New Product Development - Essay Example

Business Management Assignment 3 Contents Contents Answer 1 Answer 2 Answer 3 2 Answer 4 2 Answer 5 2 Answer 6 2 Answer 7 3 Answer 8 (a) 4 Answer 8 (b) 5 Answer 8 (c) 5 Answer 8 (d) 5 Bibliography 5 Answer 1 Stage Cost (£000) Idea Screening 32 Concept Testing 80 Product Development 400 Test Marketing 500 National Launch 2500 Answer 2 4 Answer 3 £112,000 Answer 4 £3,224 Answer 5 Today we are living in a global village where all businesses have to compete not only with local players but even a business on the extreme opposite corner of the world can also pose a threat to it’s market share. In such an environment change plays a very vital role as companies keep on improving and innovating. This change is aimed on a single target i.e. increase the bottom line, which can be increased by either decreasing cost or increasing revenues. Companies decrease cost by making their operations and value chains much more efficient. While on the other hand in order to increase revenues, a very common practice is to generate a new product. In order to be successful this product must offer a higher value to customer. So now here comes in the importance of developing a new product. If in a market, any player has innovated such a product which can provide higher value then it simply takes away market share. In such a condition it becomes imperative for other players of market to bring in their innovation because any late response in this regard simply means lost customers, which is not desired by any business. In other words it can be explained as that every business requires a sustainable competitive advantage. In some businesses competitive advantage is totally dependent on the innovation associated with the products. So in order to create a sustainable competitive advantage, all businesses are required to stay up to date and keep bringing in new products. Answer 6 There is no doubt in this regard that every business has to stay up to date and ensure that they are offering the best possible product or a product which can provide the company a sustainable competitive advantage. However there are some industries which require some extra efforts in the field of product development, research and innovation. One of the most common industries in this regard is the pharmaceutical industry. Pharmaceutical companies invest millions of dollars annually on their research and department. This is because of the reason that they have to ensure that they come up with the latest and most effective combination of drugs. This happens because their whole profits are based on the relative effectiveness of a medicine. In addition to this if a pharmaceutical company has invented a new medicine to cure a disease then this innovation can promise company high profits for the upcoming years. This happens because when a company innovate a new product then it can get patents for it. These patents provide company an opportunity to be the single producer of that specific product. Answer 7 For this purpose, most simple answer is to keep a very clear eye on the external environment. In external environment all external stakeholders are included i.e. government, customers, competitors, suppliers etc. Starting with the most important i.e. customers. A company must analyze the changing demands and needs of its customers and shall identify different methods through which it can provide maximum possible value to its customers. It should identify that how it can better serve its customers and in this regard if a change is required then surely company must opt for it. After this comes the second most important thing and that is competitor. Every business must be aware of the fact that competitors share same market so if there sales are increasing then it only means one thing that they are eating your part of potential market share. So it’s imperative for every business to keep analyzing its competitors and check that what the moves are taken by competitors. If a competitor has created any new product which is providing a higher value to customers then it becomes imperative for other market players to react immediately. Because a new product in the market by a competitor is simply a red flag reflecting that come on and if any company does not react properly then it simply dies. So keeping a close eye on the competitor is vital to decide the right time of launching a new product. After these two most important external players, next come the suppliers and distributors. For a successful business it is important that company stays in a close contact with this part of the value chains. The reason behind this is that since distributors are much closer to customers so they can provide very important information about the changing demands and needs of them. In addition to this suppliers can also help in deciding the right time for the launch of a new product because they have very important market intelligence. Answer 8 (a) Like every living organism, any product also goes through a life cycle but the only difference is that it can keep on dying and reforming. Depending on the market conditions and related macro and micro economic factors, a product keeps on going through different stages of its life. These stages include: Introduction Stage Growth Stage Maturity Stage Decline Stage Introduction stage It is the very initial stage of any product in a market. It is the stage when high revenues are foreseen by the producers. In this stage there are very little or no number of competitors. Due to this low level of competition, more and more market players get attracted and this thing leads to the next stage of product life cycle. Growth Stage Once different market players get attracted to any market and keep entering an arena then it becomes a growth stage. In this stage there is a growing level of sales as well as competition. Competition keeps on growing because different players keep on assuming that still a lot of potential exist in the market. Maturity Stage High expected sales attract more and more market players to a market and this thing eventually leads to the saturation. In this stage there is a high level of competition and every thing gets stable. Market practices get defined, value chains are set and customer growth becomes very weak. Most common business practice in this stage is differentiation. Decline Stage Due to intense competition in the maturity stage, all players keep on pushing each other towards the walls. Those players which have something unique to offer or carry a unique competitive advantage survive, while other dies. Since many products get eliminated in this stage so due to this reason this stage is known as decline stage. Answer 8 (b) Product life cycle analysis provides the strategic management of any organization to decide that which strategy to follow. It helps the management to see the level of competition and growth level of customers. Answer 8 (c) In order to simply survive in the intense competition and low customer growth market, businesses try to extend their maturity stage by applying the strategy of differentiation and diversification. Answer 8 (d) Best approach in this regard is to ask the customers about it through survey. Other than this competitive intelligence can also provide very important information in this regard. Answer 8 (e) Patent is a grant made by a regulatory authority and it provides a company the sole right to offer any product or service. These patents benefit an organization as a pay off to their initiative to innovation. Bibliography The Product Life Cycle (PLC) and Strategies at different stages. Available at: http://drypen.in/advertising/the-product-life-cycle-plc-and-strategies-at-different-stages.html. Accessed (May 5, 2010) Importance of Change. Available at: http://hubpages.com/hub/IMPORTANCE-OF-CHANGE. Accessed (May 5, 2010) Strategic Importance of Change. Available at: http://www.workinfo.com/free/downloads/300.htm. Accessed (May 5, 2010) Importance of Innovation. Available at: http://findarticles.com/p/articles/mi_m0KJI/is_1_117/ai_n9485217/. Accessed (May 5, 2010) Read More