What are the benefits of innovation within a business?


Innovation is the successful exploitation of new ideas. This is predominantly achieved through research and development (R&D). R&D is the necessary investigations in order to discover new products or manufacturing processes.


Improved quality: Innovation develops higher quality products that become more attractive to customers leading to increased sales and better reputation

EXAMPLE: A new iPhone model is an example of innovation. Each model that is released includes new features that enhance the user’s experience. This can include higher quality graphics, faster processers, higher pixel camera etc.

Enter new markets: Innovation can allow a firm to enter new markets

EXAMPLE: Apple innovated and create the Apple Watch. This allowed Apple to enter the watch market that penetrate the growing Smartwatch market segment.

Increase value added: Innovation encourages the development of highly differentiated products, creating a unique selling point (USP). The lack of similar products upon the market means that demand for this differentiated products is inelastic. Inelastic demand means that firms can increase the price (without losing many customers) and make a higher profit margin. Similarly, the lack of similar products to a differentiated one creates an opportunity to patent a product and ensure long term success of this product.

EXAMPLE: Apple innovated with the original iPhone model, creating a highly differentiated mobile phone that at the time, no other companies offered anything similar (the market was still fixed on Motorola flip phones). Apple charged in excess of £400 for the iPhone (because of the inelastic demand present) and made a high profit margin on the iPhone. EVALUATION: The combination of high profit margins and Apple purchasing numerous patents over the years helps to ensure the longevity of success. High profit margins generate more profit that can lead to greater budget on R&D. A greater budget on R&D increases the opportunity for innovation, which is secured through the use of patents. This means that Apple can innovate regularly without fear of losing their monopoly upon the smartphone market.

Increase product range: Innovation encourages the development of a new products and a wider product range.

EXAMPLE: Apple innovation created the iPhone, iPad, Macbook, iMac, and Apple Watch.

Reduces costs: Innovation can improve processes and make them more efficient. If I innovate a process and make the process quicker I can use company resources less and save money. 

EXAMPLE: Many big banks use the innovation of computer software to improve processes. Various technology departments within these banks enhance company softwares that help to speed up processes. 

Jake H. A Level Business Studies tutor, GCSE Business Studies tutor, ...

7 months ago

Answered by Jake, an A Level Business Studies tutor with MyTutor

Still stuck? Get one-to-one help from a personally interviewed subject specialist


Tia L. GCSE Business Studies tutor, A Level Business Studies tutor
View profile
£20 /hr

Tia L.

Degree: Business and Management (Bachelors) - Exeter University

Subjects offered: Business Studies

Business Studies

“Hi, my name is Tia and I am 19 years old. I currently study BA Business and Management at Exeter University.Ever since I started studying business in my first year of college, I found that I could understand the topics very easily, e...”

PremiumHelen M. GCSE Business Studies tutor, A Level Business Studies tutor,...
View profile
£30 /hr

Helen M.

Degree: Law (Bachelors) - Durham University

Subjects offered: Business Studies, Maths+ 2 more

Business Studies
-Personal Statements-

“Hello, my name is Helen and I am a second year law student at Durham University. Having being tutored myself since GCSEs I know how important it is to keep students engaged and interested.”

Emma S. A Level Business Studies tutor
View profile
£22 /hr

Emma S.

Degree: Education Studies Sociology (Bachelors) - Durham University

Subjects offered: Business Studies

Business Studies

“About me:  I am an Education studies student at Durham Univeristy. Business Studies is something I have always enjoyed and had a knack for. As an AS and A2 student I used to do free tutoring for peers helping them to understand conten...”

About the author

Jake H. A Level Business Studies tutor, GCSE Business Studies tutor, ...
View profile
£22 /hr

Jake H.

Degree: Business and Management (Bachelors) - Durham University

Subjects offered: Business Studies, Economics

Business Studies

“About Me I am a final year Business and Management Student at Durham University. My degree covers abroad spectrum of critical business topics, extending to economics, psychology, and some aspects of law. I have a real passion for the ...”

You may also like...

Other A Level Business Studies questions

Evaluate the use of marketing plans for businesses:

Explain what factors will influence a business' choice of supplier

What is a PESTLE analysis and when are they used?

How does quantitative sales forecasting compare to qualitative sales forecasting?

View A Level Business Studies tutors


We use cookies to improve our service. By continuing to use this website, we'll assume that you're OK with this. Dismiss