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smu mba assignments Q.Explain the various stages involved in new product development .

Answer: New Product Development
New products are essential for existing firms to keep the momentum and for new firms they provide the differentiation. New product doesn’t mean that it is absolutely new to the world. It may be a modification, or offered in a new market, or differentiated from existing products. Therefore it is necessary to understand the concept of new products.
Meaning of New Products:
a. They are really innovative. For example, Google’s Orkut, a networking site which revolutionized social networking. In this site people can meet like minded people; they can form
their own groups, share photos, comments and many more.
b. They are very different from the others: Haier launches path-breaking 4-Door Refrigerators first time in India
c. They are imitative; these products are not new to the market but new to the company. For example, Cavin Kare launched Ruchi pickles. This product is new to Cavin Kare but not to the market.

New product development process:
Stage 1 - Idea generation: New product idea can be generated either from the internal sources or external sources. The internal sources include employees of the organization and data collected from the market. The external source includes customers, competitors and supply chain members. For example, Ingersoll Rand welcomes new ideas from the General public.

Stage 2-Idea screening: Organization may have various ideas but it should find out which of these ideas can be translated into concepts. In an interview to Times of India, Mr. Ratan Tata, chairman TATA group discussed how his idea saw many changes from the basic version. He told that he wanted to develop car with scooter engine, plastic doors etc… But when he unveiled the car, there were many changes in the product. This shows that initial idea will be changed on the basis of market requirements.

Stage 3 - Concept development: the main feature or the specific desire that it caters to or the basic appeal of the product is created or designed in the concept development.
Concepts used for Tata Nano car are –

Concept I: Low-end ‘rural car,’ probably without doors or windows and with plastic curtains that rolled down, a four-wheel version of the auto-rickshaw

Concept II: A car made by engineering plastics and new materials, and using new technology like aerospace adhesives instead of welding.

Concept III: Indigenous, in-house car which meets all the environment standards
Stage 4 - Concept testing: At this stage concept is tested with the group of target customers. If any changes are required in the concept or the message it will be done during this stage. Also the effectiveness is tested on a minor scale. If the concept meets the specific requirements, then it will be accepted.

Stage 5 Marketing strategy development: The marketing strategy development involves three parts. The first part focuses on target market, sales, market share and profit goals. TATA’s initial business plan consisted sales of 2 lakhs cars per annum. The second part involves product price, distribution and marketing budget strategies. TATA’s fixed Rs 1 lakhs as the car price, and finding self employed persons who work like agent to distribute the cars. The final part contains marketing mix strategy and profit goals.

Stage 6 - Business analysis: it is the analysis of sales, costs and profits estimated for a new product and to find out whether these align with the company mission and objectives.

Stage 7 - Product development: during this stage, product is made to undergo further improvements, new features or improvised versions are added to the product. There is also scope for innovation and using the latest technology into the product.

TATA Nano car development (Source: business world nanolution)
– Tried to outsource the product from all over the world.
– Development of ‘mule’ or prototype with 20bhp.
– Designing the small engine
– Thermodynamic simulations and final engine
– Development of MPFI with help of Bosch.
– Cost reduction and negotiating with vendors.
– Sona Koyo and Rane Group came up with hollow steering shafts, saving cost and cutting weight. Sharda Motors and Emcon designed the exhaust system and MRF tweaked the tyres to bear extra weight on rear wheels.

Stage 8 - Test marketing: is the most crucial stage for the testing product’s performance and its future in the market. There are certain cases where product has failed in the test marketing and had to be withdrawn.
– The product is introduced into the realistic market
– The 4P’s of marketing are tested.
– The cost of test marketing varies with the type of product.

Stage 9 - Commercialization: In this stage product is completely placed in the open market and aggressive communication program accompanied with promotion activities is carried out to support it.


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