THE FACTORS THAT INFLUENCE THE DISTRIBUTION OF PROFIT FROM INNOVATION IS;
First - the industry evolution, in the early stages of an industry, a variety of products solution maybe introduced with no clear leader. And once the market chooses the winning set of product characteristics, less design heterogeneity is possible and the competition becomes more prices based. The early phase often amounts to standard competition (David and Greenstein, 1990).
The second factor is the appropriability- this hinges mainly on the nature of the technology and the accessible legal mechanism to protect an innovator. It clearly deals with the firm’s strategy and organization as a means to appropriate value from innovation (winter, 2006).
The third is the complementarity, for many electronic products, widespread acceptance depends on the availability of related goods that enable or enhance their functionality. For instance, computers need software, and the DVD players need pre-recorded movies. The innovating firms must decide whether to produce such complement internally or to rely on others to do so (teece, 1986). Also in an outsourced supply chain, a lead firm coordinates a partner network to maximize the market value of its innovation. The lead firm is responsible for maximizing the profit that divides with its partners and suppliers.
Lastly in dynamic, the highly networked industry such as the information technology and electronics, these are additional factors that come into play. each innovation at the core of a new product offering, is likely to require access to and coordination with other innovations to provide to users. the technology at the heart of electronic products have a high rate of change, so the entry barrier are always short lived and management must be capable of recognizing and responding to the changing market characteristics. (teece et al., 1997).
The difference between the ipods and the notebook pcs is:
• Software does not figure in apple’s bills of materials, the ipods software was developed in house, which spares the apple from paying license. • The input devices vary by product- the note book computer has the keyboard and the track pad or other pointing devices. While the ipod is the scroll wheel.
• Another difference is the ipods limited purpose microprocessor are relatively inexpensive as a share of cost (9%) compared to the notebooks general processor chipset (27%). • The ipod storage system is a hard disk drive, accounts for half the of the companies cost compared to just 12% in the notebook for both the hard disk and DVD drives.
The problems a country will face if they only concentrate on the lower part of the value chain is that: In most developing countries people are made to work under difficult conditions such as less pay, more hours and no pension. This is mainly due to the governments of particular countries concentrating only on the lower part of the value chain. For example in the hierarchy value chain, the (shell oil company) in Nigeria is a good example because due to the nature and the size of the company, the government focus on the subsidiaries, placing high tax, shortage of staff payments and always pressing them to support the community around them due to the swamps and the destruction the spilt oil is doing. all this problems are being faced by the subsidiaries while the head quarters is where the main business is ran and the Nigerian government are not focused on them.
Another example is the market- if the government will focus on the lower part of the value chain the suppliers will tend to face a high cost of imports, high taxes and revenue generation which can lead a very low number of suppliers because it will be to expensive for a lot of people to be in the business. It will also affect the customers because the VATs will be very high which will lead to a very high cost of living, and the price of products are going to be high average class people will find...
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