Risks In Starting A Business | Discussion

1. Starting business can be hard, especially if a person is inexperienced. The risks can be even higher is the product that is sold is quite valuable. That is why it is generally suggested that a person should carefully examine the environment prior to starting a business since otherwise one may not reach one’s full potential. The case of George shows that sometimes other companies may take the advantage of failing entrepreneurs. Here is what he should have considered before deciding to start Electrolytic Solutions, LLC.

To begin with, it may be useful to carefully examine the demand for the product. Koester (2009) notes that many contemporary markets are driven by the customers; so, determining the demand will help an entrepreneur determine whether one will be able to stay in the business for long. Originally, George did not target many customers, believing that hydrogen will be in high demand by various labs and factories.

The second point that it essential for the success of an enterprise is the supply. George may have made a mistake, believing that he could make a significant difference in the way in which hydrogen is supplied. Obviously, his innovation takes the production of it to a completely new level, but it is highly unlikely that he alone even with such a superior technology to introduce any changes in the supply patterns.

All this logically brings the discussion to third element – the competition. George must have known that there are some major players, acting in the industry and they have their established distribution channels and loyal clientele. Therefore, it was particularly difficult for him to offer something that would convince the customers to abandon their old business connections and turn to him (Fleisher & Bensoussan, 2015).

Finally, George had to have considered the costs that are associated with starting a new business. To begin with, he must have thought about the promotion of his company: while his innovation is truly groundbreaking, it is of limited use if it is not known to the clients. Furthermore, he should have considered the cost of the raw materials, storage, and transportation, making sure that all this does not make his services too expensive.

So, the case of George shows that prior to starting a new business, it is essential to consider various aspects in order to achieve success. There is no surprise in the fact that he failed to develop his enterprise correctly, as he may not have given a sufficient amount of thought to the elements which were described above.

2. One of the peculiarities of the contemporary world is that intellectual property is protected by the law. That is why the inventors are encouraged to work hard, knowing that they will be rewarded for their work. This becomes possible through the process of issuing licenses. Nevertheless, there are some disadvantages that are associated with this process. That is why they must be carefully considered by a person who is willing to make a living on royalties.

There numerous risks that are associated with this process. To begin with, it is always possible that someone will be able to copy the technology and introduce necessary changes that would allow the court to treat it as something new (Waterstone, 2012). In spite of the fact that this may be quite difficult to perform, there is always a possibly that a good engineer and a lawyer will be able to convince the court to grant them a patent on something that other people invested. Another point that should be mentioned is that the world of technology is constantly changing. This means that in a short period of time the invention may not longer be effective and a person will not be able to enjoy royalties since no one will be using the invention.

Nevertheless, there are also some opportunities that one can identify in this process. First of all, licensing process allows the investor to capitalize on one’s word. This is particularly important as research and development often take a lot of time and effort (Audretsch, 2015). The money that one will receive may be invested in a new invention which will be even better. So, every innovator is interested in obtaining a license. This gradually leads to a situation when one person may hold a portfolio of patents which will make one quite rich. As soon as one has developed several useful innovations, one might start looking for a company who would like to buy this portfolio. Given the large amount of money that companies are ready to pay for breakthrough technology, this may be a viable financial goal for an inventor.

Licensing process may be seen as one of the most important aspects of the contemporary business world since it shows that intellectual property may be as valuable as real property. However, an innovator should carefully consider all the risks that are involved in this situation. That is why living off royalties may not be the best source of incomes due to the ever-changing nature of technology.

3a. Disruptive technology is something that moves the industry forward by showing a new revolutionary way how to achieve the old goals. Some might suggest that managers and companies should welcome it, using every opportunity that they have to accept disruptive innovations. However, the reality may be quite the opposites: managers often reject such innovations which complicated the life of innovators. There are several reasons why this happens.

First of all, it is worth noting that management is closely connected to stability. Christensen (2011) insists that it is quite natural that managers reject innovations that are able to disrupt the existing status in the industry because they are afraid of losing control over what they have. Another point that should be mentioned with this regard is that any disruptive innovation eliminates predictability of the performance. As a result, managers are not comfortable accepting it.

The second major issue deals with cost-benefit analysis. Suppose a manager considers adopting a disruptive innovation. One is likely to find oneself in the following situation: the risks that are associated with this change are high while the positive outcomes are uncertain. The risks are high because the disruptive innovation threatens to make the old ways obsolete which is, obviously, a disaster for a company. The benefits are uncertain because the innovation has not been fully tested yet.

These two reasons can even be identified in the case study provided. Thus, the managers rejected the innovation, arguing that the customers will see no value in it. This is reasonable since the customers will not feel that hydrogen was produced in a new way. However, the introduction of the innovation will disrupt the existing order and the managers would like to save it.

The second reason that was given by the managers in the case study focuses on money: they did not feel that cost-benefit analysis of the situation was promising. The managers were afraid that they would lose money that they could use for further development. As a result, they were not willing to risk using new technology the benefits of which would not be guaranteed.

As one can easily see, the text of the case study support the general pattern, according to which managers are likely to oppose disruptive innovation because it will cause instability in the industry and the cost-benefit analysis of its introduction is not quite positive. All this leads to the understanding that disruptive innovations should be implemented independently or it takes a very insightful manager to accept it.

3b. Disruptive technology is something that is quite easy to miss, but those who were able to take the advantage of it will be able to enjoy great benefits that it brings. Another point that should be mentioned is that sometimes simple innovations are dismissed as insignificant, but as soon as their proper application is found they become extremely influential. One of the greatest examples of it is the introduction of the so-called mini-mills.

Originally, mini-mills were not seen as a competitive threat for a number of reasons. First of all, they were suitable only for a limited volume of production (Matthews & Brueggemann, 2015). The giants of the industries saw the dramatic disparity between the outcome of the technique that they were using and the one which mini-mills represented. The big companies thought that even if this approach was successful, it would not make a significant difference in the industry.

Secondly, the importance of mini-mills was dismissed because of the quality of raw materials that were used. The big companies believed that the consumers would not want the products to be manufactured from scrap even though the quality of the end product was the same. In addition to that, the big companies knew that there were limits to the application of the new technology and were not threatened by it.

However, gradually, mini-mills showed that they could make the difference in the industry. Nucor is largely seen as the large country that relies on this technology. It was also the first to start manufacturing rods using thin-slab technology which proved that the application of mini-mills can be expanded greatly (“The Castrip® Advantage”, 2017). It is worth mentioning that Nucor proved that given the advantages of the economy of scale, the limited application of mini-mills can be improved.

In addition to that, the company in question focuses on the cost-benefit analysis of this innovation. It was found that a single mini-mill required much less space than the conventional steel mill. As a result, it was possible to set up several mini-mills in the space that used to hold only one. If that is repeated, the company achieved more efficiency per mini-mill.

The example of Nucor in particular and mini-mills in general shows that disruptive innovation needs proper application in order to show its full potential. This means that developing a new approach is not enough: in order to disrupt the existing state of affairs, it must be utilized to the limit of its capacity. Therefore, not every innovation that had the potential of becoming disruptive could change an industry.

If one applies the concept of disruptive technology to the device in the case study, one might suggest that tabletop hydrogen device may be seen as a good example of disruptive innovation and Salvation Technology does its best to take the advantage of it.

To begin with, one might see that there are several similarities between the example which was mentioned above, namely mini-mills and the device in question. Thus, they both have the potential of changing the way in which hydrogen is produced. In other words, if used properly and widely, it will change the entire industry and Salvation Technology will take the credit for it, ultimately becoming the next Nucor. In addition to that, both technologies rely on raw material that is considered to be of secondary quality (Gans, 2017). That is why here will be no problem in obtaining it.

All this leads to the situation when the pattern of the supply chain will be changed as well. Given the fact that Salvation Technology will be able to produce hydrogen using just water, it becomes obvious that this will reduce the costs of production since water is not expensive at all. Furthermore, it will be possible to secure several suppliers that will offer best prices or even supply this raw material independently.

Another point that should be mentioned about the innovation in question is that it features several advantages that the conventional technology does not. First of all, it is far less dangerous to operate which means that the company will experience less accident and will reduce the risks that are associated with the operations. This will also result in the smaller amount of money needed for the training of the personnel.

Finally, the tabletop hydrogen device has excellent efficiency rating. Given the amount of space that it occupies, the output that it has and the cost of the raw material if compared to the end product, it becomes obvious that Salvation Technology will benefit from using numerous devices like that. Therefore, it is quite possible that in the future it will become a serious competitor of major hydrogen production companies.

As one can easily see, Salvation Technology made a strategically correct move when it decided to buy out the device from George. If they succeed in doing so and will use the device to the limits of its potential, the company in question will be able to able to take the advantage of this disruptive technology and become quite successful because of this superior device.

References

Audretsch, D. B. (2015). Technology transfer in a global economy. Berlin: Springer.

Barnes, D. (2008). Operations management: an international perspective. Sydney: Thomson Learning.

Christensen, C. M. (2011). The innovator’s prescription. New York, NY:  HarperCollins.

Fleisher, C. S., & Bensoussan, B. E. (2015). Business and competitive analysis: effective application of new and classic methods. Upper Saddle River, NJ: Pearson Education.

Gans, J. (2017). Disruption Dilemma. Cambridge, MA: MIT Press.

Koester, E. (2009). What every engineer should know about starting a high-tech business venture. Boca Raton, FL: Taylor & Francis.

Matthews, C. H., & Brueggemann, R. F. (2015). Innovation and Entrepreneurship: a competency framework. New York, NY: Routledge.

Sidhu, I. (2010). Sustainable Disruptive Innovation. New York, NY: FT Press.

The Castrip® Advantage. (2017). Retrieved April 08, 2017, from http://www.castrip.com/Advantage/advantage.html

Waterstone, M. (2012). Risk and Society The Interaction of Science, Technology and Public Policy. Berlin: Springer-Verlag.

The terms offer and acceptance. (2016, May 17). Retrieved from

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016.

[Accessed: March 29, 2024]

freeessays.club (2016) The terms offer and acceptance [Online].
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[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]
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