By
Boniface Okanga, Nekeshia Danvers and Ruga Rugyiya
London, 5 April 2026
Some businesses often become excited on hearing that “today’s winners are tomorrow’s losers and today’s losers are tomorrow’s winners”. It provides hope, but it is not automatic that today’s winners are tomorrow’s losers. Some winners often work hard and continue working hard for their success. Hence, today’s winners can even turn out to be tomorrow’s winners again and again. Through constant innovation ecosystem scanning and response to the unfolding trends, today’s winners often remain tomorrow’s winners and even the next years’ winners. Constant response to the constantly changing dynamics enables high performing enterprises defy the widely stated assumption that given the constantly changing global markets, “today’s winners are tomorrows’ losers and that today’s losers are tomorrow’s winners.” Just as Toyota has demonstrated since August 1937, while Unilever has also done the same since September 1929, today’s winners can even remain winners and winners forever and forever. For as long as they are responsive to the evolving ecosystem trends, today’s winners can even turn out to be the best winners of tomorrow. Since 28 June 1926, Mercedes-Benz has so far done exactly that by remaining on top of the global premier car-making game from one decade to the other. Unfortunately, when the world is sleeping and doing nothing, several businesses also often sleep along with the world. Sometimes it is often not because they are not aware that they are sleeping. Instead because they are sleeping because they feel satisfied and contented with the existing level of profitability and market performance. As they do that, an avalanche of novel business opportunities just like threats often continue to unfold to offer an avalanche of not easily detectable novel innovation ideas. Just like the opportunities that offer new opportunities, threats that risk destroying a business often insinuate new solutions. It is in exploring the plausibility of new solutions that can be adopted that the novel innovation ideas are detected.
While discerning how to deal with the devastating effects of the Second World War, the likes of General Electric, Boeing and Lockheed Corporation did not take long to realize that their aircraft engine making proficiency could be of significant value to the US airforce. Likewise, when the other businesses closed and ducked from the Second World War bullets and booms, Pfizer-the modern day inventor of the disruptive Covid-19 vaccine did not take long before realizing that the multitudes of the wounded Allied forces would require some form of unique antibiotics in order to immediately heal and resume the war or even survive death. To respond to such changing political trends, Pfizer invented penicillin as a new antibiotic with the best efficacy for wound healing. To respond to the surge in penicillin demand, Pfizer also invented deep-tank fermentation as the new production method for enhancing the penicillin’s mass production. Some alert, insightful and open-minded businesses are often able to easily spot and respond to even not the easily detectable opportunities, while also diffusing threats. In contrast, the other less inquisitive businesses often continue sleeping with the world.
The end result is the disrupted business performance or even failures. It is such dissonance that provoked this seminal paper to explicate the importance of constant analysis, tracking and response to opportunities just like threats presented by the constantly changing political, economic, social, technological, ecological and legal ecosystem trends of the contemporary world. Everything in the world including even the creation of man or the world itself in the Bible’s book of Genesis has emerged from the diagnosis of the external business ecosystem. Even if the internal business product imaginations and modifications play more instrumental roles towards innovation idea generation, the secret is often still the external business diagnosis. In the external business diagnosis, there are multitudes of businesses making mistakes of ignoring important gaps while others are doing very well to offer novel innovation ideas that can be extracted. When Tesla reached the idea saturation point with limited direction that the new Electric Vehicles’ (EVs) innovation could undertake, Tesla had to lift its intellectual property restrictions so as to allow new competitors and even imitators to come in to explore new electric vehicle concepts from the existing Tesla models.
Through aggressive competition actions and behaviours of firms in the new electric vehicle making industry, Tesla believed that it would be able to easily identify some novel innovation ideas that it could use to further improve its electric vehicle concepts. Such an approach has been useful for improving EVs’ diffusion as a substitute of gasoline vehicles, while Tesla also learns new ideas of making its EVs better. Instead of thinking and acting like the rest of the world, inventors and innovators often think upside down. Inventors and innovators are unpredictable. Instead of restricting competition, Tesla saw the encouragement of competition as part of the idea generation platforms. Some of the most disruptive business concepts of today are the results of the yesterday’s businesses’ inquisitiveness to diagnose and try different alternatives for responding to the unfolding ecosystem dynamics. Even if it is just a small business, constant analysis of the business ecosystem leverages a business’ success. Quests to improve and influence a business’ success never come from heaven. Instead they are easily discernible from the everyday trends unfolding in the business’ political, economic and social ecosystems. If the ideas on the potential opportunities are not arising from the changes in technological trends, it can instead emanate from the changes in the ecological or legal trends. Hence, constant analysis and response to different forms of the changing macro-trends is essential for leveraging a business’ effective market performance.
In new venture creation and development, or in the quest to explore new products/services to create, scanning the innovation ecosystem is part of the process of searching for new innovation ideas from the unfolding megatrends. It is a tool that informs inventors and innovators of the prevailing trends as well as the challenges posed by such trends to create problems. It is such problems that often offer the opportunities for businesses to create new products or services that solve the diagnosed problems. Southwest Airlines, which emerged as one of the disruptors in the global low-cost airline industry, was created as a result of intense analysis of the global airline industry. Scanning the global airline industry revealed an increasing population, a growing number of travellers, and the quests of travellers to travel to more remote areas for tourism or other forms of entertainment. As household incomes increased to boost disposable incomes, the innovation ecosystem trends also revealed that most of the travellers would opt to fly rather than travel by roads to more remote locations.
Combined with the evaluation of what the legacy airlines were doing to respond to such changing dynamics, it was the poor response of the legacy airlines to these dynamics that prompted the introduction of Southwest Airlines. Southwest Airlines did not just respond to the consumers’ need for cheaper airlines, but also to the demand for simpler airlines’ charging just for flight costs for those flying to remote internal locations in the United States. In effect, innovation ecosystem scanning is essential for businesses or innovators to identify and understand the behaviours of all the players in the context of the conditions and circumstances unfolding in the innovation ecosystem. This improves the business executives’ ability to discern how the identified disruptive behaviours can be countered to bolster a firm’s overall effective performance. As Dacia, a Romanian-based car maker, struggled to respond to the competition dynamics posed by the likes of Toyota, BMW and Suzuki in the Eastern European market, Russia’s invasion of Ukraine instigated international sanctions that prevented Russia’s cash in-and-out flows. The war also disrupted the global supply chain systems, while also halting the operations of most multinational car makers like Toyota, Volvo, BMW, Ford, Daimler and Jaguar-Land Rover, which had to withdraw from Russia in compliance with sanctions. The prevention of cash in-and-out flows from Russia implies it has even become difficult for automakers to continue dealing with their Russian business partners. This has disrupted supply chains, while also causing shortages of inputs such as semiconductors, electric car battery cells and steel from Russia.
Trends in Russia changed. And Dacia responded to the turbulence in Russia by continuing to operate in a market which is its largest, generating 86.7% to 92.2% of its sales and 10.2% of Dacia’s global revenues. However, its Dacia-Lada brands still experienced a 2.7% revenue decline from 2021, when it sold 350,714 units (a 2.1% increase from 2020 to $10.6 billion in 2022), as AvtoVAZ and Renault Russia sales declined by 1.1% to 8.9 billion euros (Zamfir, 2022). Russia-Ukraine war also instigated energy shortages that caused inflation and the rise of commodity prices across the globe. With Dacia relying on labour-intensive car manufacturing processes to lower costs and bolster its cost competitiveness, this could instigate the need for wage increases, as well as increases in the prices of other supplies. In turn, these may escalate its operational costs to undermine its cost competitiveness. Though getting supplies into Russia is also impossible, Dacia has adopted a strategy of clinging to Russia as its largest market, hoping that things will improve soon. Such a strategy is accompanied by the intensification of marketing and promotion to increase its brand awareness across Europe, India, Asia-Pacific, Africa and South America, in order to generate more sales that can offset the declining performance in Russia (Dacia, 2022). Whether the innovation venture is doing well or not, constant scanning of the innovation ecosystem is a prerequisite for innovators to stay alert and respond to the unfolding disruptive trends. Even in the situation where the new venture is already established and doing well, practices from the historical innovation ventures like BMW, Toyota, Unilever, Nestlé, McDonald’s and Ford, which have existed since the first industrial revolution, suggest that continuous scanning of the innovation ecosystem is part of the proactive strategies for a business to continuously identify and respond to the unfolding new market dynamics and remain sustainable.
Depending on the market in which a business operates, opportunities refer to the emergence of trends or changes that enable a business to achieve its strategic goals and objectives. Threats are trends that disrupt the capabilities of the business to achieve its strategic goals and objectives. Such strategic goals and objectives often encompass sales maximisation, profit maximisation, market share expansion, countering competition, growth through expansions in other market segments, and diversification into new industries. In the analysis of the innovation ecosystem, opportunities can arise from the problems that need new products/services, or threats from new disruptors that can be converted into new opportunities by acquiring such new disruptors to create new capabilities. Opportunities can also emerge from threats posed by new disruptive products/services, which can be converted into opportunities by exploring new innovation insights that such new rival products offer. It is through the evaluation of such new insights that the business is able to acquire new innovation ideas that it can pursue to disrupt even the disruptors. As businesses seek to achieve these strategic goals and objectives, the enabling or even the disenabling business conditions are often evident in the unfolding political, economic, social, technological, ecological or legal trends.
In the constantly changing modern business environments, business opportunities may easily emerge from the changes in government policies.
Tesla
Tesla, which is involved in the manufacturing of electric cars (EVs), is actually the creation of stringent environmental laws being increasingly adopted by several governments around the world. Though half-baked, the technology for EV development was already present and just waiting for perfection from some EV concepts that had failed prior to the creation of Tesla. It was the increasing advocacy by several world governments for businesses to adopt environmentally friendly operations that offered insights to the likes of Elon Musk that EVs would be the disruptive sustainable way of the future. Combined with the stronger support offered by the Bush Administration at the time for the development of alternative sources of clean energy, this fuelled Tesla’s EV innovation successes when the George W. Bush administration gave Tesla $465 million in 2008 as a government loan. Though Tesla paid the loan nine years before the due date, the loan was part of the initiatives that George W. Bush created after the Iraq War to avoid what he called “dependence on Arab oil.” To develop alternative sources of energy, the U.S. Department of Energy created the Advanced Technology Vehicle Manufacturing Program (ATVMP), which was approved by Congress and signed by George W. Bush to accelerate the development of energy-efficient cars. Under the programme, Tesla was loaned $465 million, while Ford took $5.9 billion, Fisker Automotive $529 million, and Nissan $1.4 billion. Besides the changes in government policies providing funding for certain innovation activities, changes in government policies can also encourage outsourcing of processes for the accomplishment of different government socio-economic activities to the private sector. This unlocks enormous opportunities for businesses operating in the designated industries.
Quite often, outsourcing or public-private partnerships are encouraged in critical areas such as the provision of healthcare and education services. Outsourcing tends to be more undertaken in areas such as the development of key infrastructures like roads and schools, the construction of hospitals or the installation of telecommunication technologies. In a bid to improve the living conditions and standards of the UK population, the British government has of late introduced some large-scale government socio-economic projects that aim to modernise and strengthen the United Kingdom’s infrastructure to respond to the changing needs and preferences of the UK society. Such projects which are being managed by the Infrastructure and Projects Authority (IPA) include the Home Office’s Biometrics Programme, the Ministry of Defence’s Queen Elizabeth Programme for the delivery of two new government aircraft carriers for the military, and the Department of Transport’s High-Speed Rail Programme. Since the UK government has the financial resources, but not the skills and technology, the successful completion of these government projects would require some use of public-private partnerships to bring in important players from the private sector. It is not only public-private partnerships that offer opportunities but also the opportunities for bidding for such projects by the businesses that are able to execute the project with limited intervention from the government. These highlight some of the opportunities that can arise from the changes in political policies introduced by the political actors in the innovation ecosystem. The capabilities of different businesses that gain from such opportunities may still depend on the extent to which the adopted government policies encourage free bidding and the awarding of contracts. Free bidding and the awarding of contracts facilitate the extent to which only the competent businesses with the requisite capabilities are selected to deliver the desired services.
In South Africa, the legislation on preferential procurement requires that mainly, the emerging black businesses be prioritised in the award of government tenders. That implies such requirements unlock enormous business opportunities for mainly black businesses. If business opportunities are not emanating from such changes in government policies, changes in the political systems that recognise the value of businesses may also offer the other enormous opportunities. In such initiatives, a government may designate certain businesses to gain from either tax reductions or soft loans. Such trends are reflected in government pronouncements that may significantly reduce taxes for certain businesses, as mainly small and medium-sized businesses receive tax waivers to allow them to grow prior to being subjected to heavy taxation.
Regarding soft loans, a government can announce a policy through which certain sectors are designated, where businesses investing in such areas are promoted by granting them access to certain soft loans. While recognising that small and medium-sized businesses contribute 53% of Gross Domestic Product (GDP) and 40% of tax revenue, the Chinese government, in 2022, introduced measures and an economic support package for small businesses. The package was aimed to enable businesses operating in the service sector, as well as the small and medium-sized businesses recover from the devastating economic effects of the Covid-19 pandemic.
To achieve that, the Chinese government, through its National Development and Reform Commission (NDRC), introduced a document titled: “Several Policies on Promoting the Recovery and Development of Service Industries in Difficulty.” The policy aimed to provide fiscal and logistical support to service businesses, as well as small and medium-sized businesses, affected in sectors like retail, catering, hotels, transport, and tours and travel. Since it was the service businesses that were affected due to the ban on gatherings, the Chinese government extended tax exemptions, reductions, and other financial and soft loan support to enable the businesses restart their operations.
Almost every government introduced such opportunities. However, others did not offer any enormous support. This suggests scanning the innovation ecosystem can enable innovators identify what could be the unfavourable or favourable unfolding government policies. It was also the change in the political factors that offered opportunities to William Armstrong, the inventor of hydroelectric power, with the opportunity to engage in other innovations. Through the engagement in the other ventures, he acquired resources and technological capabilities that improved the development of the hydroelectric power concept. When the Crimean War broke out in October 1853 to February 1856, Armstrong shifted his attention from developing and improving his hydroelectric power concept to the development of arms and warships.
These new products sold extensively as Armstrong was engaged by the British government to participate in the development and supply of the required light firearms. This enabled Armstrong to generate enormous funds that he later used for improving his hydroelectric power innovation concept, just as a retirement job at his Cragside House in Northumberland. Quite often, supportive government economic programmes emerge if the government aims to encourage investment in a particular sector of the economy like automotive manufacturing, IT, agriculture and industrialisation. Yet, as countries in the economic bloc liberalise their systems and remove all the stringent regulations, it tends to encourage businesses to easily globalise by expanding to such new markets. This leverages the overall growth and profitability of the businesses in that regional economic bloc. How such macroenvironmental analysis influences a firm’s innovation strategies to bolster its effective market performance is reflected in Starbucks’ case. Starbucks, a business which was established in the 1970s, represents the cases of businesses that have managed to evaluate and innovatively respond to the dynamic changes in their innovation ecosystems. From the time that it was established up to the present day, Starbucks has utilized its ecosystem analysis to thrive as one of the most disruptive operators in the global food and beverage manufacturing industry.
Starbucks
Starbucks is a Seattle-based American coffeehouse chain multinational corporation that emerged in 1971 to revolutionise the entire global coffee processing and drinks industry by creating and delivering a series of disruptive premium coffee products like caramel macchiato, instant coffee, espresso, caffe Americano, frappuccino, caffe latte and caffe mocha. But as Starbucks integrates such coffee products with premium quality pastries, chocolate and snacks to further leverage its competitiveness, its rivals like Dunkin’s, McDonald’s and Nestlé have also been doing the same to emerge with some of the disadvantaging premium brands like Nespresso, Nesquik and Smarties.
Combined with the other variables instigating Starbucks’ market volatility, Starbucks must not only constantly analyse its innovation ecosystem, but also engage in constant innovation and re-innovation as part of the strategies of responding to the unfolding disruptive dynamics in its innovation ecosystem. As far as Starbucks’ innovation ecosystem is concerned, political changes in China and India that instigated stronger liberalisation, deregulation and usage of attractive incentives for foreign direct investments have created opportunities for Starbucks to move outside the Americas to tap the larger Asian market of enormous coffee and tea lovers. Such global opportunities are further catalysed by the emergence of the North American Free Trade Agreement that eased doing business in the Americas and the European Union that eliminated trade barriers across Europe. Despite that, Starbucks still operates in a complexly changing political economy of coffee production and market. As coffee production is considered a major foreign exchange earner for most of the developing countries like Colombia, Brazil, Ethiopia, Rwanda and Uganda, Starbucks has often been entangled in complex political waves that accuse foreign coffee buyers and processors like Starbucks of undercharging and degrading coffee grades to exploit farmers.
The International Coffee Organisation often operates to mitigate such undesirable political waves by bringing governments, farmers and international coffee buyers together on different information exchange and sharing platforms. But coffee production in some of the Arabica coffee production areas like Ethiopia and Colombia have often still been plunged into political conflicts and fighting that disrupt coffee production.
The Tigray conflict of 2020 disrupted the production of the usually cherished Arabica coffee production in Ethiopia. It became a political factor that affects coffee production to cause shortages and surging price increments. The conflict also turned into an economic variable that integrated with the Covid-19 devastating economic effects. These affected coffee production to cause shortages and price escalations around the world. Besides Starbucks closing over 2,000 stores during the Covid-19 pandemic, the impacts of such disruptions on the increment of Starbucks’ coffee input costs were further worsened by the recent Russia-Ukraine war.
Russia-Ukraine war instigated energy shortages to escalate the increment of all prices of commodities and costs of doing business across the globe. Starbucks attempted to deal with such complex price increments. However, it also had to deal with the emerging new competitive forces in which the likes of Dunkin’, McDonald’s, Nestlé and several other local and global actors in the coffee production and making market are seeking to reshape the industry terrain to their favour. Besides a surge in the global population from 6.9 billion in 2010 to 8 billion in 2022 that creates more coffee market, such complex political and economic changes are also accompanied by social dynamics in which most of the coffee brand consumers in the United States, Europe and Australia are increasingly preferring non-dairy milk products and drinks.
In this post-Covid-19 lockdown era, there is also an increasing global population’s preference for outdoor relaxation and leisure. Technologically, Starbucks is faced with enormous technological changes reflecting the emergence of blockchain, Internet of Things and big data technologies, as well as different coffee ingredients’ making and mixing biotechnologies. These new innovative technologies are transforming and revolutionising the way coffee-making businesses are run. Such technological changes are accompanied by the increasing ecological concerns among the global population for all forms of businesses to accomplish their activities in a way that significantly minimises the damage to the global ecological environment.
Combined with complex environmental legislation like the European Community Action Programme on the Environment that emerged in the EU and the likes of the Kyoto Protocol on Climate Change and International Environmental Treaties on Biodiversity that are applicable across the globe, it is a nexus of such changes that Starbucks will have to innovatively deal with if it is to sustainably thrive into the future. As Starbucks strives to respond to the unfolding trends, it has adopted more innovative strategies that have leveraged its sustainable competitive advantage as well as improved branding, segmentation, targeting and positioning.
Despite enormous competition pressure from the likes of Dunkin’, McDonald’s, Nestlé and several other local and global actors in the coffee market that are seeking to reshape the industry terrain to their favour, Starbucks has not adopted cost minimisation as a competitive strategy. Instead, it tends to focus on a significant level of differentiation to distinguish its coffee brands from those of rivals. In such quests, Starbucks spends enormously on costly R&D to engage in radical novel coffee brand innovations. These innovative endeavours have enabled Starbucks to emerge with more disruptive coffee, cocoa and non-dairy milk products that its rivals had never imagined. It has created and delivered a series of disruptive low-calorie and sugar-free products that its rivals like McCafé, Lavazza, Caffè Coffee-Day, McDonald’s and Dunkin’s have failed to replicate with such success.
Starbucks consistently upholds its premium quality and superior taste commitment. It invented and delivered a range of disruptive non-dairy milk products like soya milk, coconut milk, almond milk and oat milk. Starbucks has also developed and delivered different pastries, snacks, fruit juices, sodas and energy drinks, but it is good quality coffee and cocoa with great and unique pleasant tastes that Starbucks is well known for. For all these, Starbucks does not consider cost and pricing, but spends enormously on research and innovation to create premium quality coffee brands for premium pricing that customers cannot resist paying the highest prices or even more. While focusing on differentiation and not cost competitiveness, Starbucks has adopted automation. Not for the purpose of minimising operational costs, but to leverage the quality of customer services. Through its automated systems and robotics, Starbucks offers customers self-services where they can choose a variety of drink mixes and play games as they wait for their orders to be processed.
In such a differentiation process, Starbucks’ focus is not on low-income consumers, but on the middle class and super-rich customers. To achieve that, it has created the ambience of its stores and coffee shops to reflect the premium consumer segments that it targets. Contrasted with McDonald’s, Lavazza and Caffè Coffee Day, Starbucks offers free Wi-Fi in all its stores to meet the needs of the affluent and working class who need to be constantly connected with the outside world. It focuses on the middle class and super-rich. Starbucks also seems to have attracted lower-income consumers. In the context of Kotler and Keller’s (2016) notion of the good “word-of-mouth”, this spreads good word of mouth about its products.
In terms of the rising demand for non-dairy products, Starbucks seems to be responding to such needs by innovating and creating more non-dairy products to outwit its rivals like McDonald’s and Dunkin’s. Though some of its differentiation strategies, like offering free Wi-Fi, automation, and drive-thru, have already been copied and replicated by the likes of McDonald’s, in the context of Barney’s (1991) “Resource-Based Theory”, this may erode the sustainable competitive advantage of such differentiation strategies. It seems that the ingredients of most of its distinguishing premium coffee and milk brands, as well as their associated delighting unique tastes, are yet irreplicable.
Though its food blends with drinks to create Starbucks’ unique value offerings, such a combination is still aimed at targeting the working class who need hot breakfast plus pastries and snacks on their way to work or lunch, oatmeal and yoghurt during lunch breaks. Using a mix of its different drinks and food products, Starbucks also targets consumers who are in relaxation mode and undergoing different leisure and entertainment activities, who would like to spend time drinking coffee in Starbucks’ stores or in other locations. This explains why Starbucks has not only created more store ambience to meet such needs, but also partnered with Disney to open its store at Walt Disney World. It is also partnering with Apple and Spotify to stream music to meet the entertainment needs of such consumers as they drink coffee and eat Starbucks’ pastries, snacks and ice cream.
Starbucks targets tourists and travellers around the world with its instant coffee by partnering with Aeroplan and other airlines to offer its coffee and food products at different airports and as part of the in-flight menus. Besides targeting holidaymakers with its gift cards, Starbucks also targets at-sea travellers and tourists by partnering with different cruise ship companies to provide at-sea holidaymakers with its coffee and pastries. These are accompanied by partnerships with Uber Eats and PayPal to target online consumers and at-home consumers by bringing Starbucks’ coffee, pastries and snacks to their doorsteps at any time they need it. Starbucks’ non-dairy milk products are also aimed at targeting the increasingly health-conscious consumers with zero-calorie products and food. Through all these, Starbucks has, in the context of Kotler and Keller’s (2016) notion of positioning, been able to position itself in the minds of its global consumers as the creator and deliverer of superior coffee and cocoa products and pastries, which are able to respond to the needs of its customers in any location and at any time they require. Such positioning has also positively influenced Starbucks’ branding.
To counter competition in its macro-environment, Starbucks has been well-branded as a business that consistently creates and delivers superior quality coffee products like Mint Majesty, Caffè Americano, Emperor’s Cloud & Mist, and Passion Tango that its rivals like McCafé, Lavazza, Caffè Coffee Day, McDonald’s and Dunkin’ Donuts are yet to replicate with such success. It complements these superior coffee products with health-value-adding attributes to further position and brand itself as a business that is not only concerned about profits, but also with leveraging the health of its consumers. This brands Starbucks to significantly distinguish it from the likes of Nestlé, which have been accused of offering unhealthy products. Starbucks undertakes continuous innovation and improvement to stay ahead of its rivals by continuously creating and delivering new, delighting superior coffee brands. Starbucks strongly emphasises safety and quality management throughout its value chain system. It does not outsource or use franchising to ensure it stringently controls its quality to deliver the desired values to its customers.
Starbucks is well-branded as a business that places corporate social responsibility at the heart of its operations by training its farmers and suppliers on sustainable agricultural practices, contributing to ecological restoration and opening its stores in economically disadvantaged areas to boost employment creation and empowerment of poor populations with sources of income. These branding strategies have enabled Starbucks to stay ahead of its rivals like Nestlé and Cargill, which have been accused of destroying the global ecological environment. If disruptions and opportunities are not arising from the changes unfolding from the political systems of the innovation ecosystem, business opportunities or even threats may emerge from the trends unfolding from the economic systems of a particular country.
Economic Ecosystem Trends
In the innovation ecosystem, the opportunities emerging from the unfolding economic trends may arise from positive changes in the demographic figures in the markets in which a business operates. Changes in demographical figures reflecting the overall increase in population growth suggest the possibility of improving the overall market attractiveness. Economically, population growth implies improvement in the overall market attractiveness and vice-versa. Even if some countries are against immigration and refugees, more people tend to demand not only more socio-economic services like health and education, but also an array of different goods. This unlocks enormous opportunities for businesses operating in different sectors.
As the population increases, it is essential for businesses to analyse the reasons for such faster population growth. The causes of population increase insinuate the types of goods that businesses will have to focus on producing and selling. In this analysis, if the causes of population increase are attributable to an increase in migration trends, then it is most likely that it is the demand for adult and youth products that may increase.It is the adult and youthful population groups that have the energy to migrate as compared to the older and aged groups. This contrasts with the situation where the increase in population is caused by high fertility and birth rates. That implies it is most likely that it is the demand for children’s and young people’s products that will increase. As such analysis is being undertaken, it is also important to evaluate and select the most attractive segments of the population by undertaking market segmentation.
Market segmentation would require the analysis and division of the population according to categories such as gender, age groups, income levels, and geographical locations. Gender analysis aids the evaluation of whether, in the population increase, it is the males that are more or the females. This aids the determining of whether to focus on the production and sale of female things or male products. Age group analysis would facilitate the assessment of the age segments that are more prevalent. If it’s the young, further analysis may still have to be undertaken to discern which age groups to focus on and whether it should be the young males or young females. For differences according to income levels, the executives may be required to divide the population into low-income groups, middle-income groups and high-income groups. This analysis must be accompanied by the assessment and selection of the income groups to focus on.
Understanding the differences in income levels of the population also influences the determination of the pricing strategies to adopt. If the majority of the population is of low and average incomes, then low pricing strategies could be adopted, as contrasted with businesses targeting higher-income segments of the population. It was through market segmentation and understanding of the population in its ecosystem that Uniqlo, a Japanese-founded company, was able to emerge with more disruptive clothing and fashion brands that propelled it into one of the major innovative leaders in the global clothing and fashion retail industry. It changed from just creating and selling female clothes to introducing even clothing lines for men, kids and younger adults. In that process, Uniqlo’s case illustrates the pure innovation case reflecting how periodic analysis of the innovation ecosystem can inform business executives on the kinds of product/service, process, position and paradigm or business model innovation initiatives to pursue.
Uniqlo
Since its establishment in 1949, it is Uniqlo’s capabilities to read situations and proactively act to stay ahead of competition that have been the sources of its competitive advantage. Combined with the use of process innovations that emphasise the use of more accurate market selection techniques, localization in various segments of the global market, embracement of digital technologies and innovation, all these have propelled Uniqlo’s performance from just the Tokyo-based operations to one of the leaders in the global clothing and fashion retail industry. Higher performance has influenced Uniqlo’s capabilities to consistently generate higher revenues that peaked $4 billion in the 2023/2024 financial year. However, Uniqlo still faces enormous competition heat from the major fashion operators like Zara, Burberry, Armani, Louis Vuitton, Dior and Ross Stores that seek to reshape the global fashion industry to their favour and advantages. Combined with the constantly changing macro-trends as punctuated by the constantly rising energy prices and inflation that increase operational costs to reduce profitability, it is a nexus of such market dynamics that Uniqlo will have to innovatively with by engaging innovation adventures to introduce new products, services, processes, business position or paradigm/business model.
Given the constantly changing customer tastes and preferences, Uniqlo has been quite innovative to introduce a series of fashion clothing. It changed from just creating and selling fashionable female clothes to introducing even clothing lines for men, kids and younger adults. Through such initiatives, Uniqlo has been able to respond to an array of various changes in customer preferences and demands. Due to the constantly rising cost of living as influenced by inflationary situations around the world, Uniqlo also faces significant changes that threaten to increase the cost of its materials and inputs. Initially, Uniqlo faced the challenges of rising material costs. But of late such higher costs have been exacerbated by the devastating negative economic effects of Russia-Ukraine War. Russia-Ukraine War introduced sanctions causing energy shortages to instigate rising prices and inflationary situations across the global economy. Increment in material costs increase operational costs. In response, Uniqlo adopted the strategy of manufacturing and selling its own clothing brands using its various retail stores that are scattered across the world. Through manufacturing, Uniqlo is able to control material costs by partnering with the suppliers of cotton and other materials who are able to supply the required clothing materials at relatively lower prices. This lowers its operational costs to bolster its cost competitiveness.
To further bolster its overall cost competitiveness in the global clothing and fashion retail industry, Uniqlo shifted most of its manufacturing activities from Japan to China. Compared to Japan which is relatively expensive, exposure of Uniqlo to cheaper labour and lower taxes in China was considered essential for lowering the manufacturing costs. This bolsters Uniqlo’s overall cost competitiveness. Such a strategy enables Uniqlo to respond to the constantly changing customer preferences and needs not only for the latest fashions, but also for relatively cheaper clothes. The establishment of the clothing manufacturing facilities in China also enabled Uniqlo counter competition from lower costs clothes made in China.
Yet, as customer tastes and preferences change, Uniqlo had to deal with the demands of the customers for better quality clothes sold at relatively cheaper prices. It also had to respond to customer demands of integrating leisure and entertainment with shopping. Ever since the end of Covid-19 that restricted public gathering and enjoyment, most of the consumers around the world have been graving for more form of entertaining commercial activities. Consumers have been graving for retail facilities that integrate shopping with leisure. In recognition of such changes, Uniqlo changed its retail settings to construct shopping malls containing its retail outlets across the world, as well as integral coffee shops, children’s playing facilities, sauna, gyms, restaurants and other forms of entertainment facilities.
Combined with the constant invention of new fashions, such initiatives have bolstered Uniqlo’s competitiveness. In the financial year 2022/2023, Uniqlo generated the total revenue of $4 Billion, though most businesses were just recovering from the Covid-19 pandemic. Such approach accentuates Kotler and Keller’s argument that effective analysis and response to changes in customers’ tastes and preferences bolsters a firm’s competitiveness. Unfortunately, Uniqlo also faces enormous competition heat from the major retail fashion operators like Zara, Burberry, Armani, Louis Vuitton, Dior and Ross Stores that seek to reshape the global clothing and fashion retail industry to their favour and advantage.
To counter such growing competition dynamics, Uniqlo has adopted aggressive branding strategy by not only creating and delivering superior clothing brands, but also demonstrating the consistency of how to do that. Using its “LifeWear Brand”, Uniqlo has created and used several promotional messages that seek to promote and build its image as a business that seeks to create better lives through clothes. It uses several events like the recent 2023 Asian Games, Fashion Shows, Celebrities and TV Shows to market and promote most of its clothing brands. This has enabled Uniqlo to promote and position itself in the minds of most global consumers as the maker and retailer of the best clothing brands. Uniqlo adopted the use of internet as a strategy for enhancing its competitiveness.
Using internet technology, Uniqlo has created the e-commerce platform that enables them reach to the e-commerce enthusiastic consumers in China, while also edging out some of the rival clothing brands that have been creating online platforms to reach consumers in the markets that they are unable to physically reach. Uniqlo adopted a combination of the industrial 4.0 digital technologies like artificial intelligence, robotics, machine learning, cloud computing, big data and 5G networks in its manufacturing processes. This has enabled Uniqlo to improve its manufacturing efficiency whilst also lowering the manufacturing costs to bolster its overall competitiveness. To counter threats arising from the rivals’ usage of more advanced technologies, Uniqlo uses big data. It uses big data to gather and analyse data on how it can improve its operational efficiency to reduce costs and bolster its cost competitiveness. It uses big data technologies to gather and evaluate data on the likely emerging threats and opportunities from the global clothing retail and fashion retail industry. This enables Uniqlo to gather and analyse multitudes of data from various e-commerce sites and social media to discern and respond to the changes in trends before competitors are able to do so.
Uniqlo’s usage of such strategies echoes Tidd and Bessant’s argument that proactive analysis enables a business anticipate and respond to the changes in customer tastes and preferences to bolster its overall competitiveness. The business becomes able to identify and thwart threats or identify and tap opportunities before rivals are able to do so. In that process, Uniqlo adopted branding strategies by creating and selling more premium quality clothes like heattech innerwear that customers prefer during cold winter to reduce energy costs, down-jackets, linen shirts, Bra-Tops, T-Shirts and other impressive brands.
As this bolsters increased customer attraction, sales and competitiveness, Uniqlo also streamlined its operational structures to enhance the efficient flow of its fashion brands from raw-materials’ suppliers, manufacturing, distribution and retailing upto the final customers. Uniqlo combines such initiatives with a focus on creating superior quality cashmere, extra-fine merino and subima from natural materials like cotton that most of the European consumers often prefer as compared to synthetic materials.
To grow and dominate the world market to diffuse higher competition, Uniqlo has in line with Hitt et al.’s strategic management theory, been pursuing expansion and growth across the global market using strategic alliance, partnerships and collaborations. It signed a consulting and cooperation agreement with Jil Sander as the fashion designer while Shiatzy Chen was approached through a collaboration to produce a capsule collection of ready to wear pieces. Uniqlo signed a collaboration agreement with Bic Camera, a Japanese tech retailer to enhance the sale of Uniqlo’s clothing brands across its various departmental stores. The implication is that Uniqlo was able to expand and diffuse competition in markets cross Europe, North America, Asia and Australia.
However, the outbreak of Russia-Ukraine War was a setback for its expansion activities in Russia, Ukraine and Eastern European Countries, since it had to halt some of its business activities. Uniqlo faces challenges of how to deal with the increasingly powerful labour movements and activists raising accusations for underpaying workers, harassment, abuse and subjection of workers to unfair labour practices in markets such as China, Australia and Korea.
Yet as Uniqlo must strive to change such perceptions and narratives, it must also improve its capabilities to tap some of the emerging future growth opportunities in order to bolster its sustainability in the global clothing retail and fashion industry. Despite such dynamics, Uniqlo’s case still illustrates the pure innovation case reflecting how periodic analysis of the innovation ecosystem can inform the business executives on the kinds of product/service, process, position and paradigm or business model innovation initiatives to pursue.
During the evaluation of the population’s income levels, the analysis of the geographical areas of the population’s concentration would also influence decisions on plant establishment as well as the location of distribution and retail outlets. As macro-environmental changes characterised by the increasing population, liberalisation and growth of the middle class population improve the attractiveness of the global food and beverage market, Starbucks has also innovatively responded by segmenting its global food and beverage market according to Europe, Americas, Oceania, Asia, Africa and At-Sea segments. In each of these segments, Starbucks has sub-segments that include drinks, food, at-home coffee, merchandise and gift cards’ segments. Using the drinks segment, it mainly targets the natural coffee and tea lovers like the enormous coffee lovers in North America and Europe. Asia is mainly targeted with tea because it contains more tea lovers in China, India and the Middle East.
Yet, as the opportunities arising from the changes in demographical trends are being evaluated, it is also critical for the executives to analyse the changes in the other economic variables like the inflationary situations, interest rates and government economic policies on the importation and production of certain goods. Higher levels of inflation increases the prices of inputs and demand for higher salaries and remunerations. These affect the overall cost of doing business. It contrasts with the situations where inflation is low and under control by the central bank of that economy. As for interest rates, higher interest rates increase the overall cost of capital for businesses seeking to borrow from different financial institutions to finance R&D or any other innovation related activities.
Higher cost of capital also affects the cost of doing business as well as the profitability of the businesses doing business in that industry or market. However, as such economic trends are being examined, it is also of essence to explore the implications of government economic policies that ban the importation or production of certain goods. In certain cases, the importation of products like secondhand goods is increasingly being banned in most of the developing economies. Arguments are often advanced that the importation of secondhand goods destroy the development and evolution of local industries. However, such a ban can unlock opportunities for the local businesses. Instead of importing, investments can be committed on the establishment of industries that produce substitutes of such imports. Production, marketing and sale of certain products such as alcohol and cigarettes that expose such products to especially younger population of below eighteen years are often banned. This implies if the business is to gain from the opportunities unfolding in such markets, then, it would be critical for marketing executives to focus on the age groups not prohibited by law.
In such analysis, scanning the economic aspects of the innovation ecosystem must be directed towards the evaluation of how certain unfolding macroeconomic indicators may either leverage or even undermine the new or established innovation venture’s effective market performance if the appropriate response strategies are not adopted. This informs decisions on the proactive strategies that must be integrated in the new innovation venture planning and implementation to bolster its overall market success and sustainability. Whether the venture is a new or an old one, the specific economic indicators that it must pay attention to during the innovation ecosystem scanning encompass competition trends, GDP growth rate, GDP per capita, inflation rate, unemployment rate, general government balances, balance of payments and monetary and fiscal policy.
Despite the attractiveness of the innovation idea or product concept, these specific economic indicators are critical for discerning whether the market in which the business is to be established is attractive enough to generate the desired returns that bolster the business’ overall growth and sustainability. The relevance of such specific economic indicators for improving the performance of the innovation venture is reflected in the Boeing case study. Boeing case study elucidates the importance of analyzing the specific macroeconomic indicators in the United States and Chinese markets in which it operates.
Boeing
As instigated by high energy prices and the quest to enhance efficiency and cost minimisation, such new aircraft innovations threaten to replace Boeing’s large Superjumbos with narrower and smaller aircrafts. Narrower and smaller aircrafts take less time to fill and fly travellers more efficiently and flexibly across different remote routes. Even with such rivalries, opportunities are also arising from the US Travel and Tourism market, which rebounded with US$128.40 billion in 2022 at a projected growth rate of 9.81% up to 2026. The US’ branding as a favourable travel destination is also attracting aircraft manufacturers to tap opportunities from the increasingly lucrative global air travel that grew after the Covid-19 pandemic by 30% to be valued at US$2.3 billion in 2021.
Yet, as air travel demand soared, aircrafts’ sales also soared to 3,456 aircraft valued at US$25.2 billion. Aircraft leases generated US$167.81 billion in 2021. But even with such opportunities, Boeing’s operation is still threatened by environmental demands for emission reductions. These may escalate operational costs as aircraft manufacturers strive to comply with relevant emission regulations. Boeing seeks to leverage its global outreach. However, it still faces enormous competitive pressure from Airbus, Textron and Bombardier in the midst of even more complex US-China trade wars. In such complexities, China has remained less receptive to US exports despite signing a series of US-China trade agreements. Boeing established its new US$33 million China 737 factory in an attempt to edge out Airbus from the Chinese market. However, it also faces competition from the local Chinese aircraft manufacturers like Aircraft Industrial Corporation, Shaanxi Aircraft Industrial Group, Aerospace Industry Corporation China and ACAC Consortium.
Such a competitive local aircraft manufacturing terrain is further complicated by the entry of Russia’s MC-21 and C919, which seek to outwit some of Boeing and Airbus’ bestselling aircraft brands. The increasing entry of foreign players like Bombardier and Embraer is attributable to China’s deregulations, attractive incentives for foreign direct investments, an extensively growing middle-class population that needs to fly across different Chinese destinations, and China’s strategic location to the densely populated Southeast Asia and East Asia. China’s less stringent visa requirements and its bolstered brand image as the fastest growing economy in the world have also catalysed an increase in travels into and out of China. This spurred an increase in the demand for faster and more efficient air travel. It also catalysed an increase in the demand for new passenger aircraft, leading China to purchase 6,795 new aircraft in 2020. If the current growth pattern is maintained or even surpassed, China is predicted to need 8,700 new aircrafts in the next 20 years. Despite threats from Airbus’ US$37 billion aircraft China deal, these imply more growth opportunities still exist for Boeing, which has already sold over 2,000 aircrafts to the Chinese market. For Boeing to exploit such opportunities, it must innovatively devise the strategies for managing complexities of China’s monetary policy and the implications of trade relations with the US that Boeing must deal with. In the US, which is Boeing’s major market base, the monetary policy tools implemented by the Federal Reserve are clustered according to reserve requirements, discount rates, and open market operations.
Reserve requirements were reduced to zero in 2020 due to high profits generated by commercial banks, rendering reserve requirements irrelevant. In response, the Federal Reserve instead introduced interest on reserves to lure banks to deposit reserves with the central bank, as compared to lending out to consumers at lower rates. This enables the Federal Reserve to control interest rates and consumer and business borrowing and spending. The discount rate is the interest rate that eligible banks are charged for borrowing on a short-term basis from the Federal Reserve to stabilise money supply and financial market. Open market operations sell or buy government securities to respectively reduce or increase the money supply. Besides overnight reserve repurchase agreements, in which the Federal Reserve sells securities to financial institutions and rebuys them the next day to control federal fund rates, the Federal Reserve also uses crisis tools to purchase Treasury securities and mortgage-backed securities to control interest and mortgage rates. It can also lower the discount rate to encourage borrowing and lengthen the payback period among consumers.
The US government often integrates its monetary policy with fiscal policy to regulate tax levels and spending to control economic activities in a way that generates employment and bolsters price stability and economic growth. These monetary and fiscal tools have improved the resilience of the US economy for businesses like Boeing to thrive. However, China’s monetary and fiscal policies tend to vary. Though the People’s Bank of China has reserve requirements and market-based instruments, it also uses direct instruments through which the government sets interest rates to lower the cost of capital as well as exchange rates even at lower rates to bolster the price competitiveness of its products in the international market. This offers Boeing opportunities to access cheap capital and benefit from China’s fiscal policy that encourages tax cuts to bolster business and economic growth. However, there are also hindering complexities in the US-China Trade Agreements. Following the reinstatement of US-China diplomatic relations in 1979 and China’s joining of the World Trade Organisation, trade agreements like the Economic and Trade Agreement between the US and Chinese governments, as well as the Trump Trade Deal, have been signed. Unfortunately, Figure 8 indicates US’ discontentment with the influx of imports from China into the US market than exports from the US into China, which has instigated US-China trade wars.
China seeks to avoid US sabotage to maintain the status quo. The US is more interested in reducing imports from China. This has instigated the use of trade tariffs even amidst a series of signed trade agreements. In such wars, the US has been discouraging offshore investments into China in a bid to boost US domestic employment creation. Though China also seeks to limit US exports into China, Boeing’s decision to establish its manufacturing plant in China seems to have managed to bypass such trade barriers, making Boeing acceptable across the board as a US and China-based aircraft manufacturer.
These reflect some of the opportunities as well as disruptive trends that can unfold in the business’ innovation ecosystem. Such trends often require usage of a more innovative approach to navigate through all such disruptive waves while also exploiting the unfolding opportunities. Boeing seems to be doing innovatively well in that regard. However, it is not just the analysis of the unfolding economic opportunities and threats which is essential for discerning new innovation directions to pursue. Instead it also requires the evaluation of the unfolding social trends in the markets in which the business operates.
Social Ecosystem Trends
Social trends can create a lot of opportunities for the contemporary businesses. In the innovation ecosystem, these social trends may emerge from either events or changes in tastes and preferences of the population, lifestyles, traditional and religious beliefs, and seasonal behaviours. The emergence of social events can create a lot of business opportunities. However, since such social events are usually seasonal, it often does not make business sense to over-focus and commit extensive resources to social events. This is explained by the fact that whereas some of these social events are seasonal, others occur only once in a while. That implies attempts to over-invest can cause waste that erodes a firm’s overall financial reserves. In effect, precision in planning to ensure that the invested capital is recouped is critical for maximising the opportunities presented by social events.
However, despite such concerns, it is still often the occurrence of social events that constitute part of the social trends that offer enormous opportunities for businesses. Yet, if the changes in social trends do not present social events, they tend to offer changes in tastes and preferences of the population. Such changes in tastes and preferences may either favour or not favour a business’s products. If changes in tastes and preferences of the population favour a business’s product, then they tend to create opportunities that businesses can maximise by increasing the investment in marketing and promotion.
As intense marketing and promotions are undertaken, it is also important to evaluate and improve the overall distribution outreach of the business. This would ensure that customers are not only well-informed about the availability of the product but also conversant with where they can find such products. However, if tastes and preferences of the population do not change in favour of a business’s products, then the mere identification that the business is not favoured should be enough to inform the executives that new strategies should be crafted to bolster a business’s capabilities to make relevant modifications to respond to the detected unfavourable customer tastes and preferences.
To respond to such opportunities, analysis must be conducted to assess whether several competitors are responding to such opportunities. If there are several competitors, the analysis of their capabilities vis-à-vis the capabilities of the business must be undertaken. This would aid the assessment of whether, given the existing strengths and resources, the business would be able to successfully take on such competitors without experiencing much damaging retaliation. Attempts to make modifications to respond to the changes in customer tastes and preferences that do not favour a business’ products would amount to an attack on the other competitors’ customer bases. If the executives do so, they must also be prepared to thwart any possible retaliation.
Such analysis would aid the assessment of the extent to which competitors are responding to the changes in customer tastes and preferences with precision. To identify gaps that can create opportunities that a business can exploit, such analysis must be accompanied by the evaluation of the overall market impression of the responses that competitors have so far undertaken. This would aid the identification and response to the detected areas of customer dissatisfaction that offer gaps that a business can fill by undertaking the necessary product modifications. However, if the changes in social trends are not revealing such opportunities, then opportunities may emerge from the changes in lifestyles, traditional and religious beliefs, or seasonal behaviours.
Such changes may either favour or not favour a business’s products, and hence it is upon the executives to undertake necessary product or operational modifications in situations where a business is affected by such changes. The extent to which the analysis of social trends in the innovation ecosystem influences product, service, process, position and paradigm innovation approaches that the business pursues is reflected in the innovation cases of Ben & Jerry’s as contrasted with Häagen-Dazs’ innovation approaches in the context of changing ecosystem dynamics.
Ben & Jerry’s
Ben & Jerry’s is an ice cream flavour manufacturing venture founded and established in Vermont, US. However, since its acquisition by Unilever Group, its innovation activities of inventing, developing, manufacturing and distributing its innovative products are directed from the Unilever London headquarters rather than from Vermont. In contrast, Häagen-Dazs is also a US-based ice cream brand manufacturer founded by the family of Reuben and Rose Mattus. It remains headquartered in Minneapolis, US, to continuously engage in innovation, production and distribution of its various innovative products. To discern how to improve their innovation management to attain a competitive edge over their rivals, Ben & Jerry’s has been exploring all its product, process, position and paradigm innovation spaces, albeit in a less structured way. Product innovation is the development of completely new products or the improvement of the features and attributes of the existing products. It can be radical to entail the development of completely new and better products, or incremental to just improve the features, quality and attributes of existing products. In such initiatives, Ben & Jerry’s uses new food science technologies to mix various ingredients to create unique ice cream flavours. Yet, as Ben & Jerry’s produces these best-selling ice cream brands to reshape the saturated global ice cream market to its favour, it also uses recombinant product innovation by combining aspects of food, biotechnology and health science technologies to create light ice cream brands that have low calories, fats and sugar. These respond to the needs of the growing population of diabetic patients and other health-conscious ice cream consumers. To create such products, it also engages in radical and incremental process innovations to use the best manufacturing processes.
Process innovation is the creation and establishment of completely new procedures and methods of creating and delivering products to the market (radical innovation) or the improvement of the existing processes to create additional business value (incremental innovation). Ben & Jerry’s uses radical and incremental new processes to control cost, quality and ice cream brand development as well as the manufacturing, storage and movement of different ice cream brands to the final consumers. It uses crowdsourcing to identify the best ice cream flavours and applies stringent high-quality standards for materials sourced from farmers and for manufacturing processes.
Through a series of iterative quality tests before the flavours reach retail stores, the marketing team reviews flavours selected by customers and passes them to R&D. It is R&D that develops several concoctions that are tasted repeatedly to extract a list of a few potential flavours that are further subjected to in-plant trials, tasting and re-tasting to develop the final flavours. These unique radical and incremental process innovations have led to Ben & Jerry’s being labelled the global “Ice Cream Flavour King,”. Ben & Jerry’s also engages in radical and incremental position innovations.
Position innovation connotes how a business defines itself to be viewed and perceived by consumers through its product offerings. It involves radical and incremental branding strategies that uniquely position a business in a way that differentiates its offerings from those of rivals. Through consistent high-quality flavour creation and delivery, Ben & Jerry’s has positioned itself as the creator of premium ice-cream flavours that also offer enormous social and health values. As much as this has led consumers to brand Ben & Jerry’s as the “Ice-Cream Flavour King,” such position innovation still ignores low-income consumers. This creates a gap that its competitors are increasingly exploring as potential entry points for attack. Even amidst that, Ben & Jerry’s has also positioned itself as the ice-cream manufacturer that upholds social justice by consistently issuing statements and corporate positions against racism and destructive environmental activities.
Though such a radical social justice position can alienate some of its consumer segments, it has still also invested significantly in paradigm innovations to introduce novel mental frames and business models in the global ice-cream industry. Paradigm innovation is the conversion of business ideas to create novel mental frames reflecting a business model that defines what the business does, as well as how and why the business operates in the way it does. Ben & Jerry’s has created a radical product-centric business model that focuses not on pricing and convenience but on creating and delivering superior quality products for premium pricing. It uses an iterative product quality control process and extensive R&D investment business model that cannot in any way be cheaper. This explains why Ben & Jerry’s is product-centric rather than price-centric. Such an approach, however, can create a loophole that its rivals can utilise to create relatively affordable superior ice-cream brands to undermine its competitiveness.
Ben & Jerry’s business model emphasises continuous R&D and product innovations based on good leadership and experiential marketing to continuously create, deliver and capture new business, social and health values. Ben & Jerry’s also uses multi-channel systems consisting of its own coffee and ice-cream shops, online retailing, home deliveries, catering, retailers and supermarkets like Walmart. It also uses social media platforms like Facebook, G+, Pinterest, YouTube and Instagram to reach its consumers across the globe. Advocacy against racism created controversies during the George Floyd incident. However, Ben & Jerry’s social advocacy, combined with the collaboration from its customers and farmers who are its suppliers, has still enabled it to use a more sustainable business model. In turn, this model aids effective management of its innovation. Unfortunately, Ben & Jerry’s innovation management strategy still ignores the lower consumer segments. This has created a gap that its rivals like Baskin-Robbins, Kemps and Häagen-Dazs can easily exploit to make inroads into Ben & Jerry’s upstream main markets.
Häagen-Dazs
Häagen-Dazs seeks to edge its rivals in the global premium ice-cream market by engaging in both radical and incremental innovations to emerge with ice-cream products that have carved out for themselves a significant market share in the global ice-cream market. Its radical product innovation first led to the introduction of vanilla, coffee and chocolate flavours. It then subsequently invented and produced salted caramel chocolate, strawberry waffle cone, vanilla, blackberry and triple chocolate ice-cream flavours. It also produces brands like frozen yoghurt, sorbets, ice-cream cakes and ice-cream bars. Häagen-Dazs prides itself as having super-brands of super-premium quality, taste and thickness, with little air mix to offer its customers real value for money.
As Ben & Jerry’s markets its products on the basis of experience for the young and health attributes, Häagen-Dazs’ product innovations are aimed at adults and focus on offering super-premium quality with good tastes and pleasure, not just experience. However, in all these, it also has a process efficiency advantage that offers cheaper products. Process innovation is the exploration and conversion of extracted ideas into new or improved operational business processes to create the desired values.
Häagen-Dazs continuously undertakes radical and incremental process innovations to adopt new, efficient and cost-effective processes for creating and delivering value to its customers using more delightful ways. In such processes, it sources only the purest and finest ingredients from its suppliers, undertakes periodic testing of manufacturing equipment and employs a total quality management system to preserve the superiority of its ice-cream’s premium tastes. It conducts tasting before and after ingredient mixing to minimise air content and preserve ice-cream thickness as one of the key attributes that it offers.
Häagen-Dazs’ efficient and cost-effective manufacturing process innovation has enabled price lowering compared to Ben & Jerry’s, which costs more in China, Singapore and Hong Kong than in the US. Ben & Jerry’s attributes high costs to the quality commitment of moving its ice-cream brands in highly costly refrigerated systems to maintain quality. Häagen-Dazs’ low-cost manufacturing capabilities seem to have also aided its position innovation. Due to its consistent capabilities to create and deliver high-quality ice-cream brands that taste good at relatively affordable prices, Häagen-Dazs’ position innovation hinges on most customers’ belief and trust that it consistently delivers on its promises. Its original focus was the adult luxury super-premium ice-cream market segments. However, its brands have continuously been embraced by the other market segments. This has significantly lowered advertising and promotion costs, as its brands, compared to those of rivals, market themselves through pleasant tastes and consumers’ word-of-mouth about their experiences.
Since Häagen-Dazs’ brands do not offer any health attributes, it implies that they can easily become vulnerable amidst an increasingly health- and safety-conscious global population. This compares unfavourably with Ben & Jerry’s, which has integrated health and environmental issues into its business model. Paradigm innovation is reflected in Häagen-Dazs’ business philosophy, which holds that superior product quality and taste drive differentiation, customer attraction and the creation of the desired values. Its business model also uses only the purest and finest ingredients, such as yellow egg yolks and real cream from Brazil and Denmark, chocolate from Belgium, vanilla beans from Madagascar, and coffee beans from Colombia.
Häagen-Dazs invested in manufacturing automation and partnered with General Mills to control its operations outside North America and with Nestlé to add a new mix of superior dairy product manufacturing capabilities. However, Häagen-Dazs’ paradigm innovation to produce and sell at relatively affordable costs is still undermined by the high costs of raw materials, which are mainly sourced from within and outside the US. Other deterrence are high costs of refrigerated product transportation, and import duties in markets like China. Though it has attempted to resolve such dynamics through a partnership with China’s Ting-Hsin Group, Häagen-Dazs has not yet established a manufacturing facility in China to avoid quality and brand dilution. Häagen-Dazs has been increasingly introducing new ice-cream brands, changing packaging, store and shop designs, as well as promotional messages to target the dot-com and millennial generations. However, it still has to deal with its lingering association with ice-cream brands for the old phenomenon among the Instagram generation in the US market by adopting the appropriate innovation management processes and strategies.
Technological Ecosystem Trends
Technological changes representing technological advancements are offering enormous opportunities for the modern businesses. The emergence of technological advancements that leverage operational efficiency would certainly render it possible for businesses to utilise such technologies to achieve the desired cost competitiveness. Businesses often integrate such advanced technologies into their operations and production processes. The resulting improved operational efficiency tends to induce improved cost savings, quality and extensive activity coordination and operation in a globalised world. That implies businesses that invest in such technologies tend to gain advantages that may not arise for businesses that have not invested in them. As most global car makers adopted a lean operational approach, BMW, which had never focused on consistent waste identification and elimination, was inspired to rely on technological advancements to improve its lean operational principle.
Unlike the other car makers like Toyota, BMW’s business philosophy is to use complex engineering and design to create and deliver more customer-tailored premium cars. In such a process, limited lean principles are used, as more quality-heavy materials are incorporated. However, due to the need to improve production efficiency and competitiveness in the premium car market, BMW’s executives introduced lean production methods emphasising high levels of computer-aided design, automation, robotics and artificial intelligence. Higher automation and the use of artificial intelligence and robotics signified that BMW would use only limited human resources to lower the overall manufacturing and operational costs.
BMW uses computer-aided design. It also employs the highest level of automation to improve the accuracy of the design, framing and welding of most of its car components. In its production system, BMW has adopted an approach where the design and production of new cars are determined by the colour, design and features that customers want. Through such an approach, BMW is able to eliminate waste by focusing on producing and delivering only what customers desire. In its iFactory, BMW has adopted digitization to reduce the costs of marketing as well as coordinating and managing its extensive global operations. Through digitization and automation, BMW has been able to improve its operational efficiency, precision and flexibility to bolster its overall competitiveness against premium car manufacturers like Land Rover, Mercedes-Benz and Toyota’s hybrid cars.
In the other areas of technological change, the emergence of technologies such as enterprise resource planning systems has enabled businesses to integrate and improve the synchronisation of different functional activities like sourcing, production and marketing. The introduction of technologies such as e-commerce, which introduce new approaches for business operation, has offered opportunities for businesses to extend their outreach into new markets and to globalise without necessarily using a brick-and-mortar approach. The use of e-commerce to reach new markets enables businesses to assess and test the overall level of a market’s attractiveness. This aids market research and analysis to determine the overall market attractiveness before engaging enormous resources in establishing the usually expensive and costly brick-and-mortar operations. Evidence that the emerging advanced technologies can offer enormous business opportunities is reflected in the fact that, following the emergence of e-commerce technologies, businesses like Alibaba.com and Amazon.com utilised such technologies to go online and globalise to reach consumers across the globe.
On-premise e-commerce technologies are easily customizable and secure. It provides a higher degree of performance compared to software as a service (SaaS) e-commerce or open-source e-commerce. In contrast to e-retail anchored on the on-premise e-commerce technologies, the use of software as a service (SaaS) e-commerce only requires businesses to subscribe to the applications, which are hosted and managed at the service provider’s data centre. For e-retailers not well-resourced financially, software as a service (SaaS) e-commerce provides opportunities for such e-retailers to go online because it is not only affordable as it is hosted by the service provider, but also easily scalable.
However, the limitations of SaaS are still often latent in the risk of security being compromised because, since the e-retailer is not entrusted with the entire control of the functionality of the system, it is not easy for relevant modifications to be undertaken. These can affect the extent to which the e-retailer is able to operate efficiently to respond to its customers’ needs. SaaS can also be affected by limited integration with back-end systems like enterprise resource planning (ERP), customer relationship management (CRM), and data security management systems. Investment in these e-commerce technologies unlocks opportunities for businesses to use any of the four main models for e-commerce, which include business to business (B2B), business to consumer (B2C), consumer to consumer (C2C) and consumer to business (C2B). These illustrate how the emergence of new technologies cannot only influence the development of new business concepts, but also the emergence of enormous opportunities that previously never existed. In terms of technological trends in the UK hospitality industry, innovation ecosystem trends indicate that, as different hospitality firms aim to creatively edge out each other through the adoption of different forms of technologies in their operations, rivals’ creativity has led to the emergence of multitudes of disruptive technologies. Some of such disruptive technologies that are transforming the UK hospitality businesses’ terrain whilst also disadvantaging laggards that take long to embrace new technologies include the Internet of Things that support online booking systems, Wi-Fi-supported services, and RFID (Radio Frequency Identification).
Internet of Things and UK Hospitality Industry
Through internet-supported technologies, multitudes of UK hospitality operators are now offering different online search, booking and even check-in using their websites, mobile apps, and different social media platforms to improve the quality of their services and customer experience. Wi-Fi has not only improved the quality of internet connections but also lowered internet costs for both the customers and the hospitality operators. For customers, Wi-Fi improves the quality of hospitality services because it enables guests to stay in touch with the hotel management, family members, friends, and work colleagues as they enjoy different room services. It also enables guests or customers to spend longer time in their hospitality facilities like restaurants, hotels and entertainment centres because customers can work whilst also enjoying different entertainment or hospitality services. This eliminates the need for the customer to hurry and leave to attend other work-related obligations. In the end, the longer the customer stays at the hospitality facility, the more the customer spends, thereby increasing the overall returns on investment per customer. For the hospitality business, Wi-Fi lowers the overall costs of communication, activity coordination, and control to aid the achievement of the desired hospitality business goals and objectives.
Just like Wi-Fi, most UK hospitality businesses have also adopted RFID to improve the efficiency of supply chain management as well as inventory management. RFID aids effective analysis, tracking, and response to any challenges arising from the movement of different supplies to various points in the hospitality business entity. It also enhances the effective room management, vehicle management, personnel tracking, and linen and laundry management. This lowers not only costs but also improves the overall efficiency of hotel operations.
For room management, RFID is enabling most of the UK hospitality operators and managers to get real-time updates about check-in and check-out trends to discern the empty rooms that must be sold to new guests. This suggests that without investment in RFID, hotel managers may not be able to evaluate the room occupancy rates as well as the revenues being generated daily, weekly and monthly to influence how marketing and promotional messages must be repackaged to catalyse an increase in new customer attractions and sales. For hospitality businesses that fail to embrace such technologies, this signifies that it is these technologies that may turn out to be disruptive to their operations and business sustainability. Contrasted with the hospitality businesses that fail to adopt and assimilate the emerging disruptive technologies in their operations, those integrating different disruptive technologies often experience leveraged competitive advantages. This implies that the emerging disruptive technologies reflect one of the contemporary issues that the modern UK hospitality operators and managers must deal with if they are to survive and thrive in the future.
Emerging disruptive technologies like Internet of Things improve the interconnectedness of hospitality businesses with the market. This bolsters seamless engagement and interactions of the hospitality sales personnel with the customers to catalyse the ease of deal conclusion. In turn, this increases sales, revenue, profitability and returns on shareholders’ value. The integration of the required new technologies in different hospitality businesses’ operations improves the overall operational efficiency by lowering the costs of activity coordination. Using artificial intelligence, machine learning, robotics and different algorithms to automate different activities and processes, business often experience improved operational efficiency. Improved automated processes, as integrated with the provision of self-services improves customer experience and confidence about privacy and security services offered by the hospitality business.
Using Internet of Things, the emerging disruptive technologies enhance the disrupters’ interface and interconnection with different suppliers and contractors in the UK hospitality industry. This leverages the seamless flow of activities along the value chain systems to improve not only the hospitality businesses’ cost competitiveness but also competitiveness based on differentiation. The usage of technologies like cloud-based POS systems enables the hospitality business operators and managers receive and process different orders and payments from various customers.
In addition, using big data analytics, UK hospitality operators and managers can easily adopt a customer-centric approach through which the hospitality business constantly analyses, tracks and responds or even anticipates and responds to the unfolding changes in customer tastes and preferences. This improves its overall competitiveness based on improved customer focus. Even if big data analytics enables demographic, behavioural and psychological segmentation, the associated information security risks are the other issues that the contemporary UK hospitality operators and managers are also increasingly grappling with. Since compromising customer information and data affects customer trust and confidence, most UK hospitality operators and managers are often struggling to mitigate the risks of information security breaches. Unfortunately, such quests are often rendered difficult by the fact that the nature and dimension of information security risks and their causes keep changing over time.
That implies constant innovation ecosystem scanning enables new ventures to extract and respond to the unfolding opportunities with the requisite new value-creating innovation outcomes. However, as it does so, the analysis of Dacia’s case implies it also leverages the capabilities of the existing businesses to spot and respond to the emerging new technological opportunities to bolster their growth and sustainability. Facts on how the unfolding technological trends can influence businesses to emerge with new innovation ideas are reflected in Dacia’s response to the challenges posed by the technological advancement for automobile innovation and development in the European car-making market.
Dacia
Instigated by Tesla’s quest to aid the transition of the global car-making industry and market from gasoline-driven engines to electric vehicles, Dacia’s technological macroenvironment is also increasingly characterised by the global consumers’ embracement of electric vehicles (EVs). In response, an array of Dacia’s competitors have also reacted to such changes by increasing the production of EVs. In effect, pioneers like Tesla are already in the advanced stages. This has instigated the proliferation of several premium EV models like the Tesla Roadster and Models X, Y, 3,and S. These disruptive EV models have revolutionised the entire car manufacturing industry and market.Such electrification trends have further been compounded by Toyota’s introduction of the RAV4 Hybrid Woodland, Highlander Hybrid, Camry Hybrid, Sienna, Sequoia and Tundra i-Force Max, as well as Daimler’s introduction of 621-mile range and solar-tech roof EVs that seek to change the entire global car manufacturing industry by 2030. In these electrification trends, Dacia also faces electrification competition heat from Volvo, which seeks to introduce the electric XC60 and XC90 by 2025. To respond to such electrification trends and bolster its sustainability, Dacia partnered with Renault to introduce the “Renaulution Plan”, which seeks to intensify its investment in EV development. After the establishment of its ElectriCity, which also integrates its EV Battery Gigafactory, Dacia introduced the Megane E-Tech Electric Car.
Dacia is a Romanian multinational car-maker that, though established by the Romanian government in 1996, was subsequently acquired by Renault in 1999. Renault’s acquisition of Dacia was aimed at leveraging its cheaper car manufacturing capabilities to create the affordable Dacia quality car brands that would respond to the needs of the Eastern and Central European customers. Dacia’s decision to get acquired by Renault was intended to bolster its capabilities to expand to the other markets outside the Romanian car market. Renault’s acquisition of Dacia propelled Dacia’s evolution from its Romanian base into a major global car manufacturer that established its footprint across 44 countries.
Using a business philosophy of continuous innovation and improvement, Dacia has utilised the prevailing technological advancements to create and deliver affordable premium car brands like the Dacia Logan, Marque, Sandero, Lada and Duster. These Dacia models are edging out low-cost car manufacturers like Suzuki, Toyota and Hyundai from most of the Eastern and Central European markets, as well as the North African, South American and Russian markets. Dacia has been able to exhibit superior performance in the global car market to generate $4.5 billion in 2021. However, it still faces enormous competition from low-cost car manufacturers like Toyota and Suzuki, as well as the premium car-makers like Volvo, BMW, Ford, Daimler, and Jaguar-Land Rover, which are seeking to reshape the Eastern and Central European car market to their advantage. In response, Dacia has been launching a series of its different electric vehicle models in Geneva-Switzerland to build EV brands that can generate higher degrees of rivalry in the global car-making industry. Even if that is the case, economic changes in Dacia’s innovation ecosystem still reflect the increasing emergence of unmet needs for affordable and easy-to-maintain and repair cars.
As major European car manufacturers like Audi, Volkswagen, Volvo, Mercedes-Benz and Land Rover focused on creating and delivering premium cars for premium pricing, a gap emerged from the changes in customer tastes and preferences for more affordable and easy-to-maintain and repair cars. The likes of Toyota and Renault, prior to Dacia’s acquisition, were unable to effectively respond to such needs. In effect, most Eastern and Central European consumers resorted to purchasing and modifying old cars in a bid to meet their needs and demands for affordable and cheaper-to-maintain cars. This did not create threats, but opportunities for Dacia to capitalise on such opportunities to further embrace its low-cost business model that had proved successful in Romania.
In the context of Kotler and Keller’s (2016) Four Ps (Product, Price, Promotion & Place), Dacia created more affordable products to respond to such unmet needs. Technologically, Dacia adopted a labour-intensive car manufacturing process in its Romania plant. Renault had converted the Romania plant into its Eastern and Central Europe car manufacturing hub to create and deliver more affordable Dacia Logan, Sandero and Duster in the range of $6,500 and $9,400. Consisting of only fewer and more reliable parts, Dacia Logan, Sandero and Duster sold 85,000 units in 2009. It is not just such macroeconomic changes in customer tastes and preferences that Dacia responded to with more novel and cheaper cars, but also the increasing competition in the European car market.
Increasing competition arose from the growing attractiveness of the Eastern and Central European car market, which has driven most of the well-established car manufacturers like Audi, Volkswagen, Volvo, Mercedes-Benz, Toyota and Land Rover to establish car manufacturing plants in different parts of Eastern and Central Europe like Finland and Poland, while also exporting to the other emerging markets like India and Turkey. This fuelled competition in the Eastern and Central European car market. And Dacia responded by striking an acquisition deal with Renault. In line with Barney’s (1991) “Resource-Based Theory”, the acquisition was aimed to combine their car manufacturing capabilities to create and deliver more reliable and affordable cars of premium quality. Dacia brought in low-cost car manufacturing capabilities, and Renault introduced a more quality-conscious car manufacturing process to create products that bolster its competitiveness on the basis of cost and differentiation. This disadvantaged low-cost car manufacturers like Toyota.
Using Renault’s well-built reputation, Dacia rebranded and positioned itself as the undisputable low-cost manufacturer of reliable, affordable and easy-to-maintain cars. It reduced the quantity of materials used in the manufacturing of its cars. With such branding and repositioning strategy, it pursued international expansion that entailed the utilisation of Lynch’s (2006) flanking strategy to attack its competitors like Audi and Volkswagen from their Eastern and Central European bases by creating and delivering premium cars like Dacia Logan and Sandero, which sold a total of 537,095 units in Dacia’s different markets like Germany, France, Austria, Czech Republic, Croatia, Belgium and Hungary. To consistently keep competition from its ecosystem at bay, Dacia, through process innovation, has adopted the operational principles of:
- Building platforms like safety features and space to meet family needs and not products.
- Selecting market segments that are price-sensitive and value reliability and space to substitute old or cheap Asian cars for Dacia cars.
- Adopting a low-cost operational philosophy that does not compromise quality.
- Commercial innovation that does not only entail product innovation, but also process, position and business paradigm innovations.
- Global brand protection by separating Renault’s premium products for premium pricing branding from Dacia’s premium quality for low-cost pricing branding strategy.
Yet, as Dacia adopts such operational principles to bolster its competitiveness in the global car market, its innovation ecosystem also presents challenges of constant changes in customer tastes and preferences. As Dacia expanded across Europe and even to other global markets in Asia, Africa and South America, it faced the challenges of dealing with the constantly changing customer tastes and preferences that favour cars suitable for leisure and tourism in remote locations. Customers that previously preferred only more affordable, reliable and easy-to-maintain saloon cars like Sandero and Logan are now demanding 4x4s and SUVs with capabilities to go anywhere and navigate through the dusty and muddy bad roads in Asia, South America and Africa. To counter Toyota’s capabilities to offer such cars, Dacia, as a Renault subsidiary, introduced the SUV models Duster and Bigster, which have the capabilities to go anywhere to meet the needs of consumers in most of the developing markets and tourists that need to travel to remote locations for tourism purposes.
In line with Peter Drucker’s notion of continuous innovation and improvement, Dacia has embraced continuous innovation as part of its business philosophy. Since its inception, it has been continuously innovating and re-innovating to add value to its cars to respond to the constantly changing customer tastes and preferences. Dacia thrived as consumers recognised the versatility of Dacia cars and their batteries to withstand all situations and weather. Dacia further anticipated and responded to the changes in customer tastes and preferences by modifying its 4-Wheel-drive Buggy to include:
- Airless tyres for all terrains.
- Seats that convert to sleeping bags and portable camps to meet tourists’ needs when travelling to remote locations.
- A car rear that unfolds into a workbench for portable office work.
- Detachable headlights that can be used as flashlights.
- A water-bottle dashboard.
- A dashboard that can be linked with a smartphone to offer infotainment and mapping.
These have enabled Dacia to keep Toyota cars, which are also meant for bad terrains, at bay. In addition to these, the other enormous business opportunities may also arise from the unfolding ecological trends in the firm’s innovation ecosystem.
Ecological Ecosystem Trends
Quite often, most businesses perceive the changes in ecological trends as instigated by the promulgation of legislations such as the National Environmental Management Act No. 107 of 1998, as threats instead of opportunities. However, recently, most businesses are recognising that the changes in ecological trends instigate new thinking that unlocks different business opportunities. As environmental legislation emphasises the need for waste recycling, such provisions unlock new thinking that introduces waste recycling as a new form of business. Some businesses have been established to focus on waste recycling as a new business concept.
Yet, as such business concepts emerged, new opportunities arose for businesses to also sell waste from their industries and businesses as inputs. This introduced new sources of revenue to not only leverage their profitability but also improve the overall returns on shareholders’ value. However, the emergence of new businesses engaged in waste recycling is not the only opportunity that often arises from the changes in ecological trends. Instead, it has also emerged that as businesses strive to comply with stringent environmental regulations, such efforts often instigate the need for firms to be innovative and adopt better operational measures and systems. Firms strive to be innovative by developing and applying new measures that improve their operational efficiency and compliance with relevant legislation.
The positive effects tend to spur improved cost reduction, risk mitigation and efficiency levels. This leverages improved reputation and brand recognition. Subsequently, these benefits turn into critical value drivers that improve a firm’s competitiveness, market performance, revenue and returns on shareholders’ value. This implies that sources of value configuration and creation are externally driven by the emergence and evolution of stringent regulations rather than the changes in market forces and competitive dynamics.
Ecologically, macro-trends indicate the increasing need to enforce the consistent compliance with different International Environmental Regulations like the Kyoto Protocol on Climate Change, the Paris Agreement, the Montreal Protocol on Substances that Deplete the Ozone Layer, and the Convention on Biodiversity. All these international legal instruments have been ratified in the markets in which Dacia operates. These are accompanied by the introduction of the European Union Environmental Policies and Regulations that require businesses to conserve natural habitats, minimise air and water pollution, and reduce carbon emissions to reverse climate change. Given the stringent requirements for automobile manufacturers, which are among the largest carbon emitters, Dacia’s rivals like Tesla and Toyota have so far made environmental sustainability part of their business operations. Dacia has also adopted the Triple Bottom Line (People, Planet & Profit) Business Model, which not only emphasises the attainment of profitability but also enhances the well-being of people and the planet in which it operates.
Though its adoption of electric cars minimises emissions and damage to the global environment, Dacia has still gone the extra mile to brand itself as a car maker that emphasises not only profitability but also environmental sustainability. Dacia uses durable steel in its car bodies to limit waste that enters the environment when its vehicles depreciate and are disposed off. It uses recyclable materials to minimise damage to the global environment and reduce impacts that affect the well-being of people. Such strategies have enabled Dacia to use materials that improve the quality of its cars, market itself as ecologically friendly, and minimise the costs of non-compliance to bolstering its overall cost competitiveness.
Wildfires destroy and threaten the lives of wild animals in parks, game reserves, peatlands and woodlands, thereby affecting the overall attractiveness of the tourism features of the UK ecological system. Heatwaves causes air pollution, which scares visitors and tourists with lung and heart problems away from the hospitality facilities located in areas prone to wildfires. Yet, while these affect the seamless operations and profitability of some hospitality businesses, climate change has also been precipitating devastating torrential rainfall that causes floods, while also disrupting most outdoor tourism and hospitality events and activities like picnics, birthday parties, and wedding anniversaries hosted by some hospitality businesses. An increase in floods has often paralysed the attractiveness of the hospitality businesses in coastal areas like Hull, Peterborough and Great Yarmouth. Heavy floods often shift debris and rubbish from different areas to beaches, rendering them less user-friendly or clean for visitors and tourists hosted by the hospitality businesses in areas like Cumbria, Kent, Essex and Merseyside which often experience heavier rainfall and floods compared to the other parts of the United Kingdom. Combined with the rising sea levels and coastal erosion in areas like Norfolk which often experience heavy floods, it becomes difficult for the hospitality operators and managers to attract visitors and tourists to their hospitality facilities and services. This affects the attractiveness of the UK tourism and hospitality industry.
Most hospitality operators and managers who are largely involved in tours and travel, often opt to respond to customer demands by organising tourism trips to warmer places like California, Africa, India or the Caribbean. However, while some hospitality operators and managers use such an approach, others have opted to invest enormously in the improvement of the quality of indoor entertainment services/products. However, the challenge often arises from the rising costs of energy and food. As hospitality activities take place indoors during the extremely cold winters or rainy days, heating costs escalate, thereby increasing energy expenses. This raises operational costs to lower the overall profitability margins. Declining profitability margins for hospitality operators are not just due to increased energy costs but also the rising cost of food. Prolonged heavy rainfall or adverse weather conditions destroy crops and plantations. This affects the quality and quantity of harvested foodstuffs. It causes food scarcity which in turn leads to the rising food prices. Since food, drinks and other beverages are central to the services and products offered by most hospitality operators, higher prices tend to affect the profitability of their operations. Higher food prices repel customers and visitors while also reducing the length of stay for different tourists, thereby improving the overall profitability of the hospitality businesses. As hospitality businesses grapple with the devastating effects of climate change, they also have to deal with the increasing environmental activism. Environmental activism which is often punctuated with pressure to ensure all businesses comply with and mitigate the devastating effects of climate change, is also putting pressure on most UK hospitality operators and managers to adopt greener operational approaches. Unfortunately, balancing the need for the commitment of resources to greener operations while also maintaining and improving profitability and business continuity is often a challenge.
Since most costs and returns on investment in greener hospitality operations can only be recouped in the long run, less well-resourced hospitality operators that are unable to meet such costs often struggle and exit the market. This is because apart from the pressure from environmental activists, there is also enormous pressure from the government to ensure compliance with various environmental legislations and regulations such as the Control of Pollution Act, the Wildlife and Countryside Act, and the Ancient Monuments and Archaeological Areas Act. In the quest to adopt greener approaches and sustainable operations, most hospitality businesses have also adopted various forms of technologies. This has instigated a crisis arising from disruptive technologies as one of the contemporary issues that the UK hospitality operators and managers must also deal with if they are to thrive.
Even if the United Kingdom’s (UK) hospitality industry rebounded from Covid-19 disruptions with the impressive growth of £11.28 billion in 2021 to £16.42 billion in 2022 and then £19.76 billion in 2023, the overall attractiveness of the UK hospitality industry is still affected by a myriad of contemporary issues that the hospitality operators and managers must innovatively deal with. Such issues encompass the rising energy costs, climate crisis, Brexit which instigated labour shortages, Alcohol Duty Reform, ecological sustainability pressure and the rising costs of living and inflation that reduce disposable incomes for leisure, travel, tourism and entertainment. In terms of energy costs, the constantly increasing energy prices instigating inflation are some of the contemporary issues affecting hospitality operators and managers in the UK’s hospitality industry. In the 2021 financial year, soaring energy prices were still manageable. However, from 2022, Russia-Ukraine war disrupted energy supply chains. Combined with the announcement of international sanctions on Russian energy, this caused acute shortages of gas, electricity and energy in the UK.
Just like the manufacturing sector, the UK hospitality sector significantly relies on energy supplies to bolster the efficient operations of most of its departments and units. Hence, the increasingly uncontrollable energy prices are becoming a major concern for about 30% of the UK hospitality enterprises. Increasing energy prices have instigated a rise in transport costs. This has caused inflation which has led to an increase in the prices of essential commodities like food, accommodation, cosmetics, drinks and the other forms of beverages. As prices increased and hospitality operators and managers also raised prices for different hospitality services and products to increase their operating profit margins, consumers became more cautious about how much, where, and when to spend on different hospitality services and products.
Prior to the energy crisis, outdoor eating, drinking, entertainment, travel, tourism and holidaying had become necessities for the stressed population emerging from the Covid-19 lockdowns. However, the constantly rising energy prices, which have led to increased prices for hospitality services, have caused consumers to review their budgets and behaviours. Most UK consumers are spending less on food, drinks, entertainment services, and holidays.
As most of them are taking shorter holidays, the overall sales, revenue, profitability and returns of most hospitality businesses have also reduced. To survive, most UK hospitality operators and managers have adopted drastic cost-reduction strategies such as using alternative, sustainable and less expensive energy sources like solar and biogas. Many hospitality businesses have also adopted artificial intelligence and automated systems and processes to reduce human labour costs, bolster operational efficiency, and lower costs to enlarge operating profit margins.
Even if such initiatives reduce costs, complexities still arise from the fact that, in the hospitality sector, a labour-intensive approach is still essential for improving the quality of hospitality services compared to a capital/technology-intensive approach. In that regard, most UK hospitality operators and managers often relied on the free movement within the European Union (EU) to fill such gaps at relatively lower labour costs.
Since the advent of Brexit, the UK hospitality industry has been experiencing growing shortages of relatively cheaper skilled labour. This skilled labour scarcity and increasing labour costs affect the ability of the UK hospitality operators and managers to reduce operational costs in other areas to offset the devastating negative effects of the constantly increasing energy prices. Since the energy bill for all households and businesses is now three times higher than it was in 2021, this poses operational risks for the contemporary hospitality operators and managers to ensure profitable operation. To mitigate such risks, some hospitality businesses have signed long-term contracts for the supply of energy at fixed rates to mitigate the constantly increasing operational costs arising from the escalating energy prices.
Rates relief is another important initiative for mitigating rising energy costs. However, most hospitality businesses in Scotland may still struggle compared to the hospitality enterprises in England and Wales since Scotland does not have rates relief. To deal with such issues, UK hospitality operators and managers are calling for the government to help renegotiate terms and conditions for long-term contracts that some businesses are struggling with, while also providing rates relief throughout the United Kingdom. UK hospitality operators and managers are also agitating for a government fiscal package and support for struggling businesses. However, most UK hospitality operators and managers also face the challenges of the climate crisis and ecological activism as the other contemporary issues affecting the effective performance of the UK hospitality industry. Despite such challenges, changes in legal trends often introduce new business practices and approaches that leverage a firm’s overall competitiveness.
Legal Ecosystem Trends
Changes in trends arising from the promulgation of new legislations like health and safety regulations can drive innovation through the need for constant analysis and risk mitigation. Such quests can motivate businesses to engage in the creation of products that reduce the amount of carbon emitted into the atmosphere or even the kinds of environmentally friendly materials used to reduce the negative impacts of the business on the surrounding communities.
The need for compliance with government regulations like tax regulations can also motivate businesses to become more innovative by exploring new and adopting new ways of lowering costs to create additional revenues that can be used to meet tax obligations. That applies in situations where the business is behind on the payment of its tax obligations. If the business is significantly behind, it may engage in process and position innovations to generate enough financial resources to offset its unmet tax obligations. In such situations, process innovations could involve the introduction of new operational processes that eliminate, add, or even combine some wasteful processes into one to reduce costs. Process innovation aimed at reducing costs can instigate the introduction of new machinery, equipment, and automation using artificial intelligence and robotics to lower costs.
Quite often, such innovative process innovations unlock extra financial resources that can be used for settling the unfolding tax obligations. If the business is not engaging in process innovation to lower costs, it could opt for position innovation to create unique selling propositions that enable the business to uniquely position and market itself. This often catalyses sales’ increases. In turn, it spurs revenue and profit growth that improve business liquidity to handle all its unfolding financial obligations. Yet, as businesses engage in such practices, they tend to unlock new opportunities that were previously unthought of. The quest to explore new ways of solving a particular problem can inadvertently lead to the discovery of a completely new product.
In the quest to mitigate the risk of causing health and safety incidents and accidents, intense analysis of the existing business operational approaches may lure businesses into using operational risk analysis and mitigation methodologies. This may leverage a firm’s value configuration and creation. This supports the identification and minimisation of incidents and events that disrupt or cause failures. Such failures often affect the effective accomplishment of the required business activities. Such a narrative is reflected in the case of Johnson & Johnson, where its efforts to comply with health, safety and environmental laws, as well as the basic conditions of employment have driven the introduction of some innovative products, services and practices that have become part of its business culture.
In the quest to reduce carbon emissions from all its value chain activities, Johnson & Johnson has reduced the utilisation of non-renewable energy like coal in all its manufacturing facilities around the world. Instead, Johnson & Johnson is emphasising the stronger utilisation of renewable energy in all its manufacturing plants. The introduction of renewable energy is part of the quest of improving Johnson & Johnson’s sustainable operations. But in the process of achieving that, it also motivates Johnson & Johnson to invest in the innovation of processes as well as the utilisation of machinery and equipment that reduce costs. In the long run, the innovative approaches adopted by Johnson & Johnson will not only have enhanced compliance with the relevant environmental laws but also the adoption of more efficient and cost-effective operational processes and methods. Besides the introduction of more innovative value chain processes, Johnson & Johnson has also introduced more novel products that place significant attention on improving the health and safety of the entire global population.
Johnson & Johnson applies more innovative approaches to eliminate aspects of the products that affect the safety and health of consumers. It also forces the introduction of innovative ideas that enable the creation of more quality premium medical products as well as devices. These initiatives have enabled Johnson & Johnson not only to create and supply better quality medical products and devices to respond to the demands of environment as well as health and safety legislation but also to improve its branding and subsequently its competitiveness. To eliminate waste that affects the quality of the ecological environment, Johnson & Johnson has introduced recycling initiatives as part of the innovation processes of creating other products from waste.
As Johnson & Johnson engages in such innovations, it is able to create new products that enlarge the portfolios of products that it can sell to generate more revenues. Through waste recycling, Johnson & Johnson reduces waste and the overall operational costs. This increases the overall operating profit margins to bolster the overall profitability of Johnson & Johnson as one of the leading operators in the global pharmaceutical industry. This suggests how quests for improving a business’ compliance with the relevant laws and regulations cannot only instigate new innovation ideas but also quests that bolster a firm’s value configuration and creation.
Value configuration and creation are strategic processes of undertaking a holistic analysis to identify variables that must be either added, subtracted, combined or modified to create advantages and benefits that leverage a firm’s overall competitiveness and market performance. It aids the analysis and identification of the major value drivers that must be further strategically developed to catalyse the other value drivers and spur the improvement of a firm’s value creation. Subsequently, this improves product or service quality, features, design and attributes to leverage a business’ overall differentiation of their products or services from rivals.
As operational risk management is integrated with the process of value configuration and creation, it may enhance an enterprise’s ability to identify and remedy major operational glitches constraining a firm’s effective business operation and achievement of its strategic objectives and goals. Mitigation or prevention of operational disruptions, failures, errors, defects, losses and waste often spawns cost minimisation, process efficiency and quality excellence. In turn, these advantages often turn into critical value drivers that, in turn, create other values such as improved customer satisfaction, competitiveness and enormous returns on a firm’s financial performance. Operational risk management spawns the overall effectiveness of value configuration and creation by facilitating radical review. Correspondingly, it also aids the required operational processes and systems’ modifications and reconfiguration to consistently provide enormous business benefits in the midst of all the emerging discontinuities and uncertainties.
Yet, as businesses engage in business practices that bolster their compliance with the relevant health and safety regulations, new opportunities reflected in the need to produce and sell protective clothing and safety wear also tend to arise. Compared to anti-trust or tax laws, it is environmental legislation as instigated by the worsening cases of global warming that are pressurizing businesses to adopt new practices. The increasingly stringent environmental regulations are requiring businesses to engage in some novel product, service, process, position or even paradigm innovations in order to survive and thrive. Such outcomes are also not only reflected in Johnson & Johnson’s behaviours but also in the innovative activities aimed at improving eBay’s compliance with the relevant environmental legislations. To minimise waste generated and dumped on the ecological environment, eBay as an e-commerce site has created a platform where people from various parts of the world can exchange goods that they no longer want with the items that they are looking for.
Alternatively, one can also auction or resell a product which is no longer needed. Though the focus of eBay is trade in brand-new goods, it also includes auctioning second-hand goods as well as the exchange of second-hand goods no longer wanted with the ones desired by the customer as part of its corporate social responsibility initiatives. Besides environmental regulations, the legal macro-environment in which Dacia operates is also characterised by the changing legislations on Employment Equity, Basic Conditions of Employment, and Employee Health and Safety. There is also legislation on Consumer Protection that requires all products created and delivered to the market to meet the prescribed health and safety standards. In response to these legislative trends, Dacia has embraced the safety of its labour-intensive car manufacturing processes to minimise health and safety risks that employees may experience from using more complex automated processes.
During the Covid-19 pandemic, it also sent most of its employees’ home and halted production to ensure the safety of its employees to comply with Covid-19 Standard Operating Procedures and Regulations. Dacia integrated safety features in its cars with the effect that its Dacia-Jogger got a One-Star Safety rating and Dacia-Duster got a Three-Star Safety rating by Euro-NCAP (European New Car Assessment Programme). This bolsters Dacia’s branding and reputation as the creator and deliverer of the safest and reliable cars to leverage its competitiveness on the basis of differentiation. It also improves Dacia’s cost competitiveness as it is able to comply with relevant laws and avoid hefty fines for non-compliance. Though this leverages an increase in Dacia’s sales, revenues and returns on shareholders’ value, Dacia is still accused of responding poorly to employees’ demands for good wages and salaries as well as better employment conditions.
These accusations arise from the appalling conditions where some of the employees are required to produce a car in 40 minutes without lunch breaks or even offering meals to employees. This can affect Dacia’s branding and reputation as a good employer. Despite such positive outcomes, Dacia’s future challenges and opportunities are still intertwiningly reflected in the increasing embracement and diffusion of electric vehicles in the global car market that may finish the complete disruption of gasoline vehicles by 2030. To counter such threats, Dacia will have to convert such challenges into opportunities by intensifying its investments in the development of more affordable electric vehicles. Through the creation of cheaper electric vehicles, Dacia will be able to counter threats from the likes of Tesla, Daimler, Hyundai, Toyota and Volvo that have so far failed to develop and offer more relatively affordable EVs. Other challenges may arise from the lack of adequate car manufacturing facilities in South America, Africa and the Indian markets that are increasingly turning lucrative. As Renault maintains only a few Dacia manufacturing facilities in these markets, it creates gaps for the likes of Toyota that has covered the entire world to enjoy supremacy to generate profits that can be used to undermine Dacia’s performance in its major European markets. Instead of relying on importers and distributors to serve South America, Africa and the Indian markets, Dacia must invest more in the establishment of its car manufacturing facilities in such regions to improve its proximity to the major emerging markets before its rivals do so. Such a strategy will lower its distribution costs to bolster its overall competitiveness and operational capabilities to undermine the likes of Toyota’s dominance in such regions. However, for the innovation venture to respond to the unfolding threats and opportunities, it must also explore whether it has the requisite capabilities to respond. Such internal analysis informs decisions on whether certain major or minor modifications of a firm’s internal capabilities are required for it to effectively respond to the unfolding challenges and opportunities.
Okanga, B., Danvers, N., & Rugyiya, R. (2026). Innovation Ecosystem Scanning: The Novel Innovation Ideas’ Generation Tool for Winning and Winning in the Evolving Markets of the Modern World. London: Elicitor.
Further Readings
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