Lack of defined corporate strategy
1) Strategic management decisions are very important to formulate and plan before investing in a business. It is of no doubt that George is an inventor and he has skills in the technical department but running a business requires management skills (Gamble & Thompson, 2014). Before starting a business a business plan should be designed in details. Some of the major factors that George should have considered before deciding to manufacture the products are as follows:
Lack of defined corporate strategy: the company did not have a clear idea of the corporate strategies, like the mission, vision and objective (short-term) of the organisation. The product and the price should have been planned considering the manufacturing cost as well as the cost of production (Gamble & Thompson, 2014).
Customers: he should have listed the potential customers with the help of market segmentation. This would give him a clear idea of communication as it would have been focused on the target market of the product. George should have planned target market which would help him pitch the idea better like the organisation that bought the company did.
Analysis of the macro and micro business environment: the operations of any business organisation is heavily impacted by the factors of the internal and external business environments, it is essential to understand the strengths and weakness of the internal environment as well as determine the opportunities and threats of the external factors. George did not analyze the internal business environment; he was excited about the idea of the business. He did not check the completion as well as scope in the market. He should also have conducted a value chain analysis of the product as well this would have given him the opportunity to understand and analyze the strengths that he has (Wheelen et al., 2017).
Feasibility test: George should have undertaken feasibility test of the product on various aspects of business like finance, operations, administration, marketing etc. The most important feasibility test should have been done on finance, he should have been clear regarding the cost of manufacture, price of the item, sources of revenue. As the product is an item that is not to be sold in retail he should have been planned in a defined manner (Hill et al., 2014).
Market research is something that George did not consider while incorporation, this would have given him an idea regarding several aspects of the product as well as the competition that is present in the market (Christensen, 2013).
Customers and segmentation
2) First of all as a consultant the idea of intellectual property should be made clear to the client, there are a number of ways in which one can get the innovations licensed. Licensing technology is the process by which two parties comes into a contractual arrangement with each other regarding the licenser’s intellectual property. In this agreement the process by which this property would be sold or made available to the third party is documented. Remuneration and compensation is also discussed in advance between the two parties involved (Intellectual Property Office, 2018).
There is three payment option for George here it can be form of a lump-sum royalty, a running royalty (based on volume of production), or a combination of both. The risks associated with this is that technology keep on upgrading and innovating if the innovation is not processed by the person who has invented the product in such cases the demand for the innovation gets precedence. In this case the George should analyze the risk and understand the process before getting in to any kind of contract with a third party. Moreover licensing technology will reduce the control over the technology. Another important thing that George should consider that copyright is one from of registering intellectual property which is recognized internationally, on the other hand trademarks and patents are based on the home country and the legal protection of the rights vary from one country to another (Helpman,1992).
George has opportunity in licensing the products with non-US companies as well, but he should get good legal support and advice before taking any decision (Intellectual Property Office, 2018)
3.a) Disruptive technology is said to be one that overpowers the existing market and disrupts the balance by creating an own market and value for the product. According to Christensen (2013), disruptive technology can have unexpected outcome as the technology has not been used previously there will not be any secondary proof to determine the impact and the rate of impact (positive or negative) on the business. The initial stages of this technology can be predicted by the later stages cannot hence it has considerable amount of risk associated with it. Disruptive technology normally develops in the course of time (Christensen, 2013).
In the book The Innovator’s Dilemma, Christensen has discussed three simple reasons why middle and senior level managers are reluctant to adopt disruptive technologies. Firstly, products that are manufacture using disruptive technology are simpler and cheaper in nature; this might seem to be a good thing but it also should be considered form the management perspective, as these products also do not have a large profit margin which is a negative aspect for the management. One of the major objectives of business organisation is to improve the rate of profit and investing in this technology would lead to the opposite. Secondly, since the technology is new there are chances that there is hardly any demand for the product itself therefore disruptive technologies are usually first commercialized in emerging or insignificant markets as the product after being launch may create demand and motivation among the target customers to buy. And lastly, it has been observed that most profitable customers of leading business organisations usually don’t want or in fact can’t use, products based on disruptive technologies. In general, a disruptive technology is primarily embraced by the least profitable customers in a market (Christensen, 2013).
Analysis of the macro and micro business environment
All the above points that have been discussed are true in this case as well hence the disruptive technology has been dismissed by the management of many organisations (Christensen, 2013).
3.b)The difference is in the scale of production and the range of products in the product range that are similar to that of the integrated mills, these minimills have proven to be more profitable due to the low scale of production. The labour-hour per ton of steel is considerably low in a minimill, the average cost of product is almost 15 percent lower than that of an integrated mill. There has been a gradual takeover of the minimills in the North American markets for rods, bars, and structural beams. In 1965 the market of these minimills were nothing and then it had risen to 19 percent in 1975 then 32 percent in 1985 gradually it had taken 40 percent in 1995 (Christensen, 2013). This is a remarkable rise in the span of time that is discussed. Having noticed this shift in the market behavior major US steel producers do not deem them to be a competition as the Managers of the integrated steel companies are conservative, backward-looking, risk-averse, and incompetent. They think that instead of using the disruptive technology of the minimills it will be convenient and also reputable to invest in developing their own efficiency. The markets that these minimills served were also not attractive for the integrated companies (Christensen, 2013).
In this case Salvation Technology’s is not a big company and hence it has the place to take risk and also cater to the markets that large organisations are not attracted to. The market that was targeted by Salvation Technology is the school and college laboratories which need hydrogen in order to carry out the students’ experiments. But the profit that this strategy has incurred may lead to a threat when the organisation expands its business and grow in the scale of operation (Christensen, 2013).
Reference List:
Christensen, C. (2013). The innovator’s dilemma: when new technologies cause great firms to fail. Harvard Business Review Press.
Gamble, J., & Thompson, A. A. (2014). Essentials of strategic management. Irwin Mcgraw-Hill.
Helpman, E. (1992). Innovation, imitation, and intellectual property rights (No. w4081). National Bureau of Economic Research.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Intellectual Property Office (2018). Intellectual Property Rights in the USA. [online] gov.uk. Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/456368/IP_rights_in_USA.pdf [Accessed 26 Mar. 2018].
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management and business policy. pearson.
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