- 5. Effective and efficient
scientific
6. Do not violate norms and values of the community
Opportunity Identification
7. Conforms with the law
The process of searching for and discovering
STARTING A BUSINESS
business opportunities is known as opportunity
identification.
Once you have identified an opportunity for
entrepreneurial venture, it is now time to start your
business. It takes talent, determination, hard work,
and persistence to start a business. It also
necessitates extensive research and planning.
However, before you start your business, you should
evaluate your strengths and weaknesses as well as
your personal goals to determine whether business
ownership is right for you.
Basic questions to ask yourself you’ll need to address
before starting a business:
 What “exactly” is my business idea? Is it
feasible?
 What will be my competitive advantage?
 What method of venturing should I
consider? Start a new venture, buy existing
one, or buy franchise?
 What form of business organization do I
need?
Method of Venturing into a Business
1. Start a new venture (starting from scratch).
Starting from scratch is the most common—and
riskiest—option. This approach allows you to start
with a blank slate and build the business the way you
want. You choose the goods or services you'll offer,
secure your location, and hire your employees, and
then it's up to you to build your customer base and
reputation.
2. Buying an Existing Business.
Some things will be easier if you decide to buy an
existing business. You will already have a tested
product, existing customers, active suppliers, a well-
known location, and trained employees. You'll also
find it much easier to forecast the company's future
success. Of course, there are a few hiccups along the
way to becoming a business owner. For starters,
determining how much you should pay for a business
is difficult. Buildings and equipment are easy to
value, but how much should you pay for the fact that
the business already has a steady customer base?
3. Getting a Franchise.
A franchiser (the company that sells the franchise)
grants the franchisee (the buyer—you) the right to
use a brand name and sell goods or services under
that brand name. Food, retail, hotels, travel, real
estate, business services, cleaning services, and even
weight-loss centers and wedding services are
examples of franchises. In addition to the right to use
a company's brand name and sell its products, the
franchisee receives assistance in selecting a location,
starting and operating the business, and benefiting
from the franchiser's advertising. Essentially, the
franchisee invests in a ready-to-go business model
that has proven to be successful elsewhere, while
also receiving ongoing support from the franchiser,
who has a vested interest in her success. However,
there are some drawbacks. The cost of acquiring and
operating a franchise can be high, and you must
follow the franchiser's rules even if you disagree with
them. The franchiser retains considerable control
over its franchisees.
THE TOURISM AND HOSPITALITY INDUSTRY IN THE
PHILIPPINES
Throughout the years, the tourism industry in the
Philippines has been a significant contributor to the
country's GDP. In terms of tourism sector GDP share
in Asia, the Philippines was one of the top
performers.
However, in the previous year, the COVID-19
pandemic disrupted the tourism industry's supply
chain, resulting in an economic downturn in the
Philippines. This year, the Philippines' tourism
industry developed major strategies and plans for
domestic travel in the new normal in order to keep
tourism alive and well in the face of international
border closures.
Tourism's direct gross value added (TDGVA)
contribution to the Philippine economy, as measured
by GDP, is expected to be 5.4 percent in 2020. TDGVA
was PhP 973.31 billion in 2020, down -61.2 percent
from PhP 2.51 trillion in 2019.
LESSON 2. STRATEGIC MANAGEMENT AND
INNOVATION
A strategy is a plan of action designed to achieve a
specific goal or set of goals within a specific time
frame while operating within an organizational
framework.
“Strategic management is the process of building
capabilities that allow a firm to create value for
customers, shareholders, and society while operating
in competitive markets,” write Rajiv Nag, Donald
Hambrick, and Ming-Jer Chen.
The process of strategic management entails:
➢ Specifically pointing out the firm's mission, vision,
and objectives
➢ Developing the policies and plans to achieve the
set objectives
➢ allocating the resources for implementing these
policies and plans
Types of Strategies
1. Intended Strategy.
An intended strategy addresses the organization's
intentions. It is the strategy that a market
organization hopes to implement. As a result,
intended strategies are frequently described in detail
in an organization's strategic plan. A business plan is
a strategic plan created for a new company. This plan
is a rough strategy for keeping the organization on
track. As a result, it is a deliberate strategy.
2. Emergent Strategy.
An emergent strategy is one that develops over
time. It is an unplanned strategy developed by an
organization in response to various unexpected
threats, opportunities, and challenges. Emergent
strategies are also inherently dynamic. Depending on
the effectiveness of the strategy, emergent strategies
can result in both success and failure. Here's an
example of a failed emergent strategy.
3. Realized Strategy.
A realized strategy is one that is both real and
practical. It is the strategy that a company actually
employs. Realized strategies are frequently a by-
product of an organization's intended strategy (i.e.,
the firm's plans), deliberate strategy (i.e., the
portions of the intended strategy that an
organization pursues over time), and emergent
strategy (i.e., what the firm does in response to
unexpected opportunities and challenges).
Five Steps of Strategic Management
A. Formulation
1. Analysis.
The analysis process entails conducting
extensive market, financial, and business research on
the external and competitive environments.
Conducting Porter's Five Forces, SWOT, PESTEL, and
value chain management analyses, as well as
combining expertise in each industry that is part of
the strategy, are all part of the process.
2. Strategy Formulation.
After analysing the internal and external
environments, the organization develops a generic
strategy (for example, low-cost, differentiation, etc.)
based on the value-chain implications. It is done in
order to derive and maximize core competencies as
well as prospective competitive advantages.
3. Goal Setting.
The next step in strategy development is
goal setting. With the defined strategy in hand,
management now seeks out and communicates the
company's goals and objectives, which are linked to
the predicted results, strengths, and opportunities.
B. Implementation
4. Structure.
The primary function of the implementation
phase is to structure the management and
operational processes. Because a strategy is in place,
the company now wishes to solidify the
organizational structure and leadership patterns
(making many changes if required).
5. Feedback.
The final stage of the strategic management
process is feedback. All budgetary figures are
collected and disseminated for evaluation during this
final stage of strategy. Financial ratio calculations and
performance reviews are sent to the appropriate
managers, executives, and departments.
Strategic management is a continuous process. It
starts with defining the vision, mission, objectives,
and goals of the organization.
Vision
In the major hierarchy of strategic intent, vision
remains at the top. It explains what the organization
hopes to accomplish in the long run.
 Alex Miller and Gregory Dess defined vision
as, “the category of intentions that are
broad, all-inclusive and forward thinking.”
 John Kotter defines vision as, “It is a
statement of the organization in the future.”
BENCH VISION
To be a recognized world brand among the best
world brands
Mission
Mission statements are responsible for the role an
organization plays in the society. John L. Thompson
states that mission is “the essential purpose of the
organization, concerning particularly why it is in
existence, the nature of the business it is in, and the
customers it seeks to serve and satisfy.”
BENCH MISSION
 When we create, we inspire.
 When we make, we innovate.
 When we lead, we serve.
Objective and Goals
Objectives tell us about the ultimate end results the
company wants to accomplish by making a strategy
for a selected duration of time. Goals include a broad
category of financial and non-financial issues that a
company wants to achieve in a given amount of time.
Objectives are the methods that specify how the
company's goals will be met. Importantly, objectives
are manifestations of goals even when they are not
stated explicitly.
The following are the objectives of a Water Refiling
Station:
 to increase its sales by 10% annually;
 to offer lowest possible price; and
 to provide the product for both business-to-
consumer (B2C) and business-to-business
(B2B) market
Water Refiling Station Goal, aims to:
 increase sales profit;
 to improve customer satisfaction and
retention;
 to acquire more customers
PESTEL ANALYSIS
Political, Economic, Social, Technological,
Environmental, and Legal analysis are all part of
PESTEL analysis. It is an external environment
analysis used for strategic planning or market
research. It provides a high-level overview of the
various macro-environmental factors that the
company must consider.
1. Political factors
analysis is related with how and to what extent a
government interferes in the economy. Tax policy,
labor law, environmental law, trade restrictions,
tariffs, and political stability are all political factors.
Political factors may also be associated with goods
and services that the government permits (merit
goods) and those that the government does not
permit (demerit goods).
2. Economic factors
contain factors such as economic growth, interest
rates, exchange rates and the inflation rate. These
elements may have an impact on how businesses
operate and make decisions. Interest rates, for
example, can affect a firm's cost of capital,
influencing business growth and expansion.
3. Social factors
contain issues such as health consciousness,
population growth rate, age distribution, career
attitudes and emphasis on safety. Trends in social
factors can have an impact on the demand for a
company's goods as well as how the company
operates. For example, an aging population results in
a smaller and less willing labor force (and increases
the cost of labor).
4. Technological factors
include ecological and environmental aspects, such
as R&D activity, automation, technology incentives
and the rate of technological change. They can
determine entry barriers, the minimum efficient level
of production, and influence outsourcing decisions.
Furthermore, technological shifts can have an impact
on costs, quality, and innovation.
5. Environmental factors
are the conditions such as weather, climate, and
climate change, which may especially influence
tourism, farming, and insurance sectors. As people
become more aware of climate change, they are
becoming more interested in how businesses
operate and what products they offer; this is both
creating new markets and harming existing ones.
6. Legal factors
include laws pertaining to discrimination, consumer
affairs, antitrust, employment, and health and safety.
These factors can affect the operations, costs, and
the demand for the products. Legal factors can also
influence the brand value and reputation of a
company.
BUSINESS LEVEL STRATEGIES
Business level strategies include the plans or
methods a firm may use to conduct numerous
functions in operating their business. Business-level
strategies are usually used to provide guidelines for
owners, managers and employees.
Five types of business level strategies
1. Coordinating Unit Activities.
A common strategy is the coordination of all
different individual unit activities found in a business.
Departments, sections of departments, and
individual job positions can all be used to
differentiate these unit activities.
2. Utilizing Human Resources.
Utilization of available human resources as well
as the overall economy is required for success.
Human labor is always required to achieve
business goals and objectives. Companies
typically develop a business-level strategy to
ensure that they have enough employees to
produce specific goods or services.
3. Developing Distinctive Advantages.
A company's success depends on its distinct
core competencies or competitive advantages.
Core competencies are the activities or abilities
that a company possesses in order to
outperform another company. These strategies
may include acquiring economic sources at a
lower cost than competitors, more efficient and
effective production, one-of-a-kind goods or
services, and a cost-effective supply chain.
4. Identifying Market Niches.
Market niche identification typically entails
economic analysis and the identification of a
specific consumer demand that is unmet or
where there is insufficient supply to meet the
demand. Other niches may include product
modification, targeting specific demographic
groups, and so on.
5. Monitoring Product Strategies.
It is necessary to conduct a review of the
business level strategies involved in the
operation of an organization. To stay on track, a
review of the acquisition process, equipment,
and business facilities, as well as administrative
costs for a sufficient rate of return, is required.
Reviewing business level strategies allows you
to stay flexible in business and make necessary
changes as they arise.
INNOVATION
Innovation itself is a very broad concept that
can be understood in a variety of ways. One of
the more comprehensive definitions is offered
by Myers and Marquis (1969):
“Innovation is not a single action but a total
process of interrelated sub processes. It is not
just the conception of a new idea, nor the
invention of a new device, nor the development
of a new market. The process is all these things
acting in an integrated fashion.”
It is important to clarify the use of the term e. Trialability – “Can the innovation be tested or
‘new’ in the context of innovation. Rogers and tried on a limited basis?”
Shoemaker (1972) do this eloquently:
2. Consumer.
“It matters little, as far as human behavior is
 Age
concerned, whether or not an idea is
 Gender
‘objectively’ new as measured by the lapse of
time since its first use or discovery . . . If the  Occupation
idea seems new and different to the individual,  Income
it is an innovation.”  Personality
 Reference
Innovation = theoretical conception + technical  Group
invention + commercial exploitation  Perception
Innovation is the management of all the  Education
activities involved in the process of idea  Attitude
generation, technology development,  Culture
manufacturing and marketing of a new (or  Belief
improved) product or manufacturing process or 3. Message.
equipment.
The content of the message affects the adoption
of innovation. The sound, text, fonts, colors,
pictures, white space affect how the message is
perceived.

4. Messenger.

The medium that carries or conveys the

message to the receiver.

 Radio
 Magazine
 Newspaper
 Opinion leader
 Spokesperson
 Fan-boys / fan-girls
 Social Media
 Direct Mail
 Television
 Internet
 Leaflet

New Product Development

Factors influencing consumers’ adoption of an

innovation.

1. Product. 1. Ideas Generation.

a. Complexity – “Is the innovation difficult to a. Formal Approach – a deliberate effort

use, or understand?”
b. Relative Advantage – “Does the innovation
offer significant benefits than existing product,
etc.?”
c. Observability – “Does the innovation offer
observable results?”
d. Compatibility – “Does the innovation fit my
beliefs, lifestyles, values, needs?”
designed to encourage innovative ideas.
Capture innovative ideas from consumers by:
 Conduct survey
 Observing consumer’s behaviours
 Experimentation
b. Informal Generation – accidental sources,
chanced occurrences, emergent ideas.
c. Merchant Approach – “if you can’t generate
it, buy it”

2. Idea Screening.

a. Suitability – “Is the new product idea an

excellent fit with the company” “Does it have
potential to improve the growth of the
company?” “Is it a good fit with the company’s
product portfolio?”

b. Acceptability – “Does the new product idea

meet the expectations of stakeholders?”
“What’s the potential return on investment of
the new product idea?” “What and how much
risks are involved?”
c. Feasibility – “Does the firm has the resources
to develop the new product idea?” “Can the
required resources be mobilised in time?”
3. Concept Development and Testing.
a. In-house testing
b. Off-house testing
Service Firms Types
1. Traditional – Small and weak technology with
undemanding customers and limited managerial
skills.
2. System Firms – Large and sophisticated:
banks, retailers, insurers, airlines, with heavy
dependence on technology and excellent
managerial skills.

4. Business Analysis 3. Knowledge Intensive Firms – All sizes (legal

and accounting, engineering and design,
a. Marketing Audit
advertising, market research and management
 PESTEL Analysis consultancy) with heavy dependence on
 Industry Audit professional employees and close connections
 Consumer Audit : Market Segmentation to customers.
 Competitors Audit Design Focus
 Internal Audit
1. Standardisation of the Service
b. “How much sales are we aiming for?”
“What’s the projected profit?” “How much costs 2. Mix of physical goods and intangible services
would be incurred?” 3. Customer contact (high/low level) in
5. Marketing Strategy. delivering the service

a. Marketing Mix Levels of Service Innovation

 Product 1. Radical
 Price a. Major Innovation – new service driven by
 Place information and computer based technology
 Promotion
b. Start-up Business – new service for existing
6. Product Development. market
– Product goes into “full” development and c. New Services for the Market presently served
production. – new services to customers of an organisation
7. Test Marketing. 2. Incremental
– Product is made available to limited customers a. Service Line Extensions – augmentation of
aimed to test its likely acceptance. existing service line (e.g. new menu items)
8. Commercialization. b. Service Improvements – changes in features
“What challenges or problems could I face of currently offered service
during the commercialisation phase?” c. Style Changes – modest visible changes in
New Service Development appearances

Elements of Service Innovation

1. Capture and use information

  Anticipate customer needs
 Market and competitor trends
 Analyse own performance

2. Management / People Skills

 Respond to opportunities, threats

 Exceed customer expectations

3. Quality Framework

 Standards
 Business planning, processes