Table of Contents INTRODUCTION...........................................................................................................................1 MAIN BODY...................................................................................................................................1 Innovation theory........................................................................................................................1 Development of Tesla using innovative theory..........................................................................3 Critical analysis of diffusion theory with regard to historical and future growth.......................5 Application of theory in relation to historical and future development......................................6 CONCLUSION................................................................................................................................7 REFERENCES................................................................................................................................9 Online........................................................................................................................................10
INTRODUCTION Innovation is a process of converting an idea or invention into products or services which create value for customers who are willing to pay. It helps company in satisfying the needs and demands of consumers. Innovation can be evolutionary which are continuous in nature or revolutionary which can be discontinuous or disruptive in existence. Organisation that wants to invent innovative products take greater risks. Essay would include innovative theories which would explain the historical development of Tesla. Further, it will include one or more ways in which product can be developed in the forthcoming time and it will also include how theories will be helpful in future growth of Tesla. MAIN BODY Innovation theory Innovation means bringing new ideas or products in market. To achieve this invention has many new concept where most important theory for business development is Diffusion of innovation. It is one of the oldest theories which help an organisation to understand and explain how a purchaser adopts and engages with new goods, technologies and techniques overtime. Enterprises use this theory when launching new goods or services or introducing existing product in new market(Frow and et.al., 2015). This theory explains how goods or services can be accepted by five different categories of consumers and how to do a business with these types of people. It also determines the success of product. Further, it includes characteristics of people adopting this theory. They can be innovator which includes a small group of workers or entrepreneurs exploring new ideas or technologies. These people are the first to try product and are willing to produce innovative and creative products. They are also known as risk bearers and trend setters. Subsequently, product will become famous and sales will increase which would result in higher profits of organisation. Early adapters are also included in this theory. They are those people who like to explore new things and have an ability to bear risk(Mac., 2015). There group is larger than innovators and also, they have a keen knowledge about the product. This knowledge makes it easy for them to advertise the product by using word of mouth advertising which helps in increasing sale of goods or services. 1
Early majority consists of people who love trends but wait for a while for purchasing any item. The product will be purchased in plenty by people of this particular group and it will help company to increase sale of goods which will become popular by time andit will assist in increasing demand of item. Late majority has a follows a buying criteria which includes that they will only buy good after many people have purchased it and has become an old or unpopular product. People of these group lack confidence in taking risk and they want to be absolutely certain about situation and trynot making a bad buy. People also in this group have low self- esteem. Laggards group do not like innovation. They will buy particular product only if they have no alternatives left(Prokop and Stejskal, 2017)They will only purchase the product after reading reviews, statistics and complete relevant data related to goods or services. Adoption of diffusion theory is the most important when looking at new good development and also, it can be useful while launching existing product in new market. Another theory which is most important is Schumpter S curve theory which was introduced by Schumpeter who was a most influential thinker and this theory is one of the famous concepts of innovation and includes curve, the technology life cycle and this theory is used in determining performance in regard to time and effort. Also, assists in determining the level of maturity of industry/product and while evaluating the product or an industry, its importance to see is this coming on s-curve or is not coming on s-curve. Therefore, to check the all possibility of risk and downfall(Wu, Lii, and Wang, 2014). Thistheory also contain some stages which are needed to be targeted by company.Ferment stageis first stage of s-curve theory, period where new product s are introduced in market and also known as beginning stage of commodity. Therefore, company check market value of product and according to requirement of the product research and development process take place for good and all the changes in the commodity are made according to the requirement of the market. This stage is also known as start up. Take-off stagecomes after ferment stage. Also, known as growth stage. In this stage product start to develop and earn good amount of profit. Demand for product also increases and cover the full market acceptance. This is stage in which demand ofproduct increases and Therefore, there is rapid growth in the production. For example: attake-off stage Tesla 2
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company introduced carsforcustomer to meet needs anddemand of customer. In this phase company earn profit at its best. Maturity stageis third stage of s-curve analysis, this stage is also known as competitive stage . In this stage there are many competitors of product and price discrimination of product is also there. (Diffusion of Innovation Theory2017.)This is phase where company is at no profit and no loss situation, in this period company need to bring changes in there product. Otherwise, company can decline. In this stage many innovations take place to increase its sales. For example:If Tesla is not involved in bringing innovative products in market its competitors will take its place in environment. Discontinuity stageis the last stage of s-curve, in this level product continues to decline and has to face tough time due to less innovation and more competition in the market. This stage is also known as decline stage(Nguyen and et.al., 2014). Totally new product is being started by the company and new s-curve process begins. For example : Tesla tend to bring new and creative products in market which consist of cars, batteries, roadster, lorry etc. They are stages of s-curve theory which was given by Schumpeter to know different levels of product. Development of Tesla using innovative theory Tesla is one of the leading motor car company headquartered in California. Tesla began its services by selling sports car which were designed particularly for early adopters which was followed by main stream and mass market vehicles. It was the first organisation to use lithium ion battery cells and first production in EV with a range more than 320 km per charge. Tesla has a vision to change auto mobile industry by creating more innovative and creative pieces that fit together. This process was called as âcomplex coordinationâ. It follows different marketing, production and sales strategies from its competitors(Nguyen and et.al., 2014). Tesla has undertaken various innovative theories for the development of its product. One of the most important innovative theories chosen by company was diffusion of innovation. This theory has helped Tesla in development of products like cars, lorry, roadsters and batteries. Company has a strategy which only focuses on innovators who want to try new ideas and strategy as their interests in innovation give them a status of out of a local circle of peers and also, they tend to have different social relationship. Tesla knows that innovators are also guarded by huge financial resources and also have ability to understand complex structure of new products. Innovators helped Tesla in increasing 3
growth of their cars as they were ready to bear risk involved in buying new products like cars sold by company and also, they accept setback which is involved in new product. After targeting innovators and gaining their trust, Tesla then focused on early adapters. Company knows early adopters are group of people who are consists of majority of local people They have the greatest degree of opinion which was beneficial for company as they tend to receive important feedbacks on products offered by them(Zeyen,Beckmann,and Akhavan, 2014). Local people have most influence on items of enterprise during evaluation stage of innovation decision process. Also, company focused on these adopters as they have great exposure to mass media like radio, TV, hoardings, magazines, etc. and have greater ability to accept changes. These people tend to have high social influence, increased economic status, and are more innovation accepting people than others. People were organised into hierarchy within society and have a great influence of people below and above them. After, targeting early adopters group of people Tesla than focused on early majority group of individual which has played an important role in diffusion process. Buyerstry to interact with peers who are which are linked to them before making any decision regarding buying of car.Purchaser of this group wait and see progress of product and how many people arebuying new cars of Tesla. And then make purchasing decision. Their decision is totally based on quality, features and price of product. They will also compare price and features of car with competitorâs product and after that, they will make any buying decision. They also choose the products of company based on its popularity as after focusing on innovators and early adopters, Tesla became famous and it was easy for them to target early majority. For increasing sales of its product like cars Tesla than focus on targeting people who belongs to late majority group. As people of this group are conscience regarding innovation and new creation of products, they will only buy product after a huge number of individual have bought it(van de Wetering, Mikalef, and Pateli, 2017). Weight system norms of enterprise have helped company to convince the majority of person. Individuals of this group also make purchase decision if there is pressure from peers and so, Tesla has also adopted policy to impress peers through advertising, public relations and sales promotion activities. Company last focuses on laggards which includes people who tend to adopt innovation after every one has adopted it as they are suspicious of innovation and change. This theory has helped Tesla in increasing its growth which resulted in higher profitability for company. 4
company does not use this channel of communication, it would not be able to transfer innovation from one place to another. Communication can be done through advertising like using social media platform, television, radio or word of mouth act. Theory also includes company to know about length of time taken by people to adopt innovation. So if this theory was not there, organisation will not be able to understand time taken by consumers for adoption of change. Diffusion theory consists of social system which includes inter related networks which come together to achieve common goals. On the contrary, if this theory is not used by Tesla, it would not be able to know about social requirements of people relating to culture, religion, etc(Frow and et.al., 2015). Tesla brings successful products in the market only by managing its team properly. There are many factors which have contributed to the success of organisation like determining market needs. Tesla has researchers who are able to determine the needs and demands of consumers. Many techniques are used by organisation to know the need of buyers like customer surveys, product sample marketing and polling. However, if Tesla does not know needs of consumers, it would create a negative impact on the minds of people(Lind, 2017). Company involves in selling quality products to consumers which has also helped in development of organisation. Products with good features are desired by people and they are always engaged in buying products with high features. In contrary, if enterprise does not sell quality items, it would affect the reputation of company. Effective promotional strategies are also followed by Tesla to increase the sale of its cars. They choose the right media to target consumers and leaving a powerful impact on them. Nevertheless, if company does not use promotion as a technique to grow, it will lead to marketing failure(Bieraugel, 2015). Tesla is also involved in creating and developing products which offer different features from competitorâs commodity. It makes a clear market position which is being derived from competitorâs analysis and differentiation. However, if enterprise is not involved in differentiating items,itmakesconsumerdecisionmorearbitrary.Companyfocusesonusingupdated technology to create and deliver products according to the market and consumer needs. On the contrary, if organisation is using old technology, it will result in wastage of time, money and resources. Managing knowledge is also one of most important tasks in the success of enterprise. Market research and other data including information related to products are highly guarded by 6
managers as if not done so, releasing of data can lead to downfall of company(Prokop and Stejskal, 2017). These factors also have a social impact on the environment as products manufactured by company are created keeping in mind items which are environment friendly, non-hazardous in nature, do not harm social, cultural and ethicalsentiments of people, use of quality materials and are related to trends followed by people. These factors contribute to the growth and development of Tesla cars. Application of theory in relation to historical and future development Tesla has being involved in bringing innovative products which includes cars which are produce in accordance with market needs and demands of consumer. Diffusion of innovation theory has a huge contribution in the historical development of company. Key focus of company was on early adopters which also acts as opinion leaders. They are the group of people consisting of huge financial resources and are also able to bear risk related to purchase of new product or service(Wu,Lii, and Wang,2015). Early adopters include majority of people who are young and have high social status, sound financial condition, well-educated and more knowledge about commodities offered by the enterprise. They have an ability to buy creative products like cars offered by Tesla. Communicating to them was also easy for organisation as these people have access to all types of media whether it is mass media, print media or social media. They are also known as trend setters as products purchased by them become trend in market. Tesla provides them with great quality and differentiated product which have unique features and techniques and has lead to organisational success of company(Acemoglu, Mostagir, M. and Ozdaglar, 2014). Tesla for its future development has to focus on those consumers who are looking for new and innovative products. Focus of company should be early and late majority or laggards. These groups consist of majority of people who can contribute to growth of organisation. Unique promotional techniques should be adopted by company to gain interests of citizenry involved in these groups. People in these groups have a tendency to purchase products only when they have no alternative left or after seeing purchase of many citizens. Enterprise should focus on changing this attitude of common man which can include methods like offering discounts to consumers, product benefits, applying sales promotional scheme, public relations by organising workshops, exhibitions, conducting seminars etc. Tesla should involve in removing consciousness of people relating to new products or items, they 7
should be involved in building confidence of group. Consideration of these factors can help company in future growth and success(Nguyen and et.al., 2014). CONCLUSION Essay summarises innovation theory and concepts relating to it. Theories which are being explained in essay are Diffusion of innovation and Schumpter S curve theory. Basic concepts of theory have been explained in essay. Diffusion of innovation theory includes five type of customers like innovators, early adopters, early majority, late majority and laggards which needs to be targeted. Further it includes development of Tesla using diffusion theory of innovation and its contribution in historical growth of company. It consists of historical development of company(Frow and et.al., 2015.). Essay also consists of critical analysis of theory used by Tesla and factors which influence success and growth of organisation also leaving impact on society. Factors consists of effective promotional techniques, product benefits, clear differentiation, building networks and knowledge management Further it includes application of theory related to historical and future development. 8
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Prokop, V. and Stejskal, J., 2017. Different approaches to managing innovation activities: An analysis of strong, moderate, and modest innovators.Engineering Economics.28(1). pp.47-55. van de Wetering, R., Mikalef, P. and Pateli, A., 2017. Managing firmsâ innovation capabilities through strategically aligning combinative IT and dynamic capabilities. Wu, L.W., Lii, Y.S. and Wang, C.Y., 2015. Managing innovation through co-production in interfirm partnering.Journal of Business Research.68(11). pp.2248-2253. Zeyen, A., Beckmann, M. and Akhavan, R., 2014. Social entrepreneurship business models: Managinginnovationforsocialandeconomicvaluecreation. InManagementperspektiven fĂŒr die Zivilgesellschaft des 21. Jahrhunderts(pp. 107- 132). Springer Gabler, Wiesbaden. Online DiffusionofInnovationTheory2017.[ONLINE]Availablethrough: <http://sphweb.bumc.bu.edu/otlt/MPH-Modules/SB/BehavioralChangeTheories/ BehavioralChangeTheories4.html> 10