Internal and External Environment Influencing Innovation (Essay Sample)

Internal and External Environment Influencing Innovation
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INTERNAL AND EXTERNAL ENVIRONMENT INFLUENCING INNOVATION
Abstract
In spite of increased importance of innovation in industries and the role played by capabilities in the growth of the company there is little information on the internal and external environment regarding innovation in different organizations. Innovation in organizations is basically driven by technology and the plan that is adapted to guide on the accumulation and technological resources and capabilities. This paper through review of diverse researches on internal and external factors influencing organizational innovation and the strategic plan for organizational innovation for a certain period of time is going to investigate how external and internal environment has influenced innovation in TATA motor industry.
Introduction
There is a high demand for change in all organizations as a result of the current dynamic environment. Innovation is important and for a company to have a sustainable development it must embrace it to the fullest. It is very vital for organizations to change how they operate and also be in a position to change the products and the kind of services they provide to their consumers.
It is therefore calls for evaluation by the organizations to do experiments and constant monitoring of the environment, evaluating own performance and have a continued commitment to their performances. Change in technology has continuously contributed to the growth an organization because it increases the potential knowledge on innovation management. According to Ettlie and Bridges (1983) suggestion, the policy of technology is a reflection of innovation attitude by the organization and innovation commitment. It is therefore concluded that organization’s competitive position in managing its innovation strategies.
Organizations may differ on matters to do innovation. In today’s current environment technology is seen as the most elements in growth of the organizations Zahra and Covin (1993). Innovation taken up by the company can create a competitive situation where it bars other new rivals to enter into the market. This can only happen when the introduced innovations can provide unique products and services which are very attractive to the customers or when the competition rules are changed in the market.
Technological innovation
When we talk of innovations then we have to include both product and the process of innovation itself. In this case product innovation can be termed as those products which are perceived new by the customer or the producer. Therefore we can define innovation as those processes which an organization put in place to either reduce the cost of production, production of new products services or change in delivery process Harmsen and Declerck, (2000). Most of the times innovative measures are set to replace the existing to totally new kind of operations in an organization. Innovation can only occur when the needs of the user are known by the organization. Chesbrough (2003) asserts that innovation has moved from being closed to a continuous active process. Researchers on the other hand have come up with an idea where they see collaboration for technological innovation Duin and Kok (2007). Both technological and administrative innovations can be included in the idea of innovation Van de Van (1986).
Internal and external environment influencing innovation in an organization tends to vary from one organization to the other. In this section I am going to discuss this factors using TATA motor company which is based in India as the biggest automobile company. The consolidated revenues in 2009-2010 stood at $20 billion. Its largest market for commercial vehicle segment is in India. They mainly concentrated on manufacturing of vehicles like commercial trucks, military trucks and construction vehicles in early 1990s. Introduction of passenger cars models TATA safari and TATA sumo was their first movement. This brought about success as their customers were satisfied with the two models. Due to this success they got a big support since they entered into small business in the Indian car sector. In September 2004 Tata motors were first listed in the new you stock exchange. Currently it has emerged as a global automobile company.
Currently Tata is one of the most established automobile companies in the world. In the last ten years Tata motor vehicles have been recognized in the passenger market. It has also been recognized in various number of market segment including Africa, Europe, Australia and Middle East. For the last ten years, it has gained a high market share enabling them to expand their business around the world. In 2004 they bought Daewoo a commercial vehicle company which is currently the second largest South Africa’s truck manufacturer.
Influence of external environment in the organization.
External environment has a great influence on business. For a business to run effectively external environment must be conducive. For any successful operations in an organization the surrounding environment must be conscious to cope up with the change environment. External environment are divided into two parts mainly; directly interactive and indirectly interactive.
Directly interactive external environment, are those with an immediate and first hand impact on the organization. For example, when a new competitor, enters the market to rival with existing firm.
Indirectly interactive- it is a bit a distant effect from the organization. For example a new legislation taking effect can have a great impact in an organization. For instance, to comply with disabilities Act, where the company is required to fix its facilities to accommodate people with disabilities.
These forces include owners, customers, suppliers, competitors, employees and their unions. In such situations, owners expect returns on the investments therefore they watch over their interests while customers demand satisfaction from the products and services they pay for. On the other hand suppliers will require an attentive communication on the payment on what they supply to the organization for better relationship. Competitor will come with challenges as they provide the same products or services to the market. Finally employees and employee unions provide the people to do the jobs and the same time represent their rights and concerns to the management.
Indirect interactive forces include political, economic, sociocultural, technological and legal/. The impact of these forces may vary regarding the nature of the business. For example a company which uses 100 per cent technology will be more affected with the change or software updates than a company which uses only a single computer in its operations. These forces are still very important to the nature of the organization.
PEST analysis of Tata motors limited
Political
Political environment has promoted globalism since currently Tata is doing business in different continents such as Europe, Africa, Australia and Middle East countries. In India for instance Tata motors strictly follow the laws and the regulations as well observing labor laws in the countries they intend to set up manufacturing plant. It therefor important to consider political changes in this countries so us to have a smooth way of spreading into the new markets. Government over a conducive environment to enable innovative process of a company. For example a good political environment will enable to support political stability, trust, strong reputation and goodwill. Tata has managed to go through a smooth innovative process since the government has the best policies which have promoted expansion of Tata Motor limited into one of the worlds’ biggest vehicle manufacturer.
The government has a responsibility of promoting local production and India has provided and environment where business thrive well especially the home made products.
Economical
Tata motor is doing business through different parts of the world and they function mostly by focusing on the individual market as they consider economic standpoint around the globe. Tata has made some changes which can see them have new market experience in the world. The supply of raw material for production od engine blocks. They have an opportunity to get the materials from South Africa but they are very expensive. Therefore they have decided to get suppliers from Europe so they easily get them from Russia. When making changes in a company you have to consider economic value of the raw material. When the price of raw material is high then it is going to have a great impact on the prices. High prices for raw materials will lead to loses. Also the rates of currency should be investigated before importing of raw materials. Fluctuations in currencies influences investments made by the company. If Tata can deal with Ford in the United Kingdom, there it requires a lot of workforce, increased technological activities, and reasonable labor costs.
Social
Most of the companies are affected by the ideas of the stakeholders, attitudes and opinions. Whether beneficial or not, the future or not, the future of the organization lies in the hands of the stakeholders. It is for this reason that Tata has decided to use assimilation and therefore they have a rare partition technique with companies from foreign countries and therefore they get to hold off. They have a point of view of localizing. India has a different car market as compared to countries like Italy and German...