These days, there are many definitions of innovation were defined by different researchers, policymakers, senior managers, or executives. However, it is known from people that innovation is a creative, invented design, solutions, strategies, or model, etc. combining with technology changes and executed methodologies to not only improve existing processes or products, but also create new ones to open a new market, or even create fundamental changes, disruption for any industry. Or innovation is the process that will be applied to the value chain of an organization to create better products or services and transfer to customers with the best value.
There are many answers to the question: why innovation is important to international companies. Among them, the most important reason is for the business’ growth and profit gaining. Comparing with companies that do not apply innovation, the companies that excel well the innovation to the business models to improve continuously their products, process, or business performance, so far will be more profitable. This means more and more innovative products enter the market, or improved process with innovation, those will achieve the market share more easily than the others and in turn, the company will achieve the Return on Investment (ROI) more effectively. For example,
nowadays, in the Internet of Things (IoT), people are preferring to surf the internet for many purposes as entertainment, research, study, connecting people, ect., or buying things from the internet without going to the store. The eCommerce companies such as Amazon (U.S) or Alibaba (China) are “eating the traditional retails” with new concepts of the shopping, purchasing things via the internet; which is considered as an innovation in the retail industry . As the research’ result from MGM Research (2019), it is showing that the Amazon eCommerce is beating the store-based retailers in the U.S (Wal-Mart, Costco, Home Depot, Target, ect.), when its market share is rasing and revenue with profit is increasing gradually also from 2014 to 2018 (Figure 1); whereas the brick-and-mortar retail sales are reducing as their margins shrink while they keep going with the traditional, or store-based shopping model, as CNBC 2019 (Figure 2).
Figure 1: Amazon Revenues and Profits Analysis – MGM Research – 2019 Update
Figure 2: This chart shows how quickly Amazon is ‘eating the retail world’ –
Lauren Thomas – 2019 The second reason to answer why innovation crucial to international business is for competing others not only in localization scale but globalization one. In the Technology Age, most of the companies are on the run-way to utilize the technologies to improve their products, gaining profit and want to take the lead in the market share. Moreover, the competition is not only happening in national-wide but in global. Most of developing countries in Asia such as China, South Korea, Japan or India are spending expenditure to the research and development (R&D) activity to improve their products and make the significant breakthrough. Per Global Data report in 2019, there are already six countries in Asia Pacific Area join the top 25 technologies companies in the world (Figure 2). And China is one of them with the fastest growth of technology in nearly years and is expected to leave the US behind in 2020 in mobile payments (Bloomberg, 2019). Therefore, it is doubtless that innovation is crucial to international business to grow up, gaining benefit and compete others in the Digital Era which is not only on a national scale but globalization as well.
Figure 3: GlobalData announces top 25 global tech companies by Market Cap for 2018