Enterpreneurship and innovation Essay

I.         Introduction

In business, there are always a group of companies consuming the largest share of market due to their unmatched quality. What most of us might also realize is that after these companies achieve leadership for certain amount of time; they usually stay there –despite the ups and downs- for generations. Microsoft in computer technology, Coke in the soda industry, and Nike in the sport shoes industry are examples of these companies. The situation reveals that these winning companies have found a secret recipe to please their customers and have found a “formula” to attract customers that make them to experience a sustainable growth in the long term.

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As business concerns run toward the increasing revenues and profits, the discussions of sustainable development become increasingly significant. This is because it becomes the basic needs that support a corporation to grow.

In addition, the emerging technologies that support and lessen how business is conducted, also help the business to perform sustainable development. However, since the development involves many aspects in the organization and sometimes also requires the business to search for new markets, the complexity of achieving the sustainable development rises.

Due to the difficulties, continual invention and innovation have become integral parts in order to achieve the sustainable development. In this situation, it is found that companies race towards finding and implementing new technologies to provide them with economically efficient and environmentally safe business operations. However, innovation does not merely relate to technological issues. In fact, it also includes creative thinking and breakthroughs in marketing strategy that leads to newer processes that are much better than the old ones.

In this situation, therefore, invention and innovation are two important factors that can help a business to perform a sustainable development in many ways. Therefore, to encourage the invention, a company needs to have the soul of corporate entrepreneurship, which means that the company’s performance improves through innovation.

Concerning the issue, this paper will discuss innovation strategy for Mozzo (www.mozzo.co.uk), a British-origin company that focus in providing quality coffee for coffee lovers in the UK. Prior to the discussion, there will be elaboration on theories of innovation and how they relate to Mozzo. In addition, this paper will also elaborate some suggestion for Mozzo managements in developing innovation strategy for the company that intends to serve new markets ion West Midlands.

 

II.        Aims and Objectives

1.                  This paper will discuss about various theories of innovation and relate them to Mozzo practices. The discussion of theories of innovation is essential to provide insight to managements of Mozzo what factors should be taken into account when developing and implementing innovation strategy.

2.                  This research will employ non-participant observation method by using secondary data peer-reviewed journals, books, magazines and online materials, in order to implement the theoretical framework obtained from the sources to assess current position of Mozzo in the coffee retail industry

3.                  In addition, this paper will also elaborate some suggestion for Mozzo managements in developing innovation

 

III.      Research Question

In the fierce competition, business needs to understand market situation that tells them current state of the marketplace. The market situation basically composes of kinds of products or services that are available in the market, market potential, prospective location, competitors, current competition etc.

The marketing knowledge as described above has become the breath of any corporations’ movement since it help them to design and deliver products and services that are exactly fit the customers’ demands and requirements. This situation greatly helps business that intends to strengthen their existence in a market and plans to expand into new markets to explore new revenue well.

Under such circumstances, the research statements for this paper are therefore”…as retail coffee industry endlessly spawn new players and start-ups, will the implementation of innovation theory help Mozzo to strengthen their existence in the industry they serve? “
IV.      Literature Review: Theories of Innovation

Innovation has become an important part in business due to its countless benefits that it provides to the business. Merton Flemings, a director of the Lemelson MIT program, says that innovation can be considered as focused applications of the human mind to the world, which in turn will result in the creation of practical methods. In addition to Merton Flemings, there are many scholars that enrich the theories of innovation. They include Utterback, Schumpeter, and Drucker.

In his article titled Innovation and Corporate Strategy, which was published in the International Journal of Technology Management, James M. Utterback (1986), who is known as a theorist of innovation problems, said that “The innovation research theory matter is highly dispersed. In was not adopted by any of the science fields. (…) There is no sufficient data set, for building innovation prediction model”.

In addition, Joseph Schumpeter (1934) provided more descriptive explanation regarding innovation when he expressed his idea in his article, the theory of Economic Development, that the motor of the development is the innovation although he did not explicitly defined the meaning of innovation.

In addition, there is also well-known scholar like Peter F. Drucker (1974) who started giving detailed explanation regarding the theory of innovation. At that time, he defined innovation as “process the process of equipping in new, improved capabilities or increased utility.”

The explanation or definition from Drucker corrects the misperception that considers innovation as a science or technology. In fact, he considered innovation to be any things that add value to a process or an object in which the value is measurable by assessing its environmental impact.

Therefore, Drucker (1974) put emphasis that an innovation has to be a market oriented; however, if the innovation turns out to be product oriented, it should have a characteristic of creating a “technology miracle” without intentionally providing the required benefits.

Buying the ideas of Peter Drucker (1974) in terms of innovation, a corporation should realize that business has two main tasks: marketing and innovation. He says that the two tasks are complementary. This is because marketing element focuses on satisfying customers’ current needs while innovation aims at fulfilling consumers’ future needs.

In this situation, Drucker (1974) urged corporations to innovate endlessly since the inability to create constant innovation will cause the enterprises to easily put aside in the market since customers always demand new and fresh ideas that make them feel better and help them to perform an activity easier.

Since the innovation perfectly helps companies to sustain a long term growth, it is often that innovation is used as a strategic factor of the competition. As described in the earlier section, we witness several companies that seem to have “secret formula” that put them to obtain large market share in the respective market. In turn out that one of their secret formula is the ability to innovate, combined with the company’s identity and image, causing these companies to stay ‘undefeated’ in the long term.

 

V.        Business Analysis of Mezzo

Any organizations especially one dealing with business environment should face a undulating performance due to both internal and external factors. Under such circumstances, it is useful to carry out an analysis that takes into account not only the company’s internal factors, but also external factors such as competitiveness of competitors’ products, the change in consumers’ taste, and current industry situation, to name a few.

 

V.1      Porter’s Generic Strategies

Concerning the business analysis of Mezzo, this paper employs Porter’s Generic Strategies that see a company’s strength from two points of views -cost advantage and differentiation- and apply these strengths in either broad or narrow scope. The results of these combinations provide three generic strategies that Michael Porter says it as “Porter’s Generic Strategies”. They are cost leadership, differentiation, and focus.

 

V.1.1   Cost Leadership Strategies

This generic strategy simply drives a corporation to produce the least-cost product for a given level of quality. By employing this strategy, the firm can sell its product at regular industry price to generate more profit that its rival does or below the average industry prices in order to sell it at large volume while gaining higher market share.

Concerning the Mozzo case, I see that in order to gain benefits and bring the cost down, Mozzo also employs cost leadership strategies but it is not so heavy. It means Mozzo does not try to bring the quality below the average industry offers in order to bring the cost down. In fact, Mozzo still deliver best product they afford. In their website, Mozzo says that they use coffee that is fair-trade origin. Mozzo also use 100% Organic, 100% Fairtrade, and 100% Arabica.

 

Figure 1          Porter’s Generic Strategies

Source: Porter, Michael. (1998). Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press

 

The fact shows that Mozzo conducts cost leadership through avoiding unnecessary costs. In their website, Mozzo explains that they use bike or walk instead of using cars when they deliver the coffee into locations that can be done in a short time.

In addition to cost saving, encouraging the environmentally-saved process also give Mozzo a great benefits since the price of coffee bean is likely to rise due to weaker supply. In this situation, coffee retailers are to increase the price. If a retailer has already high cost structure, the increase price would cut down sales volume.

In short, at current situation, I see that Mozzo has a good position in terms of cost leadership. However, Mozzo should aware of the existence of multinational coffee retailers like Starbucks that have a strong brand worldwide. There are some observers think of the rising coffee price would not have a detrimental effect on Mozzo.

Unfortunately, the rising price of coffee will not have significant affect toward Mozzo competitors, Starbucks, business because the company’s strategic advantage does not include ‘cheap prices’. Starbucks has been making their way into the world despite having prices way above average coffee prices. Another threat from Starbuck is the fact that the company has become 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.

 

V.1.2   Differentiation Strategies

Differentiation strategies are strategies, which are created to attain a competitive advantage by producing unique goods or services. These strategies are useful when a corporation faces consumers that have various preferences and/or requirements. The uniqueness of the product may help the corporation to undergo several initiatives as following:

Put a premium price on their products and/or
§                       Increase unit sales and/or

§                       Gain buyer loyalty to their brands.

(Porter, 1998)

 

In addition, a company that is carrying a successful differentiation allows them to attain following internal strengths (Porter, 1998):

Access to well-known scientific breakthroughs
Skillful and creative product development team
Powerful sales team that is able to convey the perceived strengths of a company’s product to consumers
The most sustainable results of differentiation strategies are the expensive and difficult for rivals to follow. There are many kinds of differentiation factors that a company might put in their products; they include taste, engineering design and performance, quality manufacture, and image and reputation. To achieve these goals, organizations could incorporate features that enhance buyer satisfaction in non-economic or intangible ways or compete on the basis of capabilities (rather than the product itself).

Concerning the differentiation strategies that Mozzo conduct, I see the decision of Mozzo to set up direct, interactive, and mutually benefits relationships with coffee farmers is one example of differentiation strategies that Mozzo’s rivals will find it difficult to copy. The reason to build such relationship is to deliver a transparent and fair practice while enhancing the quality of life of Mozzo’s coffee farmers. The company hopes by setting up the relationship, we can continue to bring you Fairtrade organic coffee beans in a manner that reflects the global community, in which Mozzo all live, work and play (Mozzo, 2006a).

However, Mozzo should keep their eyes open when competing in retail coffee business; this is due to multinational players, like Starbucks are ready to take over the market anytime. The rival also has uniqueness in their products; 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. ‘The Starbucks Experience’ consists of three factors:

§  Coffees, Beverages, and innovations

The core value of the Starbucks’ business is to offer coffee lovers with a selection of coffees from around the world. Besides coffees, Starbucks also offers a variety of hand-crafted beverages baked pastries, sandwiches and salads, and also blended coffees with various flavors.

Music
Music has been an essential part of the Starbucks experience since the company was established. The company sampled any types of music, including jazz, folksongs and world music in order to provide customers with the best type of music that fits the Starbucks Experience design.

People
Starbucks has over 100,000 employees. They are all trained in the hospitality business and prepared to play their role in delivering the Starbucks experience. The company is proud regarding its employees’ knowledge regarding their products, and their commitment to customer service.

(‘Company Profile’, 2006)

 

Realizing the situation, therefore, Mozzo should create completely different marketing approach. if Mozzo follo the way Starbucks differentiate their products, it may degrade the value of Mozzo since customers will perceive Mozzo to be follower of Starbukcs instead of having their own identity.

In this situation, I think that the use of Mozzo Carts, which based on Auto Rickshaw FE Delivery Van, strengthen the uniqueness of Mozzo strategies in selling their products since their rivals, including Starbucks, will find difficult to copy due to the vehicle is no longer in production.

 

Figure 2          Mozzo® Carts

Source: Mozzo. (2006b). Mozzo Carts. Retrieved June 9, 2006 from http://www.mozzo.co.uk/mozzo-carts/

 

V.1.3   Focus Strategies

Focus strategies exhibit the way a company concentrate on a narrow segment to achieve either cost advantage or differentiation (Porter, 1998). It means that the company who conduct this kind of strategy will be a marketing-oriented person.

By definition, marketing oriented as condition where customers’ wants and needs drive all firms’ strategic decisions. In this manner, the firms are automatically fostering the commitment to create customer value (‘Marketing Orientation’, 2005).

The underlying reasons behind the development of marketing oriented concepts are the facts that the more a company understands their consumers’ needs, the more likely the company has happy customers who will come back to buy in the future or at least the customers will recommend their friends to buy the same product from the firms.

In order to understand the customers’ needs, usually, the marketing-oriented firms get through three important steps as following: researching customer wants, collecting information from the research as tools to develop new or improved products, finally monitoring customer satisfaction and taking appropriate adjustment once it is found any defect in the products or systems (‘Marketing Orientation’ 2005).

In case of Mozzo, I see that the company’ focus lies on the fact that Mozzo only offer high quality coffee, only Arabica. Mozzo also use Coffee Masters™, which become the source of their coffee beans from certified Fairtrade coffee farmers. This focus enables Mozzo to built direct and interactive relationships with coffee farmers that mutually benefit both parties.

 

V.2      Expansion Plans into West Midlands region

Mozzo’ decision to expand into West Midlands areas can be viewed as strategic options for Mozzo in order to strengthen the company’s presence in the coffee market while generating new revenue wells. Under such circumstances, there are several issues that Mozzo should take as following:

 

V.2.1   Product Development and Marketing Strategy

Mozzo can develop a marketing strategy that enables Mozzo to penetrate cultural barriers and increase profitability at the same time. Nevertheless, in order to maintain the current growth level, management needs to maintain the presence of innovative ideas in developing Mozzo’s coffee products by incorporating local preferences and taste, for instances.

The company might have tremendous reputation as a well-known and quality coffee procider in some areas in UK like in the East Sussex and Hampshire. However, expanding to new markets in West Midlands means the needs to adapt to local preferences. For instance, if coffee lovers in West Midlands are price sensitive, Mozzo will find difficulty entering the market if still relies on current pricing scheme. Therefore, Mozzo should creatively find new ways that coffee lovers in West Midlands can accept Mozzo products.

There is another opportunity for Mozzo in segmenting their products. The company might focus on targeting youth segment since they are likely to enjoy having cups of coffee while talking with their friends. In addition, its rival, Starbucks does not target children and youth as target markets. Therefore, in order to position Mozzo as a coffee retailer for the youth market, the company can carry out sponsorship of youth events for some time in order to increase the brand awareness.

 

V.2.2   Human resource Strategy

The hospitality services are experiencing considerable degradation in recent years. Thus, it is important for Mozzo to maintain the quality of its services despite its already good state of management. Due to the cultural changes, customers’ disappointment today is most likely to go not notice and these customers simply decide that they would not come to the place anymore. Therefore, I believe that there are considerable reasons that from time to time, that Mozzo to perform the creative and sustainable hospitality techniques to win new market in West Midlands.

In addition, it is found that five managements of Mozzo have various interests and three of them (Gary, Steve and Matt) also run their own business. The situation should add benefits to Mozzo. The following is the diverse hobbies of Mozzo’s managements:

§  Grant (Director) – sport, reading, traveling, skiing, politics and society, geography à opportunity to  provide sporting community that use Mozzo products

§  Gary – music, family time, DJing, organising music and entertainment parties à create public relation initiatives that relate to music and entertainment

§  Steve (Grant’s Father) – gardening, sport, skiing, travel, birds à develop sport-related promotion

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

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

 

VI.      Conclusion

As business concerns run toward the increasing revenues and profits, the discussions of sustainable development become increasingly significant. This is because it becomes the basic needs that support a corporation to grow.

As described in the earlier section, we witness several companies that seem to have “secret formula” that put them to obtain large market share in the respective market. In turn out that one of their secret formula is the ability to innovate, combined with the company’s identity and image, causing these companies to stay ‘undefeated’ in the long term.

Innovation has become an important part in business due to its countless benefits that it provides to the business. In this paper, I have provided some theories of innovation including Utterback, Schumpeter, and Drucker.

In the end, we discuss Mozzo’s strategy to expand into West Midlands. The strategy is important to enable Mozzo to strengthen the company’s presence in the coffee market while generating new revenue wells. The suggestion composes of two factors: product development and marketing strategy and human resource strategy.

Bibliography

 

Arthur A. Thompson Jr. (1998). Strategic Management: Concepts and Cases, University of Alabama

Company Profile. (2006). Starbucks Coffee Company. Retrieved June 10, 2006 from http://www.starbucks.com/aboutus/search

Drucker Peter F. (1974). Management. Tasks, Responsibilities, Practices. Harper & Row

Ferreira, Joao. (2002). Corporate Entrepreneurship: a Strategic and Structural Perspective. International Council of Small Business

GNU. (2005). Innovation Definition : Comparative assessment. Brussels

Invention and Innovation for Sustainable Development. (2003). Lemelson MIT Program [online]. Available at: www.wipo.int/sme/en/documents/pdf/ip_innovation_development.pdf

J. M. Utterback (1986 ), Innovation and Corporate Strategy, International Journal of Technology Management, vol. 1

Mozzo. (2006a). About Mozzo. Retrieved June 9, 2006 from http://www.mozzo.co.uk/about/default.asp

Mozzo. (2006b). Mozzo Carts. Retrieved June 9, 2006 from http://www.mozzo.co.uk/mozzo-carts/

Mozzo. (2006c). Our Coffee. Retrieved June 8, 2006 from http://www.mozzo.co.uk/our-coffee/default.asp

Porter, Michael. (1998). Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press

Salminen, Vesa. Yassine, Ali. 2000. ‘Strategic Management of Complexity’. NordDesign. Copenhagen.

Schumpeter, J. (1934), Theory of Economic Development, Harvard University Press, Cambridge, Massachusetts.

Tushman Michael L. Anderson, Philip. (1996). Managing Strategic Innovation and Change. New York: Oxford University Press

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