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IB Syllabus 5.8
IB Syllabus 5.8
The learning outcomes (or assessment objectives) for this section of the IB Business Management syllabus are:
The importance of research and development for a business (AO3)
The importance of developing goods and services that address customers’ unmet needs (of which the customers may or may not be aware) (AO2)
Intellectual property protection; copyrights, patents, trademarks (AO2)
Innovation: incremental and disruptive (AO2)
In-Class Activities
In-Class Activities
Day 1: Meeting Human Needs + Why does R&D matter?
Day 1: Meeting Human Needs + Why does R&D matter?
Think Pair Share - Good and Bad Inventions
What is the best human invention ever?
What is a terrible human invention?
What makes a new product or service good or bad?
Group Discussion - Needs
What do you need?
Do you own anything that you don't need? Why did you buy them then?
Do businesses have a responsibility to meet real human needs rather than manufactured needs for the purposes of earning profits?
There are significant sustainability and ethics concerns when businesses use the planet’s limited resources to develop products that people do not really need. Even worse is when businesses use sophisticated marketing strategies to convince people that they do need them.
Activity: Meeting Local Needs
Identify two businesses in your city or region that are meeting a genuine human need or solving a real problem.
Connect each business to one of the Sustainable Development Goals or an element of the Doughnut Economics model, and/or Maslow's Hierarchy of Needs.
What risks and rewards do you think the two businesses face by meeting human needs in their communities?
Think Pair Share: R&D
How important is research and development in the survival of a company?
Why might some people argue against doing research and development?
Discussion: Intellectual Property Protection
Discuss how ethical considerations may influence intellectual property protection strategies of an organization.
Day 2: Innovation: Incremental and Disruptive
Day 2: Innovation: Incremental and Disruptive
Activity: Incremental and Disruptive Innovation
Find a partner
One partner will find a company doing incremental innovation
The other partner will find a company who did or is doing disruptive innovation
Briefly Explain
The company and product
How and Why the company is doing incremental or disruptive innovation
Outline the process they would need to do in the R&D phase before introducing the product to the market
Did the company do any intellectual copyright protection? How and why?
Day 3: Case Study Practice
Day 3: Case Study Practice
18. Van Nuys Shipping (VN)
Van Nuys Shipping is a major global maritime (ocean-going) shipping company based in Europe. After the last global financial crisis led to a large oversupply of shipping container capacity as demand for both consumer and capital goods dropped considerably, VN barely survived financial collapse through a series of mergers and cost-cutting. With demand now having rebounded strongly due to economic recovery and the demand for shipments of consumer goods from e-commerce booming, VN is now one of the largest firms in the industry. VN holds numerous patents on processes and copyrights on shipping logistics software that enables it to manage its network efficiently.
Despite its strength, VN is struggling to comply quickly with tougher fuel regulations in the shipping industry. Recently, the International Maritime Organization implemented a rule greatly reducing the maximum amount of sulfur allowed in shipping fuels, as sulfur contributes greatly to air pollution. Concerned that switching from the maritime fuel oil used in most of its ships to cleaner-burning diesel fuel would leave the company vulnerable to diesel supply shortages if the fuel industry couldn't meet the shipping industry's new supply needs, VN began installing emissions "scrubbers" on most of its ships to comply with the rule and reduce the pollution coming produced. The installation costs and lost revenue from ships temporarily taken off the seas are projected to cost the company more than $300 million.
VN has a long-term goal to reduce its fuel costs and emissions aggressively, but the best R&D focus is unclear, particularly as the risk of another downturn in international shipping demand must be considered in addition to the large R&D costs. It is considering the formation of a joint venture with another shipping company to develop hydrogen fuel cells that convert hydrogen into emissions-free electricity to run ships. Even if successfully developed though, this would require gradually replacing VN's current ships, which have a typical lifespan of 25 years. An easier way of reducing emissions by up to 20% could be to focus R&D on converting existing ships to burn liquid natural gas, which is less polluting than fuel oil but not nearly as clean as hydrogen power. The company has also spent heavily on researching changes to ship and container designs to make ships more efficient in moving through the water, to enable ships to carry larger loads, and to speed up the process of loading and unloading. Some of these changes, however, depend on upgrades at shipping ports to be able to handle new ships and loading processes. Many port authorities are reluctant to make these upgrades due to a lack of funding and uncertainty over global trade volumes.
Questions
A. Explain one way in which customers' needs may impact R&D at VN. [2]
B. Explain two reasons why VN developing copyrighted software may give it an advantage in its industry. [4]
C. Explain one example of a trademark that VN may hold. [2]
D. Explain an advantage and a disadvantage of VN focusing on installation of scrubbers to meet emissions requirements. [4]
E. Analyze the importance of intellectual property rights for VN. [4]
F. Explain two examples of potential incremental innovation for VN. [4]
G. Analyze one way in which ethical considerations could impact R&D at Van Nuys. [4]
What you should know
By the end of this subtopic, you should be able to:
define the following terms: (AO1)
research and development (R&D)
copyright
patent
trademark
incremental innovation
disruptive innovation
discuss the importance of research and development for a business (AO3)
analyse the importance of developing goods and services that address customers unmet needs (of which the customers may or may not be aware) (AO2)
comment on the importance of intellectual property protection: copyrights, patents and trademarks (AO2)
explain incremental and disruptive innovation (AO2)
https://quizlet.com/pa/836575664/58-research-development-hl-flash-cards/?i=4jrhob&x=1jqt
https://www.gimkit.com/view/65372ff5bdf7ba002b5f29e7
Copyrights
The legal protection for the creators and owners of published works, including those of authors, artists, composers, journalists, musicians, photographers, and film directors.
Disruptive innovation
A type of innovation that refers to any major innovation that introduces a new good or service designed to replace an existing one by radically altering the market.
Development
The section of R&D that is concerned with adapting existing ideas and products in order to commercialize new products in a financially feasible way.
Incremental creativity
A type of innovation that refers to small but continual adjustments or developments to a product or process that already exists.
Innovation
The commercialization of a new idea in order to fulfil existing customer needs or to create an unmet customer wants (desires).
Intellectual property (IP)
This refers to the intangible assets of a business through its creativity and capital expenditure.
Intellectual property protection
Also known as intellectual property rights (IPRs), this refers to the lawful and private ownership of certain creations, inventions, or works, namely copyrights, patents, and trademarks.
Patents
The exclusive right given to the registered owner to commercialize an invention, for a pre-determined length of time.
Prototype
A test (or trial) version of a product to determine whether it addresses the unmet needs of customers, thereby gauging the chances of commercial success.
Research
The section of R&D that is concerned with the creation of new ideas and new products.
Research and development (R&D)
The process of creating new products (goods and services) and processes (how things are down), in order to meet market needs.
Sunrise industry
A rising (growing) industry as there is significant growth potential in the market, so R&D expenditure is justified.
Sunset (declining) industry
A declining industry as there is no or negative growth in the market, so R&D expenditure is minimal or withdrawn.
Trademarks
The sole right to the owner to use a particular sign or symbol that belongs to the organization, such as brand names and business logos.
5.8 Powerpoint
5.8 Powerpoint
5.8 Extra Notes
5.8 Extra Notes
Research & development
Research & development
What is R&D?
Kognity: Research and development (R&D) is the process of bringing new products to market.
InThinking: R&D is the process of creating new products (goods and services) and processes (how things are done), in order to meet market needs. R&D is likely to include the following: Investment (financial funding), Test marketing, Prototypes, and Market research.
In particular, research is concerned with the creation of new ideas and new products. It precedes development. Development is concerned with adapting existing ideas and products in order to commercialise new products in a financially feasible way. Both research and development are needed to increase an organization long-term earning potential.
R&D is likely to need:
Investment (financial funding)
Test marketing
Prototypes
Market research
The importance of research and development for a business (AO3)
The importance of research and development for a business (AO3)
R&D Example: Tesla
Tesla, the world's most valuable carmaker by market value, is known for its zero advertising budget, opting instead to spend money on R&D and relying on word of mouth advertising instead.
Tesla often dominates mass media press coverage as well as social media platforms. Data from Visual Capitalist show that Tesla spends an average of $2,984 on R&D per car sold, which is triple the amount of other traditional carmakers (although marketing is typically a significant cost for these producers).
This has given Tesla and major competitive advantage by having such technologically advanced cars.
R&D is the First Step of the Product Lifecycle
R&D linked to the Ansoff Matrix through product development and diversification
Internal forces driving R&D
Desire to invent new products/services
Need to keep improving quality over time
Want to find cheaper ways to produce goods
Goal of becoming more efficient in operations
Strategy to distinguish their brand from competitors
Intention to open in new markets or business lines
Aim to stay ahead of technological changes
External factors driving R&D
Changes in consumer habits and tastes
Changes in government legislation requiring product upgrades
Innovative products launched by rival firms
Customer demands for more advanced offerings
Advancing technologies creating industry disruptions
Economic conditions creating new opportunities
Advantages of R&D
Lower costs - Research and development in relation to manufacturing processes and materials can lower costs of production for businesses, increasing profits.
Boost productivity - Invent better processes to increase output relative to input.
Product development and patents. New products can result in increased sales revenues through unique selling points (USPs); patents can secure monopoly production and large revenues for a period of time.
Diversification. New products in new markets can help diversify revenue streams, making the business more resilient over time.
Brand image - Businesses that innovate well develop a strong reputation in the market that can increase sales and profits through customer loyalty and price leadership.
Strengthen reputation as innovator - Become known industry-wide as a pioneering organization.
Gain first mover advantage - Be the earliest to introduce new products/services into the market.
Demand premium pricing - Develop higher quality goods that allow charging above-average market prices.
Maintain competitive advantage - Continuously improve offerings to stay ahead of industry rivals long-term.
Outperform rivals - Acquire unique technologies or ideas before competitors through R&D.
Lengthen product life cycles - Design upgrades that retain customer loyalty over time.
Erect barriers to entry - Allocate heavily to R&D to make market participation difficult for potential new entrants.
Disadvantages of R&D
Very expensive - Conducting research requires heavy investment with no guarantee of success.
Risk / High Failure Rate - Businesses can spend large sums of money on salaries and capital costs related to research and development that does not always result in products or services that consumers want. As a result, the money may be wasted.
Lower short-term profits - Research and development is costly so, in the short term until a product is on the market, profits may be reduced. Constant pursuit of new ideas diverts focus from improving current revenue streams.
Competitors may copy innovations - There is a risk others copy successful new products/services before the investor recoups costs.
Time consuming - Developing something new takes a long time but might not make money in the end.
Resources could be better used - The money and people spent on R&D may have brought higher returns if used in different business areas.
Rapid changes make investments risky - Technologies and customer wants shift quickly, so long-term R&D bets don't always pay off.
R&D has high failure rates. For every idea that makes it to market, 20 previous ideas may not have been successful. Even products that are launched may not be successful and may need to be supported with costly marketing campaigns. In short, R&D is expensive and it is unwise to recommend it to businesses facing immediate short-term cash flow problems.
The importance of developing goods and services that address customers’ unmet needs (of which the customers may or may not be aware) (AO2)
The importance of developing goods and services that address customers’ unmet needs (of which the customers may or may not be aware) (AO2)
To meet human needs and solve problems, businesses need to know what those needs and problems are. They can find out about needs and problems through their own market research and the research of scientists. Creative entrepreneurs and their businesses can then combine human, physical and financial resources to improve society and the environment through core business activities and business designs in order to fill gaps in the market.
Gaps in the market / Unmet need
A gap in the market refers to an unmet need or lack of a product/service that customers want. If a business can find and fill this gap, it may be able to earn a profit by selling a product or service for the unmet need to customers.
When businesses conduct market research, they try to identify gaps in what is currently available.
Examples:
A type of product that customers wish existed but no company has created yet
A product or service that addresses a need or issue important to customers that no business offers a solution for
eg. no grocery store nearby
A more affordable or more premium version of existing offerings that leaves room in between
A new way of meeting customer demands that provides a better experience than competitors
An unmet need is a particular issue, desire, function or problem that has not been addressed by society. It could be that a solution has not been found. Or it could be that a solution is not yet affordable.
Spotting a gap in the market gives businesses an opportunity. By developing a new solution that fills the gap, a company can gain an advantage over rivals since they have found an unmet customer need. Filling market gaps can lead to profits if the business correctly identifies what customers truly want but cannot currently get.
Examples of businesses addressing customers' unmet needs, which customers may not have been aware of:
Introducing Orca - the world's first largest direct air capture and storage plant (video)
Climeworks is filling a gap in the market for carbon capture technologies.
Airbnb has become the world’s largest property rentals company, but it does not own any properties
Alibaba.com is the world’s largest B2B (business to business) online platform, but does not have any inventories
Amazon.com transformed the (online) retail industry, putting lots of traditional retailers out of business in the process
Apple launching the iPhone 3, the world’s first mass-market mobile phone without buttons, revolutionised the telecommunications industry
Cloud computing, such as Google Drive and Dropbox, has reduced the demand for computers and laptops with large storage devices
Deliveroo, Uber Eats, Grubhub, and Just Eat are some of the world’s largest food ordering and delivery companies - but none of these own any restaurants
Ford made cars affordable to the masses, with the introduction of its innovative assembly lines back in the early 20th Century
Google Maps and mobile technologies have cut demand for satellite navigation devices
iTunes and Spotify have revolutionised the music industry
McDonald’s, under the leadership of its founder Ray Kroc, put food production in the fast lane by using its innovative automated processes – as Kroc famously claimed, “I put the hamburger on the assembly line”
Netflix is the world’s largest movie house but does not own any cinemas
Skype has changed the way in which many multinational companies conduct meetings (via video conferencing) and recruitment interviews, yet the company does not own any telecommunications infrastructure
Tesla’s innovative designs and products have sparked huge interest in all-electric cars
Uber, the world’s largest taxi operator, does not own any taxis
Wikipedia, the world's largest online encyclopaedia and hosted by the Wikimedia Foundation, published its first article in 2000 and quickly caused the downfall of Encyclopaedia Britannica
Zoom, MS Teams and Google Meet have revolutionised how local and multinational companies hold meetings.
Maslow's Hierarchy of Needs
Popular innovations that can cause issues:
Airbnb Challenges (legal and ethical):
Prague joins calls for Europe-wide restrictions on Airbnb to combat overtourism
Adam Ruins Everything - Why Your Airbnb May Be ILLEGAL
Addicting Technologies like Instagram, Facebook, and TikTok
Intellectual property protection; copyrights, patents, trademarks (AO2)
Intellectual property protection; copyrights, patents, trademarks (AO2)
Intellectual property (IP)
Intellectual property (IP) refers to creations of the mind such as inventions, artistic works or brand names. Intellectual property is an intangible asset. The legal protections of these creations come in different forms including trademarks, patents and copyright.
Example
a musician can copyright their music or trademark their name; a pharmaceutical company can patent a new medicine.
Different types of intellectual property protection
Copyright
Copyrights give the registered owner the legal rights to creative pieces of work. Copyrights cover the work of artists, authors, musicians, conductors, playwrights (scriptwriters), directors, and contributors to any other creative medium, including your essays and art made in school. It give the copyright holder of the intellectual property the exclusive rights to the commercial use of the product.
Copywrite is often identified with the '©' symbol. It is common to also include the name(s) of the copyright owner(s) and the year of the work’s creation. Copyrights enable the owner to prevent competitors from using their published works.
Copyrights typically have a limited duration, which varies depending on the country or region as well as the nature of the work, after which time the works generally enter the public domain.
Copyrights can generate royalties. Royalties are fees paid for the right to use copyrighted material. For example, musicians can be paid royalties if someone wants to use a song in a movie or advertisement.
Example: Music is copyright protected
Mickey’s Copyright Adventure: Early Disney Creation Will Soon Be Public Property.
The version of the iconic character from “Steamboat Willie” will enter the public domain in 2024.
Patents
A patent is a licence or grant that gives an inventor the exclusive right to make, use or sell a product for a specific period of time.
Patents protect innovation. If a business files for a patent and is approved by a government patent office, then it has ownership over that invention for a certain number of years. Only that company can produce the product for that time, giving it a monopoly.
Patents help ensure that an innovative business can earn revenues to recover the large sums of money spent on research and development. Without patent protection, competitors may immediately copy the innovation and earn revenues without incurring any research and development costs.
Samsung, for example, has over 200 000 patents worldwide.
Patent Requires:
original (no one else can have developed the product in the past)
viable (the product needs to have a use)
Covid vaccines have been the focus of a number of patent disputes.
Apple has a patent on its iPhone Packaging?! (YouTube Short)
Genki Sushi's conveyor belt Shinkansen Bullet Train
(conveyor belt sushi was patented)
Trademarks
A trademark is a symbol, word or phrase that is recognisable and associated with the business.
Examples of trademarks include brand names or logos that can help customers identify a product from its competitors.
Coca Cola
McDonalds
Case Study 1: Registered trademark or product name?
Some registered brand names have become so well-known and successful that the registered trademark name and the name of the product have become interchangeable or synonymous. These brands are known as generic trademarks or genericized trademarks. Some examples of such registered trademarks, commonly misused as the product name include:
Astroturf - A brand name owned by the Monsanto Company. The generic product is called artificial turf.
Band-Aid - A widely used term across America, Canada, Australia and New Zealand for an adhesive bandage. It is actually a registered trademark owned by Johnson & Johnson.
Biro - The product is disposable ballpoint pens but the brand name belongs to Biro is actually owned by French company Société Bic.
Bubble Wrap - The brand is owned by the Sealed Air Corporation. Its product has become synonymous with air cushioned protective wrapping.
Coke - A registered trademark of the Coca-Cola Company. The product is actually called cola.
Duck Tape - A registered brand name of the German company The Henkel Group, which first produced duct tape products in 1978. The Duck Tape brand was launched in 1980.
Frisbee - Technically called a flying disc, the Frisbee brand is owned by American toy company Wham-O.
Hula Hoop - Another trademark from Wham-O for the generic product called a toy hoop.
Jacuzzi - The registered brand name, owned by the company also called Jacuzzi, for what is generically known as a hot tub or whirlpool bath.
Jeep - This trademark is commonly used to describe any SUV (sports utility vehicle) even though the brand is owned by Chrysler.
Jet Ski - This product is actually known as a personal watercraft, as Jet Ski is owned by Japanese multinational company Kawasaki.
Memory Stick - This brand is owned by Sony, the Japanese consumer electronics manufacturer. The generic product name is rather long-winded: a flash memory storage device.
Plasticine - This putty-like modelling material is actually a trademark of British toy makers Flair Leisure Products. The generic name if modelling clay.
Post-it - The sticky note or adhesive paper note brand is owned by 3M, the American multinational conglomerate corporation.
Pot Noodle - The instant noodle brand is owned by Unilever, the British multinational consumer goods company.
Rollerblade - This is the trademark of Italian company, Nordica. For all other manufacturers, they are legally required to refer to product as inline skates.
Sellotape - This brand of clear adhesive tape is owned by Henkel, a German chemical and consumer goods company.
Vaseline - Like Pot Noodle, this brand of petroleum jelly is also owned by Unilever.
Velcro - A globally known generic term, but which is a brand owned by the Velcro Company. The generic product name is hook and loop fasteners!
Top 50 fast food brands in the US
Case Study 2 - Lindt vs Lidl
In September 2022, Switzerland’s highest court ruled that Lindt deserved protection from the likes of Lidl, a leading German discount supermarket multinational. Lindt is a premium chocolate producer. Its chocolate bunny is sold throughout the world and is one of the Swiss company’s best selling products.
The court ruling meant that Lidl had to stop selling its own version of the rabbit-shaped chocolates and to destroy all its remaining inventory of the product. Lindt was awarded a trademark on its chocolate bunny in 2001. Trademark legislation exists to prevent copycat products such as the chocolate rabbits made by Lidl.
Innovation: incremental and disruptive (AO2)
Innovation: incremental and disruptive (AO2)
Innovation
Innovation refers to the concept of creating or developing new ideas and turning them into something commercially viable.
Innovation can either take the form of a steady process (incremental innovation)
or
it can be a radical change that completely disrupts a market (disruptive innovation).
Types of Innovation:
Product innovation
Developing and improving existing products. For example, food manufacturers have been developing new products, flavours and tastes to cater for vegetarian and vegan markets.
Positioning innovation
When a product is marketed to a new target audience.
For example, AirBnB was originally positioned for the conference market before moving into tourism and holiday accommodation.
Process innovation
Developing new methods of production or product delivery. The development of artificial intelligence has led to the development of sophisticated, automated robotics within factories, reducing the costs and increasing the efficiency of operations for the businesses that have adopted them.
Paradigm innovation
A change that fundamentally alters an entire industry.
For example, Netflix revolutionised the home entertainment industry with its streaming service.
Apple
Tesla
Amazon
Alphabet
Microsoft
Moderna
Samsung
Huawei
BYD Company
Siemens
Source: Visual Capitalist
According to the BCG's annual rankings, Apple has held the title of Most Innovative Company in the world every year since 2005 with the exception of 2019.
Incremental innovation
occurs through a series of small, minor adaptations or changes that happen steadily over a period of years.
Incremental innovation (sometimes referred to as adaptive innovation) involves gradually adjusting, developing, and improving a product or process that already exists.
It involves small upgrades or improvements made to a firm's goods or services at regular intervals, such as new product features.
Much lower risk of failure and allows businesses to retain customers and maintain competitive position over time.
Examples:
New yearly IPhone models
BMW’s Mini cars
Canon’s EOS digital SDLR cameras
Microsoft's software upgrades
Samsung’s Notebook laptops
Sony’s Bravia 8K HDR televisions
Modern bullet trains
Tokyo to Osaka trip first took 6 hours and 40 minutes by train in 1964, then shortened to 4 hours, then 2 hours and 25 minutes, and in 2027 will be 1 hour and 7 minutes.
Disruptive Innovation
involves the creation of entirely new industries or markets or creating entirely new products and/or processes that performs better and at a lower cost than current products.
This can displace market leaders and transform the industry as a whole.
Tends to be radical and big, compared to incremental and gradual.
Create hug competitive advantages for an organization, including first-mover advantage
Examples:
Tesla, for example, revoluntionized the car industry that was dominated by General Motors, Ford, and Toyota.
Amazon, which launched as an online bookstore back in the mid-1990s.
Smartphones made single function devices like cameras, hand-help computers, and digital media players (mp3 players, iPods) irrelevant
Disruptive Innovation Examples
Email (1969), which totally changed the way in which people and businesses communicate.
Amazon.com (founded in 1994), which changed the way consumers around the world bought books.
Toyota’s hybrid Prius car (1997), which sold over 1 million units within the first ten years of being launched.
Tesla (founded in 2003), which revolutionized the electric cars industry, selling its one millionth car in March 2020.
Spotify (founded in 2006), which changed the way people buy and listen to music, with its online music streaming business.
Apple’s iPhone (introduced in 2007), which revolutionized the mobile phone industry and people's daily lifestyles - or, as Steve Jobs put it, "a dent in the universe".
ChatGPT, the revolutionary artificial intelligence interface, reached 1 million registered users within 5 days of its launch in late 2022.
Dyson redefining the market for home appliances with premium high performance consumer products
Google redefining the advertising industry
LinkedIn replacing the use of physical newspapers for headhunters and recruiters
Netflix redefining how individuals watch television and movies
Amazon revolutionizing the retail sector
Uber revolutionizing the taxi industry
Zoom redefining education in the online arena, especially during the COVID-19 era.
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