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Lecture

ADMS 4245 Lecture Notes - Compound Annual Growth Rate, Target Market, Cost Leadership


Department
Administrative Studies
Course Code
ADMS 4245
Professor
Peter Modir

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CHAPTER 3 Product Planning
Product Planning Process: It takes place before a product development project is formally approved. Product planning is an
activity that considers the portfolio of projects that an organization might pursue and determines what subset of these projects
will be pursued over what time period.
The product planning Process: The product plan identifies the portfolio of products to be developed by the organization and
the timing of their introduction to the market. The product plan needs to be constantly updated to reflect changes in technology,
etc. organizations that do not carefully plan the portfolio:
o bad coverage of target markets
o poor timing of market introductions of products
o frequent changes in the directions of projects
FOUR TYPES OF product development projects
1. New product platforms: it involves a major development effort to create a new family of products based on a new,
common platform
2. Derivatives of existing product platforms : the projects extend and existing product platform to better address
familiar markets with one or more new products.
3. Incremental improvements to existing products: these projects may only involve adding or modifying some features
of existing products in order to keep the product current and competitive
4. Fundamentally new products: these project involve radically different product to help address new and unfamiliar
market. Risk is higher. Eg. The first digital copier Xerox developed
The Process Steps
1. Step 1: Identify opportunities: this step can be thought of as the opportunity funnel because it brings together inputs
from across the entreprise Ideas for new products or features of products may come from different sources such as any
employee, customers, suppliers, etc. such as Google.
2. Step 2: Evaluate and Prioritize Projects: if managed actively, the opportunity funnel can collect thousands of
opportunities during a year. Thus, the second step is where you select the most promising project to pursue. Four basic
perspectives are useful in evaluating and prioritizing opportunities for a new product:
1. Competitive Strategy: an organization’s competitive strategy defines a basic approach to markets and
products with respect to competitors. Several strategies are possible:
Technology leadership: firms places great emphasis on basic research and development
Cost leadership: this method requires the firm to compete on production efficiency such as economies
of scales, superior manufacturing method
Customer focus: the firm works closely with new and existing customers to assess their changing
needs and preferences
Initiative: It involves closely following trends in the market
2. Market Segmentation: Dividing a market into segments allows the firm to consider the actions of competitors
and the strength of the firm’s existing product with respect to each well-defined group of customers. By
mapping competitors’ products and the firm’s own products onto segments, the firm can assess which product
opportunities best address weaknesses in its own product line and which exploit weaknesses in the offering of
competitors.
3. Technological Trajectories: a key product planning decision is when to address new basic technology in a
product line.
4. Product Platform Planning: it is the set of assets shared across a set of products. Components and
subassemblies are often the most important of these assets. An effective platform can allow a variety of
derivative products to be created more rapidly and easily with each product providing the features and
functions desired by a particular market segment.
5. Evaluating Fundamentally New Product Opportunities: a firm faces many opportunities in either new
markets or funadamentally new technologies. Some criteria for evaluating fundamentally new product
opportunities: Market size, CAGR, competition
6. Balancing the Portfolio: how to balance it?
Mapping the portfolio along useful dimensions so that managers may consider the strategic
implications of their planning decisions
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