Financial Innovation - Term Paper Example

Answer Innovation can have a lot of forms. Moreover, during the history types and presentation of innovation have been changed in accordance with theconditions (social, political, financial) of each particular period of time. In this context, a characteristic type of innovation has been proved to be the financial one. Financial innovation has a long tradition in the human history. Tufano (2002) refers to financial innovation as an outcome of the human development throughout the years. More specifically, he proceeds to the presentation of the general characteristics of the specific type of innovation presenting all its particular aspects as they can be observed in the particular sectors of human activity. Financial innovation does not belong solely to the area of products neither to the one of services but it is rather a combination of the two. Moreover, according to the study of the above researcher a small literature on the history of financial innovation demonstrates that the creation of new financial products and processes has been an ongoing part of economies for at least the past four centuries, if not longer. As an example he mentions the work of Benjamin Graham and David Dodds at 1934, titled Security Analysis. During the period of war financial innovation had not stopped to be developed. It should also be noticed that its major key drivers, the globalization and the volatility of the markets do not seem to be differentiated to an important level comparing the periods of peace. On the other hand, the above differentiation is not similar around the world (comparing periods of war and those of peace). For this reason in areas where the above differentiation was historically limited (like in U.S.A.) the country’s financial strength did not suffer – at least to a major point – but continued to be increased. However, in areas where the interaction between the financial innovation and war was (and still is) intense (like in countries of Asia), the financial development of the country is deeply influenced most commonly on a negative basis. Answer a) The interaction between drivers and actual innovation operation can be presented through the following graph: Graph 1 – Framework of organizational innovation (Baker, 2002, 2) In accordance with the above graph, the main key drivers of innovation are the following ones (Baker, 2002, 2): Financial pressures to decrease costs, increase efficiency, do more with less Increased competition Shorter product life cycles Value migration Stricter regulations Industry and community needs for sustainable development Increased demand for accountability Community and social expectations and pressures (giving back to the community, doing good, etc.) Demographic, social, and market changes Rising customer expectations regarding service and quality Greater availability of potentially useful new technologies coupled with the need to keep up or exceed the competition in applying these new technologies The changing economy. The presentation of the above list of drivers of innovation does not exclude the possible existence of other factors that could be considered as drivers in the innovation – related activities. b) During history drivers of innovation have been changed in accordance with the general political, social and financial conditions that characterize each particular era. More specifically, during the periods of First and Second World War, demographic changes were radical due to the losses caused by the wars. On the other hand, the research for new technologies during the same periods was increased because of the emergent need for advanced weapons and methods of destruction. At the same time medical research was also significantly developed due to the increased need for medical treatment while the need of consumers for better service was an issue that could not even set under consideration at the specific periods of time. Another example of the differentiation in the role of drivers in innovation is the period of 1920s in USA which was characterized by a severe financial turbulence. Under the circumstances held in the specific period of time the need for accountability and stricter regulations (drivers of innovation as presented above) was intense in order to protect the country’s economy. Answer Among the drivers of innovation mentioned above one of the most significant should be considered the Survival. The reason for such a choice can be explained by the fact that the whole process of innovation requires the existence of specific persons – participants who will proceed to specific innovation – related activities. Without the existence of the actors, the process would remain a theoretical framework without application in terms of real life. Moreover, survival is also connected with the continuation of civilizations the existence of which is a necessary prerequisite for the application of innovation in practice. In the past survival (in periods either of war or piece) was more difficult to achieve whereas even in such cases the consequences of war in the local and the global infrastructure would prohibit any relevant activity. On the other hand, even in periods of long term wars, casualties are usually limited due to the differentiation in the structure and the form of military activities globally while the development of medical treatment has also played a significant role. From this side of view, survival has been developed both regarding the rates and the percentage of people killed by military actions or by physical causes and regarding the level and the quality of health of people surviving (mostly due to the radical development of medical services as well as the due to the development of quality of life in general). Answer a) Regarding the first invention I would probably use the Design Registration option. The reason for the specific choice is that the particular machine is already developed and is expected to enter in the market. This means that it will be available to the public. For this reason its existence has to be announced while its Design should be protected through the Design Registration process the terms of which however should be followed strictly. In any case the newly developed machine should not enter the market before the completion of the relevant procedure regarding its protection as invention. b) As for the second invention, the best option to protect it would be the Copyright. To its actual form, the specific computer program (as all computer programs) can be equalized with a document. In this context, the Copyright procedure would be the most effective for its protection against potential fraud. c) The third invention, the screwdriver would be protected more effectively using the Patent rules. More specifically, the specific product consists an invention as of its design and for this reason it should belong to the absolute control, monitoring and selling right of its creator. d) The product of the fourth category actually already exists in the market so it is not the case of invention as of its usage and its general form. However, it is an invention as of the options offered to the consumers. In this stage and taking into account the fact that there will be an arranged meeting for the presentation of the general form and the benefits of this product it would be preferable if the inventor would keep it secret at least for a specific period of time in order to evaluate its potentials and the level of profit that would be probably generated if the specific product would enter the local or the global market. Answer A. 1) Copyright is a set of exclusive rights granted by governments to regulate the use of a particular expression of an idea or information. At its most general, it is literally "the right to copy" an original creation [6]. A common example of copyright is the right of the author regarding the text he/ she wrote. The same case involves with the painter and the painting created by him. 2) Industrial design rights are intellectual property rights that protect the visual design of objects that are not purely utilitarian. An industrial design consists of the creation of a shape, configuration or composition of pattern or color, or combination of pattern and color in three dimensional forms containing aesthetic value [6]. An example of industrial design right is the logo ‘Coca-Cola’ as a visual object. 3) Trademark or trade mark is a distinctive sign of some kind which is used by a business to uniquely identify itself and its products and services to consumers, and to distinguish the business and its products or services from those of other businesses. A trademark is a type of industrial property which is distinct from other forms of intellectual property [6]. Industrial designs are used in order to distinguish the particular entrepreneurs that activate in a specific market (the case can also refer to a global protection if the relevant procedure has completed). An example of trademark is the name ‘Coca-Cola’. 4) On the other hand, a patent is a set of exclusive rights granted by a state to a person for a fixed period of time in exchange for the regulated, public disclosure of certain details of a device, method, process or composition of matter (substance) (known as an invention) which is new, inventive, and useful or industrially applicable [6]. The existence of the above characteristics is a necessary requirement in order for the state to grant patent to a person. After such a recognition, the relevant product/ service can be considered as belonging exclusively to the patentee. An example of patent is the small glass designed especially for babies in order to be protected from possible dropping of the water or other liquid they consume. B. The Domain Name should fit in the Copyright category because it is a piece of text. On the other hand, it could also be protected as a Trademark if used by a company as its Trademark in the market. Answer a) The most appropriate rules for the protection of the specific invention could be those of Copyright. The reason that can justify such a decision is mainly the fact – as already mentioned above – that the computer program is basically a piece of text including specific symbols. For this reason Copyright should be considered the most applicable method of Intellectual Property sector regarding the specific product. b) As for the specific product the sector of Intellectual Property that could be most appropriate is that of the Registration Design. More specifically, the spanner as a product already exists; the only differentiation of the specific products from the others that belong to the same category is the existence of ‘unique’ ‘attributes’ according to its designers. For this reason it is not the spanner itself that should be protected but the mechanisms that differentiate this spanner from the other spanners that are sold in the market. c) The specific system that was developed by Consumer Products Division should be protected using the rules related with Patents. More specifically, the structure and the operation of this system are unique and for this reason it has to be set under protection as of all its parts and mechanisms. Answer The Kondratieff Cycle is a theory based on a study of nineteenth century price behavior which included wages, interest rates, raw material prices, foreign trade, bank deposits, and other data. He, like R.N. Elliott, Kondratieff was convinced that his studies of economic, social, and cultural life proved that a long term order of economic behaviour existed and could be used for the purpose of anticipating future economic developments [3]. Specifically for the technology sector the application of Kondratieff theory has led to the creation of specific standards regarding the potential outcomes of technology revolution in the future. Regarding the current (5th) cycle it should be noticed that it is characterized by the production of products of advanced technology which furthermore it is developing on a daily basis. However, there has been a significant differentiation regarding the technology products of current Cycle comparing the relevant products of the previous one. The most important difference refers to the nature and the purpose of the products involved with a priority of communication and military operations in current cycle while the previous one was mainly characterized by the intense efforts for the development of medical treatment. Specifically for the latter there has been an effort to develop very specialized sectors like genetics. Table 1 - Current economic cycles (in accordance with Kondratieff theory, [4]) Answer Graph 2 - The Kondratieff Wave [3] a) The Wagon Train Effect has been developed in order to justify the influence of in-train factors over the wagon dynamics. In other words and referring to the financial area the internal elements of a given economy can have a significant influence over its development either in short or in long term. As an example the prices of the products/ services in a specific market can alternate the inflation rate and in this way they can influence the economy of a state. On the other hand, salaries/ wages of employees if dropped under specific standards will cause a series of consequences for the economy of the state involved (decline in buying of products or services, following decline of the country’s financial development). b) The key features of fifth Kondratieff are the following: high rates of inflation, high levels of debt at all industrial levels, uncertainty in the sector of work, strong competition, and unexpected turbulences in the financial markets around the world. c) Examples of innovation that is not based on new technology can be the following: 1. The products of intellectual property 2. Behavioural practices used in the commerce d) According to my view there is not a specific reason that could justify such a decision as in this way the development of technology should remain without justification. More specifically the creation of products of advanced technology that are free from weaknesses of the past (as they have been identified through the relevant research) could not proceed. In any case the lack of sufficient capital for the funding of the research for the development of new technologies could not justify such an option. e) The ‘spirit’ of enterprise is the entrepreneur, i.e. the person that holds the total responsibility for the creation, the operation and the development of the specific enterprise. On the other hand, innovation can be: ‘the act of introducing something new: something newly introduced ‘(The American Heritage Dictionary) or ‘1. the introduction of something new or 2. a new idea, method or device’. (Merrian-Webster Online). [5] Answer A. (1) The Ideas person is the one who ‘conceives’ the idea for an innovative product/ service at first place. In this way, he is the person mostly connected with the existence of the specific product/ service and its offering in the market. He is the one that primarily imagined the form and the role of the product/ service in the local or the global market. (2) On the other hand, Editor follows the above person’s instruction trying to create a product/ service that will reach the described ones at the best possible level. For this reason Editor has to cooperate closely with the Ideas person in order to be informed on any necessary detail regarding the specific product/ service. In a general term, he is the intermediate person between the inventor (or the ideas person) and the entrepreneur trying to keep the balance in the cooperation. (3) The ‘Runner’ is the person or the enterprise that hold the responsibility for every issue regarding the disposal of the innovative product/ service in its market. At the same time he usually bares the financial risk (except in cases where this is taken by a specific company or person as a grant) as well the responsibility for any administrative issue that may appear during the design, the production or the disposal stage. B. Among the three role types described above the one that best describe myself is the Ideas Person. The reason for such is a choice is that I would prefer to involve specifically in the creation sector without participate in the rest stages of the product/ services development because of the complicated and mostly high responsible character of the relevant roles (the Engineer and the Runner). On the other hand, the Ideas person has the chance to express his creativity and his preferences regarding a specific industry sector. Answer a) The stages of Product Life Cycle are the following ones: 1. The Introduction Stage. At the Introduction (or development) Stage market size and growth is slight. For this reason it is possible that substantial research and development costs have been incurred in getting the product to this stage. In addition, marketing costs may be high in order to test the market, undergo launch promotion and set up distribution channels [1]. The most important commercial fact during this stage is the entrance of the product/ service in its market. 2. The Growth Stage is characterised by rapid growth in sales and profits. Towards this direction, it has been found that profits arise due to an increase in output (economies of scale) and possibly better prices [1]. The priority of business at the specific stage should be the creation of an extended market share (at the highest possible level). Moreover, a close monitoring of the product/ service as of its performance in the market could protect the entrepreneur or the investors involved from any possible unexpected outcome. 3. The Maturity Stage is, perhaps, the most common stage for all markets [1]. The specific stage should be considered as the most important because it is the one during which the competitors try to make their presence over the product/ service that have entered the market whereas marketing spend has to be monitored carefully, since any significant moves are likely to be copied by competitors. 4. In the Decline Stage, the market is shrinking, reducing the overall amount of profit that can be shared amongst the remaining competitors. At this stage, great care has to be taken to manage the product carefully [1]. In order to secure the finance of the enterprise or the individual there may be a case of taking out part of the costs by transferring the place of production or changing the suppliers. B) The extension of product life cycle can be achieved when using one or more of the following techniques [2]: 1. Advertising – try to gain a new audience or remind the current audience, e.g. the recent Kellogg’s Cornflakes adverts. The cost spend on advertising however should be carefully considered in accordance with the company’s financial strength and the possibility of achievement of the target set. 2. Price reduction – more attractive to customers. In the same context with the above, the price reduction should not exceed certain standards set by the relevant market and by the firm’s strength to cover its financial obligations. 3. Adding value – add new features to the current product, e.g. video messaging on mobile phones. 4. Explore new markets – try selling abroad, and 5. New packaging – brightening up old packaging, or subtle changes such as putting crisps in foil packets or Seventies music compilations. Answer a) The main reason for the existence of high failure rate on new products can be located to the fact that most of them are disposed in the markets without a proper preparation. More specifically, the research over the current market efficiencies and needs is usually limited to indicative surveys (they are also cases where no such survey exists regarding a new product) while the preferences of the consumers are not usually taken into account. On the other hand, in most cases the marketing strategy is not designed in accordance with the firm’s or the individual’s financial efficiencies, a fact that lead to the lack of appropriate marketing support regarding a specific product. b) In the above context, in order to ensure that new successful products are developed the following practices should be used: 1. A detailed research of the market involved before the beginning of the production process 2. A research on the consumers’ preferences in all the specific product’s particular elements (form, packaging, taste etc.) 3. A thorough examination of the firm’s or the individual’s financial strength including the design of a financial plan regarding all the costs involved 4. The choice of an appropriate marketing strategy after reviewing all possible options for the presentation of the specific product to the public 5. Cooperation among all participants for the identification and the rapid resolution of any problem appeared during any stages of the product development process. 6. In any case the new products have to take into account the trends of the market, the consumers’ expectations but also the financial strength of the entrepreneur (firm or individual). Answer SMS text messaging could be described as an evolutionary development. The reason for this assumption can be found in the fact that the specific service offered to the users of mobiles phones is in fact a ‘subordinate’ element of the net of services offered by mobiles or by other devices (computers). More specifically, the provision of such a service cannot be considered as possible to be achieved without the use of specific technological products. In case specifically of mobile phones SMS text messaging was a service that was developed gradually but this fact cannot change its character as an evolutionary development. On the other hand mobile phones could be considered as revolutionary development comparing with the conventional/ traditional types of phones. The above assumption should not reduce however the importance of the above development but in any case the specific service should be characterized as an innovative one as related with the use and the potentials of mobile phones. References Baker, K. (2002). Innovation http://www.au.af.mil/au/awc/awcgate/doe/benchmark/ch14.pdf Gordon, I. (1999). The Long Wave Analyst. Cannacord Capital, 2(1) Tufano, P. (2002). Financial Innovation. Harvard Business School http://levine.sscnet.ucla.edu/archive/fininnov_tufano_june2002.pdf http://www.tutor2u.net/business/marketing/products_lifecycle.asp [1] http://www.tutor2u.net/business/gcse/marketing_product_life_cycle.htm [2] http://www.angelfire.com/or/truthfinder/index22.html [3] http://www.kwaves.com/kond_overview.htm [4] http://en.wikipedia.org/wiki/Innovation [5] http://en.wikipedia.org/wiki/Registered_trademark [6] Read More