Evaluate the importance of product and process innovation to the future profitability of TK.

Mark scheme

Marking points from the official mark scheme (May/June 2022). The mark or mark type is shown in brackets.

1. [2] Knowledge: Innovation – The development and introduction of new/updated products and processes, maintaining or improving competitive advantage.
2. [2] Knowledge: Definition of profitability and/or profit:
3. [2] Knowledge: Profit = revenue minus costs
4. [2] Knowledge: Profitability is the link between profit and revenue and capital employed
5. [2] Knowledge: Product as part of the marketing mix
6. [2] Knowledge: Process innovation reducing unit costs
7. [2] Knowledge: First mover advantage of being leader of innovation in a market or in an operations process
8. [2] Knowledge: Capital cost of research & development (R & D)
9. [2] Application: TK has been at forefront of innovations in the food delivery business
10. [2] Application: Thierry was an early adopter of the smartphone app for food delivery
11. [2] Application: Patent on food packaging container
12. [2] Application: Response of innovations to change in social trend, i.e. less eating out, more deliveries
13. [2] Application: Necessity of continuous innovation in food menus such as vegan dishes, as well as keeping 'customer favourites'.
14. [2] Application: Advantage of trials in response to need for 'contactless' delivery (possible reference to Covid)
15. [6] Analysis: Innovation has differentiated TK from other delivery companies leading to growth of revenue, profit, and the company.
16. [6] Analysis: Innovation is often costly in the short term, such as development of packaging, which leads to higher costs, lower profits, lower shareholder dividends.
17. [6] Analysis: Innovations offer solutions to problems but require substantial investment and therefore carry risk – will the ADVs prove to be a costly experiment with no future benefit?
18. [6] Analysis: Innovation in menus can enable TK to take advantage of changing social trends such as consumption of non-meat products and give TK a competitive advantage leading to increased sales
19. [6] Evaluation: Conclusion as to the past and future importance of innovation.
20. [6] Evaluation: Importance of continuing the trend for innovation as a way of maintaining competitive advantage.
21. [6] Evaluation: Other important internal and factors which determine profitability, such as marketing e.g. letting customers know about innovative menu ideas.
22. [6] Evaluation: The meaning of success in terms of profitability? Brand image?
23. [6] Evaluation: The external environment is dynamic and may change in the future and affect profitability differently.
24. [6] Evaluation: Impact of changing environment will depend on the management of TK and its flexibility in responding to change. Contingency planning may be significant.
25. [6] Evaluation: Need for continuous research to lead to new ideas.
26. [6] Evaluation: Need to maintain USP of high quality food which might be threatened by constant change to the menu.