Innovation in the Car Industry, Its Implication towards Economic Growth - Michelin Company - Case Study Example

Entrepreneurship Name Course name Instructor’s Name University Name Date Introduction According to Casillas et al. (2007), entrepreneurship has been advocated as a major catalyst for economic development in various sectors. It is believed that innovation and creativity have been one of the leading causes of permanent change in production sectors and other business sectors of the economy. The aspect of entrepreneurship can be recognized at various levels. Individual entrepreneurship is the kind of innovation masterminded by an individual. In individual entrepreneurship, a single person takes the risk to invest in an invention while targeting growth and development (Kritikos, 2014). Aspects such as autonomy grasping opportunities to fill a market gap are a characteristic of this kind of entrepreneurship. Another level of entrepreneurship is the entrepreneurship at the organizational level (Larson, 2012). At this stage, the classification of entrepreneurship can further be classified into two categories. At the organization level, innovation can take place in the overall organization or a particular unit within an organization. Entrepreneurship at organizational level targets to achieve competitive advantage in the market increased productivity and overall growth of the organization. Entrepreneurship must be differentiated from intra-prenuership since the later applies to entrepreneurial activities at the level of the organizational environment (Luke, et al., 2007). The different levels of entrepreneurship imply that the gains of innovation can be felt at various level. Individual entrepreneurs, organization and the general economy stand to benefit from a range of changes. This paper will delve into innovation in the car industry, its implication towards economic growth and the sustainability of the innovation. Innovation The automobile industry has undergone tremendous evolution with different parts being innovated at different point in history. One of the significant innovations in the car industry came from the Michelin brothers who ventured into entrepreneurship. Edouard and Andre Michelin developed the firm Michelin and company on May 28th, 1889 in the city of Clermont- Ferrand. The company later became a family business that made a tremendous impact on the development of the modern car. The two brothers helped fix a tire puncture and realized more benefits could be derived from innovating bicycle tire, which is easy to remove and fix. The brothers then formed new innovative bicycle tires using rubber, a technology that was embraced in most parts of Europe. Even after the death of the Edouard and Andre, Edouard took the initiative to lead the company from a multinational to the global scene. The company created the most significant innovation in the car industry, the radial technology of 1949. The innovation came with a new design that enables the car industry to move to a new level. The innovation made sure that the Michelin Company remained at the top of the industry by exploiting market in over 140 countries. The company has made every effort to maintain the innovative trait in the car tire production. These innovations have made a significant improvement in the types of car tires used today. The company has decorated its brand in the modern day car industry. Specifically, the racing cars have benefited more from the Michelin innovations. According to Casillas et al. (2007), the case of Michelin is considered as one of the greatest entrepreneurship in family business. It has often been argued that the genetics of innovation has been the reason for the enormous success enjoyed by the giant company. Cogent analysis of innovation and contribution to economic development A good entrepreneurial innovation should have a substantial change that contributes to economic development. Generally, entrepreneurs who create new firms are hard to find since the cost of penetrating in the modern economy is relatively high. The change entrepreneurs bring to the market must stir up a series of changes. There are both advantages and disadvantages of entrepreneurship depending on the position one wants to view the whole idea. Benefits of entrepreneurship The Overall of entrepreneurship ensures that economic growth is boosted by introduction of innovative ideas and solutions to improve products and services (Farinha & Luís, 2015). The entry of new and more innovative solution in the market challenges the existing firms to gear up for change. The result will witness a competitive environment that will result in an increase in quality of products and services. According to Kuratko (2016), the concept of innovation does produce not only new goods and services but also new opportunities both in the product and job market. Entrepreneurs create new job openings for both long term and short term depending on the sustainability of the innovation. In most cases, innovation results in an increase in internal and external productivity. A person or firm, as well as the entire economy, stand a chance to gain from an innovation. He benefits may come in terms of revenue, partnership, patent rights or recognition of innovative skills. Firms can undergo structural alteration in the wake of innovation. Innovations may stir-up technological evolution in a given economy or sector within an economy. Disadvantages of Entrepreneurship According to Kritikos (2014), the fact that entrepreneurship can have numerous benefits to the economy, they are not excluded from certain risks. It may turn out that only a few individuals have the innovation will and brevity to be entrepreneurs. As a result, entrepreneurship can be one of the main causes of economic disparity by widening the gap between the rich and the poor. There is a high risk of failure if innovation does not earn enough support or positive response from the market. Some innovation can result in the elimination of certain sections of the production chain. In such cases, people may lose jobs thus increasing the numbers of the unemployed. It should be understood that a vibrant entrepreneurial economy does not imply the presence of entrepreneurial activity. In addition, over-regulation is a major barrier to entrepreneurship. Case of Michelin and company Two innovative brothers came together, combined ideas and developed Michelin and company. From the beginning, the company was majorly a family business that concentrated to innovating tires. The first innovation the two brothers made brought a change in the type of tire used in making bicycles. The innovation created a new technological dawn in the structure of bicycle tire that was adopted all over Europe (Finch & Orillard, 2005). The manufacture of bicycle tire still uses the same technology that Michelin and company invented. It is evident that the innovation forced other tire manufacturers, specifically in England, to adopt the new technology. In addition, the financial returns that Michelin and company are accrued from selling the innovation made huge returns. The gains increased the company’s capacity to remain in business and even strategize for more innovation that would turn to define the car-manufacturing sector. In analyzing, the impact of innovation and comparing to modern benefits of entrepreneurship, Michelin made a tremendous contribution towards economic development. The two brothers were entrepreneurs who made an innovation that induced economic growth by inputting a new technology in the transport sector. The Michelin and company new product created a new competitive product that the rest of the industry was forced to match. The growth of Michelin meant more revenue and more opportunities. Currently, the numerous companies and outlets that work under Michelin create multiple jobs. The innovation in the entire market also ignited a technological change in the car industry since more possibilities had been revealed. The structure of the modern car tire is because of the technological revolution that Michelin ignited. Now it may be hard to establish the overall economic growth that the Michelin innovation has brought. The dynamic transport sector, motor and vehicle production sectors all take advantage of the technology to compete in business. The industries have also found a platform for advancing technology to enhance quality. For instance, the innovation of the tubeless tires is a modern innovation in the car production sector. As stated previously, Michelin has enjoyed a lot of benefit from its chains of innovation. The internal benefits have contributed to the growth of company both regarding physical operation and in terms of revenue (Wei, et al., 2012). The company has undergone successful reshaping of its business structure over years to accommodate the demands that accompany growth. The global leading manufacturer of car tire boasts of almost a quarter of the market share. The overall production of its quality tires stands at a staggering number of over 194 million tires across all its 75 factories. The company currently operates in nine countries but has a lucrative market in over 170 countries around the globe. Michelin has also positioned itself in signing lucrative deals with top companies such as FM logistics and other car manufacturers. Sustainability principles Sustainability-driven entrepreneurship is a new factor, which can still be traced in some of the ancient innovations. The concept of sustainability in entrepreneurship is one component that contributes to a sustainable enterprise (Larson, 2012). The sustainable enterprise consists of three components, sustainable development, organizations, and entrepreneurship. All these components must have an aspect of sustainability to ensure a sustainable enterprise design. The diagram below illustrates the concept of sustainability enterprise. Figure 1: a figure showing the components of a sustainable enterprise design (Parrish, 2008) The issues of sustainability of an innovation should be linked to the concept of sustainable development. Concepts of sustainable development imply that an innovation in question takes into consideration the aspect of intergeneration and intra-generation equity (Gaweł, 2011). However, many stakeholders contest the concept of sustainability since it involves world’s ‘necessary evils.' ‘Necessary evil’ phrase is used because the products in question have gained irreplaceable relevance to the modern economy. For instance, rubber tires have become ‘a necessary evil’ in the transportation sector despite the environmental concerns. The transportation sector cannot do away with this innovation unless another innovation is created. Sustainability of technology can also mean that technological innovation is relevant for many years after its invention. Considering the approach, the innovation by Michelin can be categorized under sustainable innovations. The technology is relevant to modern day car and other automobile manufactures. Michelin and company have also portrayed another form of sustainability since its emergence. The company came into emergence because of a tire innovation, and the trend was constant until the death of the founding Michelin brothers. The hereditary succession in the ownership of the company ensured that the trend of innovation continued to manifest in all products of the company. To date, the company maintains a sustainable trend of evolution, which may not fade anytime soon. The Michelin Company is now a global company with massive revenue returns a condition that is also considered sustainable. The innovations have not led the company to make abnormal losses in the automobile industry. Despite the fact that many other competitors have invaded the market, Michelin productivity is still sustainable in the competitive market. The innovations by the company have made a significant mark in both technological and economic development. Conclusion Entrepreneurship entails an innovation that is aimed at changing the state of affairs in a business operation. In most cases, entrepreneurship aims at improving an organization as well as the entire market in which the organization operates. Various levels of entrepreneurship have been identified that include individual entrepreneurship and organization entrepreneurship. There are two different levels of organizational entrepreneurship. It is also important to distinguish entrepreneurship and intra-prenuership. Many benefits can be derived from entrepreneurship, as well as loss. Edouard and Andre Michelin provide a perfect example of entrepreneurship whose impact is still evident in the modern manufacture of cars. The two brothers spent all their innovative efforts to create new and efficient designs of tires. The significant innovation helped the company gain enormous growth making it one of the most sustainable innovations in history. The sustainability may not impress environmental experts but may impress the business experts. The entrepreneurship opportunity that Michelin brothers explored has played a crucial role in economic development of many countries. Trends of growth and chains of more innovation from Michelin are proving of the sustainable foundation the founding brothers laid. Currently, the company operates 75 factories in nine countries. Its products have a stable market in over 170 countries. References Casillas, J. C., Acedo, F. J. & Moreno, A. M., 2007. International Entrepreneurship in Family Businesses. s.l.:Edward Elgar Publishing. Farinha, C. & Luís, M., 2015. Handbook of Research on Global Competitive Advantage through Innovation and Entrepreneurship. s.l.:IGI Global. Finch, J. H. & Orillard, M., 2005. Complexity and the Economy: Implications for Economic Policy. s.l.:Edward Elgar Publishing. Gaweł, A., 2011. Entrepreneurship and sustainability: do they have anything in common. [Online] Available at: http://old.ue.poznan.pl/att/DZIEK_GM/working_papers/Working_Paper_No3_2011.pdf [Accessed 15 February 2016]. Kritikos, A. S., 2014. Entreprenuership and their Impact on Jobs Economic Growth. IZA World of Labor evidence based policy making. [Online] Available at: http://wol.iza.org/articles/entrepreneurs-and-their-impact-on-jobs-and-economic-growth.pdf [Accessed 15 February 2016]. Kuratko, D. F., 2016. Entrepreneurship: Theory, Process, and Practice. London: Cengage Learning. Larson, A., 2012. Entreprenuership and Sustainability. [Online] Available at: http://2012books.lardbucket.org/pdfs/entrepreneurship-and-sustainability.pdf [Accessed 15 February 2016]. Luke, B., Verrynne, M. L. & Kearins, K., 2007. Measuring the Benefits of Entrepreneurship at Different Levels of Analysis. [Online] Available at: https://espace.library.uq.edu.au/view/UQ:134152/JMO_31_4_BLuke_article.pdf Parrish, B. D., 2008. Sustainability-Driven Entrepreneurship: A Literature Review. Sustainability Research Institute. [Online] Available at: http://www.see.leeds.ac.uk/fileadmin/Documents/research/sri/workingpapers/SRIPs-09_01.pdf [Accessed 15 February 2016]. Wei, W., Zhu, W. & Lin, G., 2012. Approaching Business Models from an Economic Perspective. Illustrated ed. s.l.:Springer Science & Business Media. Read More