Beruflich Dokumente
Kultur Dokumente
Submitted To: -
Submitted By:-
Vikas Sharma
M.B.A. 1st Semester
Roll.No.19
Technology and innovation play a very important role in the business environment. It is become
necessary for all business to incorporate technology and innovation otherwise they will be out
from the market due to lack of their technology.
Innovation is the development of new customers value through solutions that
meet new needs, inarticulate needs, or old customer and market needs in new ways. This is
accomplished through different or more effective products, processes, services, technologies, or
ideas that are readily available to markets, governments, and society. Innovation differs from
invention in that innovation refers to the use of a better and, as a result, novel idea or method,
whereas invention refers more directly to the creation of the idea or method itself. Innovation
differs from improvement in that innovation refers to the notion of doing something different
(Lat. Innovare "to change") rather than doing the same thing better.
In n o v a tiv e
D y n a m ic s o f t h e
Com pany
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C u s to m e s
n e e d s /e x p e
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Gover
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p o lic y
S u p p lie r 's
o ff e rin g s
C o m p e tit i
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d y n a m ic s
S o c ia
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Innovation Drivers
The human species' use of technology began with the conversion of natural
resources into simple tools. The prehistorical discovery of the ability to control fire increased the
available sources of food and the invention of the wheel helped humans in travelling in and
controlling their environment. Recent technological developments, including the printing press,
the telephone, and the Internet, have lessened physical barriers to communication and allowed
humans to interact freely on a global scale. However, not all technology has been used for
peaceful purposes; the development of weapons of ever-increasing destructive power has
progressed throughout history, from clubs to nuclear weapons.
Technology has affected society and its surroundings in a number of ways. In many societies,
technology has helped develop more advanced economies (including today's global economy)
and has allowed the rise of a leisure class. Many technological processes produce unwanted byproducts, known as pollution, and deplete natural resources, to the detriment of the Earth and its
environment. Various implementations of technology influence the values of a society and new
technology often raises new ethical questions. Examples include the rise of the notion of
efficiency in terms of human productivity, a term originally applied only to machines, and the
challenge of traditional norms.
Philosophical debates have arisen over the present and future use of technology in
society, with disagreements over whether technology improves the human condition or worsens
it. Neo-Luddism, anarcho-primitivism, and similar movements criticize the pervasiveness of
technology in the modern world, opining that it harms the environment and alienates people;
proponents of ideologies such as transhumanism and techno-progressivism view continued
technological progress as beneficial to society and the human condition. Indeed, until recently, it
was believed that the development of technology was restricted only to human beings, but recent
scientific studies indicate that other primates and certain dolphin communities have developed
simple tools and learned to pass their knowledge to other generations.
Nature of
Limits
Technology S Curve
Technology is a broad concept that has come to refer to breakthroughs in science that allow for a
better or automated solution. While the most obvious benefit to technology in small business is
increased productivity--which translates into a lower cost structure--there are some other benefits
that can help the bottom line as well. Improved speed, the ease of sharing and storing
information and a decrease in human error through automation add up to a reduction in costs and
an increase in revenue.
Technology helps the business to enhance the goodwill of the business. Goodwill is an
accounting concept meaning the value of an asset owned that is intangible but has a quantifiable
"prudent value" in a business for example a reputation the firm enjoyed with its clients
Goodwill is an intangible asset derived from other assets of the business. Its existence depends
upon proof that the business generates and is likely to continue to generate earnings from the
use of the identifiable assets, locations, people, efficiencies, systems, processes and techniques of
the business.
The factors/reason which affect the goodwill and value of business are as follows.
Easier Storage
Technology eliminates the need for double or triple entry systems and reduces the need to file
large amounts of paperwork. Now, contracts and customer information can be stored in virtual
data warehouses and accessed in minutes, which cuts down on the need to purchase or rent
storage space.
Automation
Technology allows small businesses to automate certain functions that historically have required
the need to hire an employee. For instance, bookkeeping functions now can be handled by
software applications such as Quicken and Quickbooks. The sales function is automated through
contact management sites such as SalesForce. This gives the small business owner the ability to
focus on strategy and cut down on labor expenses.
must be taken into consideration, if your business works within tight deadlines.
Furthermore, any IT issues that occur will need to be resolved quickly, to ensure
the transition is as seamless as possible.
Abuse-of the technology made available to employees on their job can be
excessive and very costly to a company, i.e. constant instant messaging, personal
use of social media, non-work related emailing, inappropriate use of information
on the web.
The key to deciding whether or not to upgrade your business with new
technology lies in your ability to fully understand the culture of your workplace. This is
an important aspect of managing any workplace. The culture of your organization is
critical in hiring and retaining effective employees. Culture involves how workers feel
about the organization and how they feel about their jobs. Create an environment thats
aligned with the companys overall objectives and mission. A culture where employees
not only trust their leaders, but are willing to follow them, even when theyre uncertain
about change.
Importance of Goodwill
Just as a good reputation is vital for the social standing of a person, goodwill is vital to the longterm success of any business. Some of the ways in which business goodwill affects a business are
mentioned below.
Goodwill in a business increases the number of return customers and recommendations based on
their pleasant experiences.
A well-established business goodwill increases the chances of loan sanctions from a bank and the
interest of potential investors.
It strengthens the business networks, opens new avenues and creates opportunities for expansion
in business.
In case of a blunder or mistake, people are more forgiving to a business based on the goodwill it
garners, much like the mistakes of an individual with a 'good name' will be given the benefit of
doubt.
In any business, goodwill provides ammunition against resistance and sabotage.
The equity value and the accounting value of a business are greatly affected by the goodwill of
that business.
As mentioned in the beginning of this article, goodwill is one of the major intangible assets of
any business. Greater the goodwill of a business, greater the value of its intangible assets and
thus, greater the acquisition price in a takeover.
How to Develop Goodwill
Goodwill in a business takes a considerable amount of time, efforts and resources to be
developed. The key factors for developing goodwill in a business are listed below:
Quality Product and Services: Nothing is more important for the life of goodwill in a business
than the standard and quality of the products and services it offers.
Unique Selling Proposition: A good business always has a USP by which it is identified - there
has to be something in the business for people to be attracted to it.
Satisfied Customer Base: A customer is more likely to return or recommend the services of a
business if he/she has a pleasant and satisfactory experience in the first instance. Following good
goodwill is attributable to cash flows expected from future business activity; and
goodwill must have commercial value (i.e., must be transferable to a third party).
Goodwill by its very nature cannot exist independently of the business which created and
maintains it.
goodwill is not something which can be conveyed or held in gross: it is something
which attaches to a business. It cannot be dealt with separately from the business with
which it is associated. Barwick CJ in Geraghty v. Minter[1979] HCA 42 at 181
The value of goodwill is tied to the fortunes of the business in terms of its profitability and
cashflow and the value of the net tangible assets utilized in the business. The value of goodwill
will therefore fluctuate with the performance of the business.
It should be noted that the legal definitions of goodwill and the accounting definitions of
goodwill are very different. A legal definition may result in a finding that the business has
goodwill but an accounting definition may result in the goodwill having no value.
Goodwill can be derived from one or more of the following sources:
Location: based on the notion that a companys success is, to some extent, based on the
physical location of the premises;
Operations: a company which has fostered a superior working relationship with its
employees and lenders, investors, suppliers and customers, or has assembled a superior
management team, etc. is at a competitive advantage vis--vis other companies in the
industry. This competitive advantage often results in incremental cash flow to the
company.
In general, goodwill is classified as commercial or personal.
Commercial Goodwill
Commercial goodwill refers to goodwill which is sellable and which will provide the
investor/purchaser with future economic benefits (measured in terms of cash flow). Since the
economic benefit supporting the calculation of commercial goodwill is transferable to third
parties, commercial goodwill is a valid consideration in the determination of value.
Personal Goodwill
Personal goodwill pertains to the favorable attitudes of customers, suppliers, etc., which are
derived from the efforts of a particular individual in the business. In many cases, personal
goodwill can be transferred to a potential purchaser through client introductions, and so on. This
is a common operating model for the sale of service businesses, including medical practices and
accounting practices. In some cases, goodwill associated with a particular individual may also be
secured using non-compete contracts, management contracts or other prudent business
arrangements. In these cases, personal goodwill as it is transferable would be commercial
goodwill.
Personal goodwill resides with the individual and technically cannot be transferred. Personal
goodwill would apply for example to the skills, training and reputation of medical specialists,
barristers, sports people and celebrities.
Related Terms: Business Appraisers
Goodwill is a type of intangible business asset. It is defined as the difference between the fair
market value of a company's assets (less its liabilities) and the market price or asking price for
the overall company. In other words, goodwill is the amount in excess of the company's book
value that a purchaser would be willing to pay to acquire it. A combination of advertising,
research, management talent, and timing may give a particular company a dominant market
position for which another company is willing to pay a high price. This ability to command a
premium price for a business is the result of goodwill. If a sale is realized, the new owner of the
company lists the difference between book value and the price paid as goodwill in financial
statements.
The sale of a business may involve a number of intangible assets. Some of these may be
specifically identifiable intangiblessuch as trademarks, patents, copyrights, licensing
agreementsthat can be assigned a value. The remaining intangibleswhich may include the
business's reputation, brand names, customer lists, unique market position, knowledge of new
technology, good location, and special skills or operating methodsare usually lumped into the
category of goodwill. Although these factors that contribute to goodwill do not necessarily have
an assignable value, they nonetheless add to the overall value of the business by convincing the
purchaser that the company will be able to generate abnormally high future earnings.
Although goodwill undoubtedly has value, it is still an intangible asset and as such is not
recorded on a company's books. In fact, many companies use a value of one dollar for goodwill
in their everyday accounting procedures. Many companies could be sold for a premium price
based on the good reputation they have established. But such goodwill is never recorded on the
books until an actual acquisition occurs. The acquisition price determines the amount of goodwill
that is recorded following the purchase of a company. For example, if a small business with
assets of $40,000 is purchased for $50,000, then the purchaser records $10,000 of goodwill.
In general, determining the sales price of a business begins with an assessment of its equity,
which includes tangible assets such as real estate, equipment, inventory, and supplies. Then an
additional amount is added on for intangible assets (sometimes called a "blue sky" amount),
which may include things like patent rights, a trade name, a non-compete clause, and goodwill.
Experts note that in small business sales, the combined total of "blue sky" additions should rarely
be more than a year's net income, because few purchasers are willing to work longer than that for
free. For public companies, the amount of goodwill is often dependent on the vagaries of the
stock market. Since the share price determines the purchase price, the value attributed to
goodwill may fluctuate wildly during the course of an acquisition.
Standard accounting procedures state that, following an acquisition, the purchaser should
amortize goodwill over a period of 15 years using the straight-line method. In other words, onefifteenth of the original amount attributed to goodwill is deducted each year. Since this writeoff
period is longer than that required for most tangible assets, it is usually a good idea to allocate as
much of the purchase price as possible to business equipment. The shorter depreciation period
would enable the purchaser to accelerate deductions and thus achieve earlier tax savings.
On occasion, the goodwill booked after the sale of a business may be written down or reduced.
Such occasions usually occur because of some larger shift within the market in which the
business is active, a shift that causes a reevaluation of the business. An example of such is the
mobile phone market. During the 2000s the market grew quickly, as many new companies
entered the market, and many mergers and acquisitions occurred. In late 2005 and early 2006 TMobile and Vodafone announced large write-downs of the goodwill on their books in order to
more accurately reflect the competitive marketplace in which they operate.
Over the years, there has been some dissatisfaction expressed with the way that goodwill is
handled for accounting purposes. First, since goodwill is sometimes a huge component of a
company's acquisition price (particularly in the case of large public companies), the amortization
of goodwill can have a significant negative effect on the purchaser's net income. Second, the
treatment of goodwill under U.S. law differs from many other countries, which sometimes puts