Changing Perspectives in International Marketing
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This essay will discuss the pros and cons of disruption in the marketplace and it will then go on to consider the role of moral ideology in driving a more equitable economy. The essay gives a detailed introduction into the topic of disruptive innovation and gives examples of a variety of popular disruptive companies and explores how they behave in the marketplace against their competitors in trying to achieve a successful innovative product or service. It also includes an overview of the four main points of disruptive innovation theory given by Christensen et al (2015).
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Disruption is a term that is used frequently in the business sector. Individuals knew from very early on that to create a better way of life was to create order out of chaos by regularly inventing new products, technologies and processes (Furth, 2018). This new meaning of disruption has resulted in a faster, cheaper and easier way of getting clothing, food, goods and services individuals want and need. Many scholars refer to disruptive innovation as change or new technology that creates a great impact on society which can either be negative or positive (imaginamos.com, 2019).
According to Engelbrecht (2017) the most current in-demand businesses are the ones that were not around five or ten years ago. This shows how much the markets are evolving and at such a fast pace which it is only set to increase rapidly. So much so that around 65% of children who are currently in school will be applying for jobs that do not exist yet when they graduate (Engelbrecht, 2017). With such rapid change businesses need to react quickly to these trends and take advantage of these new opportunities that are presented to them. Many believe that with the new technological disruption will come with many individuals losing their jobs, however, David Roberts a disruptive innovation expert argues that it will create more jobs than losses. He states that technology will assist workers to do their jobs and help them do it better than they ever would have before (Engelbrecht, 2017). The term disruptive innovation was first introduced in a Harvard business review article by Clayton Christensen in 1995 and then revised again in 2015. Christensen et al (2015) describes this term as ‘a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others’.
Disruptive innovators gain a huge advantage in the market place over their competitors as they either create a low-end product that appeals to the consumer who is wanting a existing product but cannot afford it or it is too complex to use, or they create a new product for the consumers who are forgotten about by the mainstream competitors (Gobble, 2016). Disruptive innovations carry a lot of benefits which are centred around being smaller, simpler, cheaper and more convenient (Guttentag & Smith, 2017). Due to the increase in digital technology, the amount of disruptive start up companies has risen rapidly, they are all competing to launch something innovative that has never been seen before and these young businesses tend to be the ones that grow the quickest (Douglas, 2017). When a company creates a disruptive idea it usually faces problems, Moore (1995) explains when a company creates a disruptive idea it usually faces challenges to get their idea accepted by the mass market. In his diagram “inside the tornado of the technology adoption lifecycle” he addresses when a company tries to “cross the chasm” from early market acceptance and gaining support of the consumers comes with problem due to adopting new technologies or ideas. The realisation of a disruptive innovation only starts when the marketplace transfers to adopt a new paradigm in what Moore (1995) calls the “tornado” of adoption. When this tornado effect happens, it is not long before the bulk of potential consumers in the marketplace undergo sudden changes in their behaviours from the past due to the promise from companies to provide them with impressive benefits from the new paradigm. The element of innovation is huge for a disruptive business, but innovation can be challenging to establish and prove. The business also has to prepare for some sort of response from the competition of those who are being disrupted whom are having their business models turned upside down (Douglas, 2017). Examples of digital disruption companies are, Uber who are the world’s biggest taxi firm but do not own any vehicles, Airbnb who are the world’s biggest accommodation provider but do not own any real estate and Facebook who are the worlds biggest media company but do not post any content. These examples showcase how modern technologies can be transformed into new business models (Fostec & Company, 2019). Although Uber is mentioned here, Christensen et al (2015) argues that the company is not entirely disruptive due to it not originating in a new market or low-end foothold. As the company became very popular in a short amount of time it has been described as being superior over the incumbents. It its true to say that uber has followed a disruptive route beginning in the black limousine car market and it is said that Uber is relatively disruptive to this market (Christensen et al, 2015).
Christensen et al (2015) state that there are four main points within the disruptive innovation theory that get neglected when making decisions. Firstly, they state that disruption is a process. It is said that roughly every innovation starts of small whether it is disruptive or not. The disrupters tend to focus more on perfecting their business than getting the product right. When their business starts to prosper, their position from the low end of the market to the mainstream destroys the incumbent’s profitability and market share. This is a long process, and this means that incumbents can get inventive in trying to save their business. This is why disrupters are usually overlooked by incumbents because of how long the disruption process can take (Christensen et al, 2015). For example, Netflix originally was not appealing to blockbusters customers back in 1997 when it first launched. Netflix had an array of different films to purchase from online, but the problem was that delivery would take a few days to arrive and this didn’t appeal to blockbuster customers who could easily pop in store a pick any film that they liked and took it home the same day. However, Netflix began to broaden to a streaming subscription service over the internet offering low price, unlimited amount of watching and at a high quality, which eventually began to appeal to the blockbuster customer which then led to blockbusters failure (Christensen et al, 2015). The second point is, disrupters often build business models that are different from incumbents. An example of this is Apples iPhone, which was launched in 2007 and became an instant innovative success through disruption not of other smart phones but computers as an instant access to the internet. This was achieved by developing a new business model and product improvements. Apple then became the mainstream users first choice of device for using the internet (Christensen et al, 2015).
Thirdly, some disruptive innovations succeed, others don’t. Business tend to think that a company’s success is built on how disruptive they are. Not every disruptive route lead to success and not every successful business has gone down a disruptive route. If every successful business is called a disruption then it will make companies that have risen to the top without being disruptive be seen as the same which can create some instability within the marketplace (Christensen et al, 2015). An example is that both iPhone and Uber who are both successful companies and owe their success to a platform-based model. Uber digitally connects its passangers to the drivers; iPhone connects its app developers to its users. Uber has then focused on expanding its network to make it better than traditional taxi services. However, Apple have went down a disruptive route by building a team of app developers to make the iPhone the new computer (Christensen et al, 2015). The last point is, the mantra “disrupt or be disrupted” can be misleading. Companies need to react if disruption is occulting frequently, however, they should not panic by discounting a small business. They should focus all their efforts in building relationships with consumers by investing in sustainable developments (Christensen et al, 2015).
Businesses are constantly concerned that their biggest rivals are going to disrupt their business models and destroy the industries stability (Strategy Businesses, 2017). Companies are now so fearful of making bad decisions that they fall into strategic stillness and there has become increasing pressure for brands to find their own answers to the challenges that come with digital change (Fostec & Company, 2019). Most businesses fail to make a transformational change at every level of the company, they chose to focus less on radical innovation and more on incremental (Tidd, 1997). However, Trott (2001) states that market research can hinder radical idea development and that it contributes to little or no benefit. Disruptive innovations are usually ousted by large businesses who are comfortable to simply focus on their more profitable market segments, which means these innovations usually only appeal to small firms with little profits (Guttentag & Smith, 2017). These Large firms then struggle to compete with this new disruptive product as by the time they have recognized its success, the product is already cemented into a new market. It is not known how much disruption will take place in the next coming years, but companies have longer time than expected to react to this disruption (Fostec & Company, 2019). For example, it has taken Amazon over a decade to disrupt traditional high street retailing (Strategy Business, 2017). The company have soared in the past decade by offering a wide range and variety of products at the cheaper price than their competitors. The company successfully disrupted Apple, Samsung and Sony of two large categories: tablets and e-readers (Firth, 2018). The brand has also expanded into other sectors of artificial intelligence with the released of their google assistant ‘Alexa’ and their Amazon Echo.
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A further example of the negative aspects of disruptive innovation is explained by the accommodation rental company Airbnb who have been accused of destroying major cities. The company allows landlords to generate high profits but this in turn is leaving local residents facing rising rent costs or losing their long-term rentals all together as landlords know that they will gain more money from short terms lets (Boztas, 2019). According to Harris (2018), the number of tourists using Airbnb in the UK between 2016 and 2017 grew by 81%, this staggering figure has a major impact on hotels as they start to lose out on business due to Airbnb’s set of benefits for the consumer such as: the accommodation might provide a more authentic and unique experience and provide a more homely touch or household benefits such as a kitchen or living area which most hotels are unable to do and Airbnb accommodation is generally cheaper than a hotel (Guttentag & Smith, 2017). These attributes that Airbnb carry result in some hotel being forced to close and a major loss of jobs has resulted in locals having to relocate to find jobs or they can’t afford to stay due to the rise in rent (Burgen, 2018). Although these aspects are negative, it has to be said that Airbnb has some positive attributes, for example: the company has made travelling more accessible for all demographics and it has also brought more business to countries and cities generating a better economy (Strategy & Business, 2017).
Many researchers have stated that disruptive innovation has created a better economy due to the huge business that it has brought for major companies. They also have mentioned that these innovative ideas appear to have appealed to the consumers wanting something different and therefore these companies have grown from strength to strength. However, other research has concluded that disruptive innovated has been a challenge for other companies who have lost out on business due to the struggle of trying to keep up with the fresh new ideas. This also effects the cities who have seen their culture becoming increasingly destroyed by tourism.
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- Douglas, L. 2017. 'There's a reason it's called a disruptive business. It's not easy ‘. The Guardian. Available from: https://www.theguardian.com/small-business-network/2017/may/03/disruptive-business-its-not-easy-challenges-disruptor-ebookadabra-what3words-borrowmydoggy[Accessed 10 January 2020]
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