Innovation Case

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Technische Universität Berlin Faculty of Economics and Management Chair for Technology and Innovationmanagement

Case 1: From Imitation to Innovation: Zongshen Industrial Gr. By Willy Shih & Nancy Hua Dai

Case Seminar on Strategic Innovation Management Summer Term 2011

Name: Simon Delcourt Marc Esslinger Dennis Fakner

Matriculation Number 337929 337772 331557

#Words: 399 Question 1: Originally, Zongshen sold engines for motorcycles which were mainly knock-offs Japanese motorcycle engines. As the Chinese government lowered its restrictions Zongshen also began to sell actual motorcycles. Since the produced motorcycles were low quality copies of the Japanese ones, most of the Chinese manufacturers were also able to make them. The lack of product differentiation encouraged Zongshen to follow a low price strategy. However, after Zuo Zongshen the chairman and CEO of the company read the “Blue Ocean Strategy”, he figured out the company should not only be selling low margin products on “red ocean” markets. Zuo Zongshen therefore made the decision to stop the launching of Japanese-like low quality motorcycles and to develop a whole new motorcycle, thus following the path of differentiation. Imitation Imitation products are quite often Me-Too products, meaning that the producing company is trying to copy a specific good which is already on the market. In this case, the Chinese motorcycle manufacturers are trying to do so with Japanese motorcycles. For imitators it is quite essential that the production costs drop to a minimum so that they can sell their products following a low price strategy. They usually have low R&D expenditures due to specific measures such as reverse engineering. Furthermore they have an advantage over innovators: information about the market structure and the customer needs is already available. Since the market need for a product is established when an imitator launches his lines, it is easier for the latter to sell its product since...
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