STRATEGIES FOR

NEW PRODUCT

DEVELOPMENT

Why develop new product?

Meet changing customer needs.

Competitive advantage over

counterparts

For success in new venture.

Problems in underlying

strategies Defined strategy may discourage

innovation.

Uncertainty in how to develop a new

product.

Dimensions involved in strategy

making Market/Technology Mix

Market Width

Degree of innovation

No Technology

Change

Improved

Technology

New Technology

No Market

Change

No Activity Reformulation Replacement

Strengthened

Market

Remerchandisin

g

Improved

Product

Line Extension

New Market New Use Market

Extension

Diversification

Degree of innovation

Taking someone else’s technology

and improving/individualizing.

Thorough commitment to innovation.

Price/Quality Ranges

Prepare and market products that

represent superior quality to customer

and improve those values constantly.

Values can be in terms of quality or

price.

Particular promotional

requirements

New products should be oriented to

match current promotional strategy or

marketing resource structure

Inside vs. Outside Facilities

Strategy decides the extent of

resource allocation to R&D facilities

and personnel.

Competitive situations to be

sought out or avoided

Markets with dominant leader present

may prevent others from making entry.

Some markets are said to have

deteriorated and thus to be avoided.

Competitive conditions can also be an

opportunity.

Production Requirements

Different requirements for different

firms.

One might go for innovation and

search for new product.

Other might simply want to mass

produce.

Patent Requirements

Some companies go for patent at the

earliest.

Others, specially small scale firms

might go for non patent gamble

because of small investment involved.

Speed

Product development is a long term proposition generally.

But when immediacy is a priority for the firm, it goes for risky decisions have short term dimensions.

Others which go slow in their product development process have long term dimensions

Risk/Failure Factors

Feelings differ widely for managers that they might form completely opposite strategies in similar kind of situations.

Some firms accept their inevitable failure.

But if 1/3rd of market approaches are a success, firms might still be profitable.

Failure is occasional - Firms make less risky decisions and want to avoid production hazards.

Pay Back Condition

Financial conditions of firms change from time to time -Cash Prosperity to Cash Constraining.

People in Product Development remain unaware most of the time.

Only if the complete idea is rejected because of excessive cash drain or some pay back, these people are made aware of financial situation.

So strategy should be flexible so as to absorb some setbacks.

Bigger firms sometimes refuse ideas because of lack of glamour which might be profitable in the short term

Minimum Sales

In situations of sizeable fixed expense

commitments to a new product.

Profitable strategy.

Need for basic research

Expensive process.

Decision on desirability of ideas is crucial.

Complete innovation may or may not matter for success as imitation in a different can give desired results in some cases.

Products/service relatedness

Products can be related to systems of

use or service.

Services can be an opportunity for a

firm to differentiate itself from others.

Miscellaneous

Some other strategies and examples

The knock of opportunity

Good strategy helps in:

Reduction in wasted programs, false

starts.

Enhancement in moral.

Managerial control.

Assumptions in new product strategy:

Mistakes may occur

Cost is reduced by dealing with

guidelines

THANK YOU