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Selection criteria and economic comparison models for evaluation of innovative and sustainable products

Cholakov, Pavel V. (2015) Selection criteria and economic comparison models for evaluation of innovative and sustainable products.

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Abstract:Introduction: The issues with global sustainability are widely recognized and debated on by world leaders and the general public. Sustainability is considered a megatrend with the potential to alter the way businesses operate, comparable to other game changing trends, such as globalization, information technology, and mass production. Therefore, sustainability cannot be ignored by businesses and they should considers the environmental impact of their products. The African Agency for Sustainable Innovation (AASI) is an up-and-coming business development company whose main objective is to assist innovative and sustainable products to market. This research is aimed at assisting the company in the selection process of potential products. Research Problem, Scope and Objectives Adoption of innovative and sustainable products in Africa has a poor track record. Potential reasons for that are improper positioning of the products and unaffordable pricing. Western companies tend to face challenges when introducing new products in Africa arguably due to the limited understanding of the cultural and economic specifics of the market. This is partially due to lack of extensive and definitive research on product selection criteria in the African context. Furthermore, the majority of innovative and sustainable products introduced are unaffordable for the low socio-economic group, which includes the overwhelming majority of the consumers. Using data from five African countries, this study attempts to mitigate those issue by designing and implementing a multifactorial selection criteria and economic comparison models. Research Approach Firstly, the study looked into the existing literature on decision making, multi-criteria evaluation and sustainability measurement methods (Chapter 2). The data was gathered by an extensive search in academic literature. The research took the design approach in creating the selection criteria model and used interviews with relevant business professionals (Chapter 3) to derive and validate the criteria set (Chapter 4). In designing the economic comparison model, the study calculated the purchasing power of the consumers, both as individuals and households, and used existing literature to propose a feasible model for comparing affordability of products (Chapter 5). The study proceeds further with application of the two model on potential products and comparison of the products (Chapter 5). This aims to illustrate the use of the models in practice and clarify their application. The study concludes with a discussion of the finding and recommendations for the successful implementations of the models (Chapter 6). Findings This study researched and developed a selection criteria model for innovative and sustainable products, which can be used as an evaluation tool to assist the African Agency for Sustainable Innovation in its business operations. The model consist of the following set of criteria: sustainable energy field relevance; sustainability score; affordability for the low-socio economics; ability to be continuously produced, delivered and maintained; durability; usability (ease of use); possibility for continuous customer involvement; and triple bottom line compatibility. These criteria reflect AASI core competences and values, common practices of business professionals, and analysis of successful and unsuccessful innovative and sustainable products in the African market. Each criteria can be assigned with values ranging from 0 to 10 to allow comparison. This research also developed an economic comparison model that measures the affordability of products. Within this model a product is considered affordable if its price is equal or lower to the affordability price point (Price of unit ≤ Affordable price point). The affordability price point for this model is equal to the amount of savings by the use of the product per set period of time (Affordable price point = Savings by use of new tech for a set period). The savings due to the use of the new technology are calculated by the cost of use of new technology subtracted from the cost of use of the old technology. The cost of using a certain technology could incorporate different variables, such as energy expenses, maintenance costs, taxes, depreciation, amortization etc. The application of both the economic comparison and selection criteria models is illustrated by evaluating two products (WakaWaka Power and SUREST Solar Cooker). This allowed for a comparison of the products using a weighted sum model. The comparison results pointed out that WakaWaka Power has higher potential. However, both products proved to be with a higher than the affordable price. Therefore, to improve their chances of success of in the African market the managers should either lower the price or look for methods to mitigate the financial tow on the consumers. Conclusion The selection criteria model is tailor made for the organization and is specifically applicable when considering innovative and sustainable product for the context of the African market. This model is suitable to use when the attributes of a potential product need to be quantified in order to get a better idea about the product or measure it against another one. The model can also be used as a blueprint when looking for potential products, and ensuring that they fit the predetermined criteria. The economic comparison model can be used as part of the criteria model for assigning value to the affordability criterion or on its own to evaluate pricing of products. The model was designed for the purposes of measuring affordability, but it can also serve as a tool to measure returns on investment and payback periods. An important feature of the model is also that its complexity can be easily altered by adding relevant variable according to the desired depth and accuracy of the analysis.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/67678
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