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Essay: Constant development in technological areas

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Constant development in technological areas

1.0 INTRODUCTION

Nowadays, because of the constant development in technological areas, the global market has become even more competitive than what it was in the past years, urging companies to improve and develop their activities even more. Companies therefore are seeking of new ways to launch their brands and attract customers to them in order to increase their advantages against their opponents. The magical word that describes the procedures that are developed in order to enter a new era in the world of trade is, “innovation”. Innovation comes in different forms shapes and sizes, it might be referred to as differentiation of a product or service, or on the other hand it might just mean a new brand of product launched into the market. In essence, innovation is a crucial part of the future of companies that want to potentially conquer the market they are in. Companies that are able not only to keep up with the changes in the global market but to go beyond their own capabilities, is crucial in the new age of the global market.

Companies that are based in countries that are highly innovative, have more advantages against competitors that are based in countries that innovation levels are not as high. One of the most innovative companies worldwide is Virgin. Virgin is one of the most recognized and respected brands in the global market and is the leader in branded venture capital organizations. As stated in the company’s official website, “Virgin has created more than 200 branded companies worldwide, employing approximately 50,000 people, in 29 countries. Global branded revenues in 2008 exceeded £11 billion (approx. US$17 billion).”

Virgin is based in the UK, which is known as a country that has an average percentage of company innovation in comparison to the rest of Europe. Around 50% of UK businesses are innovators in the sense of recent introduction of

Technologically new products, processes or services. Around 40% are follower

Innovators and 10% novel innovators (new to their market). These overall figures

hide some differences between manufacturing and services and between businesses of

different sizes. So 43 % of manufacturers are product innovators and 24% are process innovators, while in service sectors some 50% are innovators.

An analysis in depth of both UK and Virgin innovative natures is going to be examined below.

2.0 INNOVATION IN THE UK

2.1 INNOVATION BACKGROUND

In the annual European Innovation Scoreboard that was issued by the European Commission in January 2009, a comparative measurement of innovation performances of the European Union countries-members was presented for the year 2007. The UK held on to its leading position in the top innovative countries in Europe alongside Sweden, Germany, Switzerland, Finland and Denmark, performing above average comparing to the rest of the EU countries (figure 1).

The European Innovation Scoreboard highlighted that there are many areas where the countries performance was below the EU average and those are parts that the UK has to focus on. Areas such as the low rates of employment in innovative companies and the exports and trades of innovative merchandise and services are areas that have to be redeveloped and focused on.

2.2 INNOVATION ACTIVITIES IN UK

Organisations like the Technology Strategy Board, universities, research councils, public sector research establishments (PSREs) have continued to support research and knowledge exchange to business. Others like the Design Council and NESTA provide support for innovation within business and the public sector, ensuring that innovation forms a key part of the drive for efficiency savings. Others including the National Measurement

System, British Standards Institute, the UK Accreditation Service and the Intellectual Property Office provide vital services underpinning innovative activities. The UK Innovation Survey shows a steady increase in the proportion on innovation active businesses in the UK. The 2007 survey also recorded the proportion of employees in particular sectors that are educated to degree level at innovation active and non-active businesses in 2006. Some sectors tend to employ more graduates and in all sectors those that were innovation active tended to employ significantly more graduates.

2.3 R&D

England is one of the top countries in the world when speaking of R&D on an educational and corporate level. The high level of universities and research foundations has boosted companies to expand into the UK market, taking advantage of the high levels of R&D. Investments have been made by leading company’s of the global market such are Ford, Nokia, Roche and Nissan making the UK the fifth highest country in the world when it comes to R&D expenditures (source: BIS 2010).

. The latest figures for total investment in R&D (for 2007) show that the UK invested 1.79% of GDP on R&D, which represented £25.4 billion and a 5% increase in real terms from 2006.45% of R&D funding in the UK comes from UK businesses (a small decrease in value and overall proportion compared to the figures reported in the previous report), and 32% from Government (figure 2). 17% is funded from overseas, mainly by business which is high when compared with Canada (9%) and Japan (0.3%) as stated in the annual innovation report 2009.

Such high levels of R&D have been achieved by the UK for many reasons. Firstly, UK has the second most powerful research foundations globally after the United States. Secondly, approximately 200 R&D patents where developed in the UK by Multinational companies during the years 2008-2009. Additionally, 8% of the global scientific papers where developed in the UK and the country has a 12% citation share ranking the country second in the global market. For the reason that the country’s standards are so high international companies are tempted to expand their activities into the country. It is a fact that entries from abroad have exclusive rights for 35.3% of R&D patents in the UK, a very high percentage if we compare it to the average of 13.5% across the EU. (Source: OECD, 2009)

Solow (1957) devised a framework for distinguishing the contributions of labour, capital and technical change to economic growth ( Snowdon and Vane, 1997, pg 612).

The Solow growth formula, regardless of its limitations, focussed attention firmly upon the role of technical progress. If the sources of technical progress could be identified, then the implication for government policy could be profound, advocate of technical progress pointed to the possible role of education and training where government policy might be expected to exert a major impact (Snowdon and Vane, 1997, pg 613).

Therefore, according to the Solow growth formula, in order for the government to increase the levels of R&D and further, the global ranking of the country, investment has to be made in this particular sector focusing on the development of the education levels and increase in expenditure when coming to education.

UK has a long history of academic and research excellence – indeed, UK scientists and institutions have won over 80 Nobel Prizes for their scientific achievements.

The UK’s universities and research centres have an exceptional international reputation and are highly experienced in working closely with all parts of the private sector in undertaking leading-edge R&D.

Universities in the United Kingdom during the years 2007 to 2008 had an external income that added up to approximately 2.8 billion pounds (figure 4). The increase comparing it to the last year has been 6.5% and since 2001 it has doubled its income proving how strong universities are in the UK and also the quantity of knowledge that is developed over the years bringing the country where it is today.

Furthermore over 900 Knowledge Transfer Partnerships are now in operation, new shorter KTPs have been launched.

UK Trade and Investment (UKTI) say that they have used the strength of the research base to attract more than 200 Research and Development (R&D) investments to the UK during 2008/09 alone.

2.4 GROWTH LEVELS

The growth levels of the country in past years had been constantly declining because of the economic crisis that “shook” the global market as an item. As we see in the figure below, the country has made relatively good increase in the general growth levels from the end of 2008 and has been increasing substantially since then. In the first quarter of 2010 Gross Domestic Product increase by 0.2%, just a little shorter than the increase in the previous quarter. The reason that the growth rates were not as high as the previous quarter is that the growth development in the service sector was not as expected.

Total services output rose 0.2 per cent, compared with a rise of 0.5 per cent in the previous quarter. The largest contribution to the weaker growth was from distribution, hotels and restaurants, but there was increased growth in business services and finance and government and other services. Transport, storage and communication growth was unchanged.

2.5 SWOT ANALYSIS

Strengths

  • World class academic scientific bases.
  • High expenditure levels concerning inward investment.
  • Highly skilled workforce
  • Outstanding R&D facilities
  • Highly competitive venture capital industry
  • Strong non technology based innovation in high value added sectors.

Because of the fact that the UK is considered to be one of the most constant developing countries globally when it comes to the technological and scientific sector, the fact that the Government has invested into the country, creating a skilled workforce and outstanding R&D facilities is what is going to urge the country to further develop scientifically and technologically leading the country to the to of the scoreboard.

Weaknesses

  • Expenditure on R&D compared to the G5 is relatively low.
  • Various companies of all sizes develop Short term strategy plans and focus on profit maximization and as a result Innovation and R&D aren’t featured as essential for their business strategies resulting into low growth and R&D power.
  • Low number of patents granted compared to other countries in the EU and also the US
  • Lack f the ability to exploit the high technology that the Country has developed and inadequate skills to innovate successfully.
  • Overall skill levels of the UK population are not as high as other global leaders.
  • Opportunities
  • Globalisation of trade
  • Increase in internet usage gives companies the opportunity to access more information and expand their trading activities to a higher level.
  • Exploitation of the high levels of Scientific and Technological knowledge of the county by focusing on low-tech products and markets.
  • Because of the fact that modern environmental technologies with higher standards have been developed by the UK during the years this give the opportunity for domestic companies to innovate and also export their environmental technologies to less developed countries.

Threats

The main threat that the UK will be confronted with, is the rivalry and the high levels of competitiveness with other countries of the same scale. The constant increase in technological areas such as the globalization of trade through the internet, is a part that the countries will be obliged to adapt and develop according to the constant changing environment of the global market.

In essence, the threat towards future innovation development for the UK is the inadequate understanding of science and technology development and the failure to manage technological change that may slow down the rate of scientific and technological growth.

3.0 VIRGIN

3.1 VIRGIN BACKGROUND

The Virgin Group limited, is a company that is based in the UK and was founded by Sir Richard Branson. The company consists of over 400 companies worldwide and the net worth of it is approximately 5.1 billion pounds.

One of the brands that the company has developed is Virgin Broadband, which is ranked as one of the top broadband suppliers in the UK after Talk Talk and BT. In recent researches, the results show that Virgin Broadbands’s market share in the UK comes up to 22.2% having almost 4 million customers whereas BT is leading the Broadband industry in the UK with a market share of 27%.

As stated in the companies official website, “We believe in making a difference. Virgin stands for value for money, quality, innovation, fun and a sense of competitive challenge. We deliver a quality service by empowering our employees and we facilitate and monitor customer feedback to continually improve the customer’s experience through innovation.” This statement is what the companies objectives are based on as well as the planning of the development strategies the company follows.

3.2 VIRGIN MEDIA GROUP INNOVATIVE PROSPECTS

The Virgin media brand is a highly innovative brand that has not been in the market for long and is relatively new comparing to the things achieved in such a small time scale. Virgin media group is a result of two companies merging and becoming one, NTL and Telewest. The main advantage that the company has when comparing to other companies is that the innovation schemes that are developed within the company are all outcomes of the brand name that Virgin has built over the years. The fact that differentiates Virgin Media with other companies in the UK industry is that the company offers all four of the basic media services which are broadband internet, mobile phone contract including many different packages, digital TV and land line telephone connections. The fact that a relatively new company has achieved to combine all media services and be one of the top companies in the industry is a result of excellent technology exploitation and successful innovation.

One of the services that Virgin offers and has developed rapidly because of focusing on Innovation is Broadband. Virgin broadband’s main focus is the customer and how to make life on internet safer easier to access and to offer packages that suit different types of users. The fact that Virgin does not focus completely on overcoming their opponents but convincing customers that Virgin Broadband is more suitable and adapts to their needs has urged drawn customers to the company earning the large market share it has.

As a result of the efforts to further develop the Broadband services of the company, Virgin toped the Broadband Innovation list earning them the second annual Broadband award for their 50Mb product and where given the name of the Fastest Home Broadband provider in the UK.

The judges of the awards where impressed and as we can see in the online Times website on the 15 of September 2009 they stated that “At a time when the average UK broadband speed is hovering around the 4Mb mark and concerns are being raised over the UK’s technological infrastructure, Virgin Media’s investment into providing customers with a 50Mb fibre-optic product is a next-generation service today.”

3.3 SWOT ANALYSIS of VIRGIN MEDIA

Strengths

Because of the fact that the company offers many services in a form of packages, they develop extensive economies of scale because they combine many of its basic roles like finance and administration and as a result the company is allowed to make their pricing strategy more competitive in order to benefit their customers.

An other major strength of the company that mainly has to do with the internal factors of the company is the huge technical capabilities and infrastructure that have been developed and exploited in such a way that the company is in a position in the top of the market with a constantly increasing market share.

Weaknesses

The main weakness of the company lies within the managerial part of it and is cause by the recent merging of the two companies which it is created of, Telewest and NTL.

Because of this merging of these two companies, the Virgin Media Group has not yet adopted its own culture and its own identity because of the different managerial styles and cultures the two companies developed before the merging. Since the Virgin Media group was created, redundancies of staff and outsourcing of the customer services have been made in order to bring down the costs for the company and increase profit. The outcomes of these actions resulted in lack of staff loyalty and also many incidents of unsettled behaviour by staff members.

These are issues that have to be correctly managed in order not have an negative impact when it comes to the customer treatment and the general brand name that has been developed by Virgin over the years stating that customers are the main focus of their strategies.

Opportunities

As far as the external environment is concerned, the opportunities that virgin media faces, changes constantly. Opportunities are usually resulted by the extreme increase of the media sector and also the technological development. Value added services such as online gaming and even faster broadband are ways that virgin media can gain opportunities against competitors. Mixing different services can help the company to gain more and more opportunities in order to increase their market share and top the media industry. Also the utilization of the technological innovations that come to surface is a point where the company could depend on and focus in order to cultivate strategies that will help them to overcome their opponents and give them the competitive advantage it needs.

Threats

The main potential threat for a company such as Virgin Media comes from companies which offer similar services such as BT and Talk Talk. As mentioned before the issues that the company is facing regarding the infrastructure reliability and the cultural collusions between the merging companies could be a huge advantage for competing companies and could increase their market share stepping on these weaknesses of Virgin.

Furthermore, because of the fact that the environment in the Media industry is constantly changing because of new technologies developed, the threat at this part is the possibility of Virgin not being able to cope with these constant changes and not be able to innovate as they wish. The result of this would be the loss of customers and again the decrease in market share.

CONCLUSION

Because of the fact that the global market environment is constantly changing, both UK and Virgin have to adapt their strategies for the future, in order not only to remain at the position they are now, but also to improve in order to become leaders in the global market and the UK industry respectively. Innovation is the ticket to future success and has to be exploited in such a way that the benefits will help the UK and Virgin meet their objectives and gain the competitive advantage that makes the difference.

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