Market-Driven Product - Assignment Example

1. Why is it important to make your new products’ realisation strategy market-driven? In highly competitive market environments organizations need to place extensive efforts towards conceptualizing, designing, developing and marketing products or services that address strategically and effectively to the market demand while at the same time offer competitive edge to the enterprises themselves. New product realization is a rather complex process that involves more than the development of an innovative product, but pertains predominantly to the entire procedures that relate to initiating, conceptualizing and eventually developing the new product (Chakravarty, 2001). Product realization entails the preliminary research towards initiation of products that are to be marketed as well as the actual development and testing of those products over their effectiveness in meeting customer demand. In the framework of new product realization the entire process comprises a number of steps that constitute the procedure efficient in terms of matching the ‘new product’ to be launched with the market demand. However, as Storey and Easingwood (1999) indicate, new product development should be consistent with the market trends and with the firm’s capabilities and resources. In that extend, firms should be highly focusing on designing those characteristics and attaching those features to their new products/ services that are meaningful and ‘desirable’ for both customers and the firms themselves. Adopting a market driven strategy with regards to new product realization is vital in that it eventually allows management to identify and explore the critical stakeholders’ requirements or needs and gradually embed these in the product/service specifications prior to launching a new product/service (Herrmann et al., 2000). Strategic new product realizations offer comparative advantages to organizations mostly due to the fact that they are credited for increasing competence, adding value to the firms’ offerings and eventually strengthen the competitive opposition in the overall market environments (Storey and Easingwood, 1999). However, product realization strategy needs to be market – oriented in order to provide the fundamental basis for successful results. According to Chakravarty (2001) the development of new products is essential only if these new products incorporate and embed the customer requirements, customer needs and generally pertain to addressing customer demand. The author further expands this view by arguing that market driven product realization strategy reflects the strategic fit of the new products to the overall market demand. New product development (NPD) is the process of conceptualizing, designing and eventually manufacturing a new good that will be launched in the market in an effort to appeal to potential buyers and purchasers (Jaworski et al., 2000) New product development is a procedure that adds significant costs to the company/firm especially those related to R&D and marketing resources; to this end, business and operational processes need to be concise and as efficient as possible in order to minimize the expenses. Chakravarty (2001) argues that this efficiency is eventually gained through developing new product realization strategy that is market driven. Incorporating demand characteristics and requirements allows organizations to minimize realization costs due to the fact that new products are able to effectively and strategically address market demand. As Herrmann et al. (2000) posit in the onset of new product realization organizations need to match customer requirements and firms’ resources; this is eventually translated into developing products and services that feature such characteristics and attributes that fit the needs and expectations of the overall market. Despite the fact that product realization is only a partial phase of the entire PLC (product life cycle) the decisions made during this stage are critical for the overall success and performance of the new products. 2. What are advantages of direct versus indirect distribution? The development of a distribution strategy in any organization around the globe is one of the most important decisions and strategic choices that marketing managers need to focus upon in order to achieve efficiency and effectiveness in reaching end - consumers. There are generally two broad alternatives to distribution of products; direct or indirect distribution. The first one involves the direct selling of goods or services to the final customer, while the second one refers to the use of intermediaries, re-sellers or distributors of the goods/services offered to the respective markets. The advantages and the benefits of direct distribution systems involve predominantly the concentration of power and control to the manufacturing or producing organization. The absence of intermediaries or other mediating sellers constitute the firm as the sole actor in controlling the processes that are implemented towards transferring the products/services to the market itself. Direct distribution offers transparency and consistency in the procedures undertaken in the flow of goods towards consumers (John and Weitz, 1998). This cannot be achieved in indirect distribution, where various channels mediate the transactions and the product flows and eventually the controlling of the processes followed moves away from the producer or manufacturer. Moving on, direct distribution minimizes the margins of the prices that are charged to the end customers. As more intermediaries get involved in the distribution system and more channels are added (in the case of indirect distribution) the margins expand and these margins are reflected in the increased products’ prices. Therefore direct distribution allows organizations to maintain relatively low prices, excluding this way mark ups that represent the margins of the prospective mediators. In a similar manner, producers/manufacturers eventually leverage the profit margins themselves without distributing these to the various channel members. Continuing with the advantages of direct distribution, it needs to be stressed that firms maintain a generic and immediate relationship with the customers and therefore gain more consistent access to market information or market requirements. Organizations employing direct distribution gradually minimize the market research costs as they receive direct feedback regarding the market performance of their products or services (John and Weitz, 1998). The important issue in terms of this argument lies in the fact that firms achieve efficiency in both distribution and marketing due to their direct interaction with the end consumers. In the case of indirect distribution systems, organizations tend to base their knowledge and learning over the market trends to the information received by their intermediaries or resellers; under this scope channel members’ interests may intervene and may distort actual reflection of the products’ performance. Concluding, within this framework of direct interaction with end buyers, organizations are able to pursuit and build strong and long term relationships with their customers and employ tactics and practices of relationship marketing. Indirect distribution cannot offer this opportunity as it tends to alienate producers/manufacturers from the consumers and strengthen the relationships between resellers and consumers. This alone is a very significant drawback stemming from indirect distribution as it pertains to the increased bargaining power of intermediaries over producers/manufacturers. 3. How important is channel coordination in reducing channel conflict? Within the overall discussion of distribution strategies and distribution channels, the issue of channel conflict appears to be a core element that needs to be addressed by organizations. Channel conflicts emerge predominantly due to three respective reasons: goals, perceptions and domains (Havaldar and Cavale, 2007). Goal conflict reflects the situation where the different channel members eventually pursuit different or opposing objectives and targets; perception conflicts occur when the channel members interpret differently the market environment or market trends and therefore employ different strategic practices and tactics; domain conflicts refer to the cases where the balance of power is not similarly and identically perceived by all channel members. Channel conflicts can hamper the entire distribution strategy for a given product or service and can ultimately influence the market performance and the degree of market acceptance. It is essential therefore to explore and identify practical solutions that can reduce or even eliminate such conflicts in the overall distribution network. Channel coordination needs to be designed and implemented in order to ensure that the distribution goals and objectives of the entire chain are effectively targeted. Channel coordination involves primarily the organization of functions and responsibilities that each channel member will undertake throughout the entire distribution flow. This is actually very important because it pertains to three fundamental issues; the first one relates to the members’ understanding of their role within the overall network and their compliance with the objectives that are set by the entire channel. Channel coordination aims at ensuring that the goals are realized by the members and providing framework and guidance for the actions that need to be implemented towards those goals. As Tsay and Agrawal (2004) state coordinating effectively and strategically the channel members eventually results in more efficient communication between the members and thus more consistency in achieving the goals or objectives. Furthermore, channel coordination organizes the functions and procedures on the basis of the interests of each channel member. Aligning the members’ interests and integrating their processes towards common values and common identification of the objectives by optimizing the members’ cooperation is a critical approach to reducing channel conflict. When chain members realize that the benefits of integrated orientation towards distribution strategy are significant to the effective flow of products/services to the end customers, then the probabilities of conflicts are minimized and the entire channel adopts a more sophisticated and consistent approach (Havaldar and Cavale, 2007). Finally, channel coordination allows management to identify the weaknesses and the strengths of the channel members and eventually work towards improving any drawbacks that gradually prevent the distribution channels to fully commit into pursuing customer satisfaction through considering customer requirements. In addition to that it offers the advantage of identifying those weaknesses that are critical and vital to the accomplishment of goals and pertains to the allocation of clear responsibilities to each member in order to minimize risks. Overall channel coordination manages to match and align the members’ interests with the channel’s interests and integrated those in an attempt to provide the basis for effective customer service. References Chakravarty, A.K. (2001). Market driven enterprise: product development, supply chains and manufacturing. New York: John Wiley & Sons, Inc Havaldar, K.K. and Cavale, V.M. (2007). Sales and Distribution Management: Text and Cases. New Delhi: McGraw Hill Companies Herrmann, A., Huber, F. and Braunstein, C. (2000). Market-driven product and service design: Bridging the gap between customer needs, quality management, and customer satisfaction. International Journal of Production Economics, 66 (4), pp. 77-96 Jaworski, B., Kohli, A.K., and Sahay, A. (2000). Market Driven vs Driving Markets. Journal of Marketing Science, 28(1), pp. 45-54 John, G. and Weitz, B.A. (1998). Forward Integration into Distribution: An Empirical Test of Transaction Cost Analysis. Journal of Law, Economics, and Organization, 4(2), pp. 337-355 Storey, C., and Easingwood, C. (1999). Types of new product performance: evidence from the consumer financial services sector. Journal of Business Research, 46, pp. 193-203. Tsay, A.A. and Agrawal, N. (2004). Channel Conflict and Coordination in the E-Commerce Age. Production and Operations Management, 13(1), pp. 93-110 Read More