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Product Innovation

Essay by   •  March 13, 2012  •  Essay  •  723 Words (3 Pages)  •  1,013 Views

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1. I suggest that companies continue to invest in innovative but risky projects or even investing more in innovation. These short-term savings during a downturn can cost a long-term health of the company. Strong innovation is a must if companies want to capitalize on future demand and it is crucial to the companies' long-term viability. Of course, during an economic downturn companies can see innovation strategy as failure and decide to cut it. However, in order for companies to be successful in the future, cutting innovation budgets would mean no possibility for the growth. At the end of the downturn, companies that "saved up" on its innovations can be left with no new products and services which means huge disadvantages for the companies' future. At the time of a downturn, cutting on innovation and research and development (R&D) might seem "the right way", however history shows that a downturn is a good time to innovate in order to prepare for better times. If a company stays innovative during the time of a downturn, it will gain a few advantages, such as:

* Less competition and less noise in the market because majority of firms are focused on cost-cutting.

* The relative cost of developing a new product can be possibly lower since assets can be acquired more cheaply.

Vijay Govindarajan, Earl C. Daum 1924 professor of International Business and founding director of the Center for Global Leadership at Tuck Business School, in the US says "A period of expansion always follows recessions and usually lasts for at least three times as long. Innovation must continue throughout a recession to prepare for this period of expansion and secure the long-term viability of the firms." We can conclude that the best strategy for the company during an economic downturn is coinciding with an innovation upturn.

2. For a company that has grown and become a competitive player from great depression I chose United Parcel Services (UPS). It has been a leading company in the postal services industry. Some of the major UPS competitors are: United States Postal Service (USPS), FedEx, Canada Post, FCML COURIERS, TNT N.V., Deutsche Post (owner of DHL), Royal Mail, LDH EXPRESS, Japan Post and many other regional carriers, national postal serveces and air cargo handlers. To become a leader of the market UPS stayed strong on innovations even during downturn. A little bit about company's background:

* In 1953 UPS was offering air carrier service

* In 1988 UPS operates own aircraft

* In 1994 UPS.com occurs

* In 1999 - Initial Public Offering/New York Stock Exchange

* UPS Worldport Server Room has 1 million data transactions/minute

* UPS has 8.5 million customers

* UPS has 400,600 employees

* UPS does 1,757 flights/day and 99,795 trucks

* UPS does international shipping to 220 countries and has 2,773 operating facilities

* UPS has 1914 alternative fuel vehicles

* UPS did 3.94 billion deliveries (2010)

All these would not be possible without investment in innovations. Since 1986 to 1996 UPS invested $11 billion in IT along with

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