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New Product Development Process

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New Product Development Process

The main components of a New Product Development process and the benefits of using the Stage-Gate Product Innovation system in the New Product Development Process

New product development (NPD) is an important cornerstone to the success of any firm. To remain competitive, companies cannot bury their head and seem less concerned about developing new products that add value to their customers (Salgado, Salomon & Mello, 2012). Because of these, new product development process is important to businesses and the reason why companies should invest in it. NPD ensures that a new product is introduced in the market to meet the needs of the customers. The paper critically evaluates main components of a NPD process as well as benefits of using Stage-Gate product innovation system.

Before a new product is introduced in the market, it has to go through different processes or stages. The major components of NPD include; opportunity identification and idea generation, product concept development, concept testing, design and engineering of products and lastly is the prototype development and testing (Hauser & Dahan, 2007).

Opportunity identification and idea generation is the first component of NPD process. This is a the most important component that kick-starts the process of development of a new product (Hauser & Dahan, 2007). The new product opportunities are identified or new ideas emerge based on the customer unmet needs. Customers are the major source of inspiration and therefore, any new idea generated must focus on meeting their needs. At this stage, it is important to embrace and consider the views or ideas of other stakeholders such as customers, suppliers, and employees’ point of view.

Communication of this view is expected in good time and no one should be left out (Salgado, Salomon & Mello, 2012). Some challenges may be experienced when gathering information from customers such as possibility of change of mind when the final product comes out, difficult in forming opinions and expressing preference because of a lack of sense of product features, and lastly biasness on the side of information gatherer due to biasness.

To avoid these, it requires use of appropriate methods of data collections for the target customers such as experiential interviews and user observation. In this age of technological advancement, use of web-based methods for the fuzzy front end can apply (Hauser & Dahan, 2007). Virtual groups participate on new product concept by providing their view and opinions. Many firms are finding such groups and individuals that browse on new product stimuli as rewarding.

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The second component is product concept development that begins after identification and grouping of customer needs (Hauser & Dahan, 2007). The journey on how to address the needs of the customer commences. Not all ideas generated are considered. Nevertheless, some of these ideas at the start seem unconventional and impractical but are refined and share into viable opportunities (Salgado, Salomon & Mello, 2012).

Different ideation methods have been proposed. They include system approaches, forced relationships, incentive compatible ideation, brainstorming, varied perspectives, morphological analysis, and archival analysis. For instance, in brainstorming, members are at liberty to generate their ideas regardless whether they are good or unrealistic.

The third component is concept testing. This is also a critical step in the process of new product development process. At this stage, the new products concepts are screened as potential customers use qualitative and quantitative research methods (Hauser & Dahan, 2007). During this process, it is also critical to carry out evaluations by asking oneself whether indeed the idea or concept is important to the consumer. Other attributes to evaluate are the purchase interest of the customers, dissatisfaction with the available products help to prioritize ideas for further testing, and funding.

The concept is defined in the form of a promise to the consumers that indeed the firm understands the relevant needs of the customers (Hauser & Dahan, 2007). It also provides a proof on how the company is prepared to address the needs of the consumers in a better way than any other (Hauser & Dahan, 2007). It is also important to provide an emotional or rational reason why the customer should try the company product, definition, and communication of the concepts core benefit proposition (CBP).

The concept is evaluated through laboratory test markets (LTMs) and survey research. The prediction need to be highly accurate for the product team to evaluate them and make improvement on them. At this stage, the setting should be realistic and concept of marketing such as consideration of marketing mix should be utilized (Hauser & Dahan, 2007).

For example, advertisement of the concepts such as storyboards as opposed to finished advertising with prototype products should be used. Forecasting should be done as the concept moves through the process. This is because, resources are being utilized and it is important to have an estimate of the profit and revenue potential of the concept early in the process.

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The fourth component also stage is the designing and engineering products (Hauser & Dahan, 2007). This stage ensures that few but highly concepts that are proven viable are designed and engineered in order to meet the needs of the customers at profitable costs (Salgado, Salomon & Mello, 2012). The company cannot afford to design and engineer a concept if they have no value to the customer as well as to the company. The techniques they use to design and engineer products are value Engineering and conjoint analysis.

In conjoint analysis, the team optimizes the quantity or level of attributes or features that will be able to satisfy the customers and at the same time accrue profits to the company (Hauser & Dahan, 2007). For example, a company that produces marker cameras will be interested in knowing the optimal values of all the features that will go into its production such as the megapixel, the size, optimal zoom and the price of the camera when completed. In addition, they may also want to put to consideration situations where customers would make tradeoffs with other features.

Different methods of conjoint models are applicable such as hybrid, newer adaptive and discrete (Hauser & Dahan, 2007). On the other hand, value engineering is the integration of both the firm and customer perspectives when making cost and feasibility tradeoffs- in respect to the product (Hauser & Dahan, 2007). The team should consider the importance customers place on every function that the product performs in relation to the cost of the parts that are contributing to that function.

The underlying principle of value engineering is that the marginal cost of every part of the product need to not to exceed the marginal contribution to customer value. With advancement of new information and communication technologies web based methods for deigning and engineering product concepts have been embraced in most companies (Hauser & Dahan, 2007). Use of web based conjoint analysis is preferred because of the many benefits it offers such as capability to be demonstrated in a contextual manner.

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The last component is the prototype development and testing. The main aim or goal of this stage is evaluating the designed and engineered concepts to make the launch easier. At this stage, various prototypes are developed and then tested. The techniques used for testing automatically generate many solutions on the product concept theme (Hauser & Dahan, 2007).

Furthermore, at this stage, it is also important to test the marketing role by testing multiple designs with customers. Realistic testing is also required at this stage. The NPD team can simulate product acceptance in the marketplace that experiences or is affected by different variables such as sales force presentations, word of mouth, and advertising among other.

As globalization increases, the level of competition is increasing and this has seen decrease in product life cycles in most of the technology intensive industries ( Jou et al. 2010). This means that companies have to produce new products that will be of higher value to the customer to win over the competition. This therefore, forces innovators and thinkers to think about the most flexible ways to manage NPD without compromising on efficiency.

One of the methods of management NPD that companies are using is the Stage—gate processes. However, other avenues of adapting Agile methods for software development and integrating them with others are also underway. Little research on integration of the Agile and stage-gate processes has made it difficult for many companies to try the same because this may affect on their performance.

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Stage-Gate product innovation systems are one of the methods that many industries rely on. This method is linear in nature and it depends on documentation on fixed set of activities (Sommer, Hedegaard, Dukovska-Popovska & Steger-Jensen, 2015). The method has a series of product development stages and it starts from the generation of idea, the development of the idea, and then implementation phases which is then followed with product launch or the evaluation stage that comes at the end.

According to Sommer, Hedegaard, Dukovska-Popovska & Steger-Jensen (2015), this method has a number of advantages to the organization. One of the advantages of using this method is that it increases the speed of development. This ensures that the company achieves its objectives within a short period. This increased speed as well cuts the costs incurred as it takes less time to come up with an idea and to take the same through the stages to the final stage of product launch.

The method is also able to produce better quality (Sommer, Hedegaard, Dukovska-Popovska & Steger-Jensen, 2015). Quality is important especially when it comes to the products that consumers want. Quality is a strategy that companies use to achieve a competitive edge over their competitors. Therefore, it is very good method to ensure that high standards of quality are achieved. The other advantage of the method is that it ensures greater discipline and better performance overall compared to other informal development processes (Sommer, Hedegaard, Dukovska-Popovska & Steger-Jensen, 2015).

Using the tool as well decreases iterations, as the entire process is predictable from the commencement to the final product. The method has been established to help improve performances at the fuzzy front end stage through development processes (Sommer, Hedegaard, Dukovska-Popovska & Steger-Jensen, 2015). Fuzzy from end is set of activities done even before the process of defining requirements specification is over. This stage therefore requires the team to deliberate on what the product should do to meet or satisfy the perceived business needs.

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According to (Grönlund, Sjödin, & Frishammar, 2010), stage-gate methodologies are known across the world and are mostly used in industries all over the world to help bring order to chaotic process of product innovation. In a survey carried out, it was found out that 60 percent of those responding NPD functions were in one way or another using Stage – Gate methodology. The methodology coined by Robert Cooper was to help achieve efficiency.

It is therefore both an operational and a conceptual model that helps to move product across all the phases of development (Grönlund, Sjödin & Frishammar, 2010). It achieves effectiveness and efficiency through integrating in a process known as ad-hoc that is lacking in many industries. The gates function as top and go and they as well help to prioritize points for decisions for the future of the project are to be made (Grönlund, Sjödin & Frishammar, 2010).

The functional groups known as gatekeepers are the ones that man them and they help in project evaluation on the basis of business rationale, quality of execution, and quality of action plan. This therefore, indicates the magnitude of scrutiny and gate keeping involved in using the methodology (Grönlund, Sjödin & Frishammar, 2010). All this is done to avoid errors. For instance, the execution must be of high quality. The business rationale is also put to consideration. Understanding the purpose of the business is key to ensure that implementation is done in a good manner to have positive impacts on the project.

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Research has shown that this method is highly appreciated by many industries for its potential to energize and to speed up the new product development initiatives (Grönlund, Sjödin & Frishammar, 2010). Despite, this, there have been criticism from other quarters leveled against using Stage-Gate method. Critics argue that the method is time consuming, and this leads to time wasting (Grönlund, Sjödin & Frishammar, 2010). The time wasted could have been used in a valuable venture.

Others criticism of the method include no provision of focus, it requires that one follows bureaucratic procedures and it restricts learning opportunities (Grönlund, Sjödin & Frishammar, 2010). The bureaucratic procedures are evidenced as the methodology adherse to the process of NPD from start to the final stage. This too is not pleasing and they feel that it should be modified. The restriction of learning opportunity is also a weakness that should be addressed quickly. The method is linear and it does not provide a better platform for other to learn.

Next generation stage-gate process method has been developed in response to the criticism against this method (Grönlund, Sjödin, & Frishammar, 2010). The motivation for developing is for improving efficiency and speeding up of processes through incorporation of fluid stage with fuzzy and series of overlapping or confrontational go decisions. More developments on the method have focused on making it faster, flexible, adaptable, and effective (Grönlund, Sjödin & Frishammar, 2010). Some of the companies that have used State-Gate processes have also begun to accommodate open innovation activities.

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The development in the NPD process demonstrates the importance of proper tools and methodologies to rely on during NPD process. Many companies have utilized stage-Gate method and they have succeeded in their NPD process. The level of speed has increased with the method. Level of efficiency and effectiveness has also increased and these are some of the reasons that still compel firms to rely on the same.

Constructive criticism against the method has also emerged. Nevertheless, instead it is important and constructive to receive criticism so that the inspiration to create a more appealing and active methodology is reached. The most important thing is that researchers are producing new advanced methods to help improve management of NPD process. Such improvements method makes management of NPD process even more productive and plausible.

As I conclude, new product development process is very important and has to be taken serious if companies are concerned about the future. It is through NPD that companies and industries are able to survive the competition and even manage to achieve a competitive edge. Competition has become high and the only way to avoid the same is to create products that are unique to the market. This process of development must therefore go through different stages to ensure that the final product is of high quality, it meets the expectation of the customer, it also adds value to the customers, and that it has to bring returns to the company.

A venture that the company investments on should have tangible benefits to be of value. In NPD, it is important to understand that it involves different components that that are of great important to the success of the entire process. These components also phases include generation of ideas and opportunities, product concept development, concept setting, design and engineer of the products and lastly, prototype development as well as testing.

Various methods are as well used for management of these processes. Stage-gate is one of the methods that I would use in the project. The method has quite a number of benefits that firms accrue. Even though, the method has some weaknesses, efforts are underway to ensure that the method is improved to offer value to the firm.

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Reference

Ale Ebrahim, N, Ahmed, S, & Taha, Z 2010, ‘Critical factors for new product developments in SMEs virtual team’, African Journal of Business Management, vol. 4 no.11, pp. 2247-2257

Grönlund, J., Sjödin, D. R., & Frishammar, J. (2010). Open Innovation and the Stage-Gate Process: A revised model for new product development. California Management Review, 52(3), 106-131.

Hauser, J, & Dahan, R 2007, ‘New product development. Retrieved from: http://www.mit.edu/~hauser/Papers/Chapter%208%20Hauser_Dahan%20Book%20Chapt er%20on%20New%20Products.pdf

Jou, Y. T., Chen, C. H„ Hwang, C. H., Lin, W. T., and Huang, S. J 2010, ‘A study on the improvements of new product development procedure performance: An application of design for Six Sigma in a semiconductor equipment manufacturer’, International Journal of Production Research, vol. 48 no. 19, pp.573-5591.

Salgado, E, Salomon, V, & Mello, C 2012, ‘Analytic hierarchy prioritisation of new product development activities for electronics manufacturing’, International Journal Of Production Research, 50, 17, pp. 4860-4866, Business Source Complete, EBSCOhost, viewed 27 November 2015.

Sommer, A, Hedegaard, C, Dukovska-Popovska, I, & Steger-Jensen, K 2015, ‘Improved Product Development Performance through Agile/Stage-Gate Hybrids’, Research Technology Management, 58, 1, pp. 34-44, Business Source Complete, EBSCOhost, viewed 27 November 2015.

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Uses of Porter five forces

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Uses of Porter five forces

Introduction

Porter five forces model helps the entrepreneur to look at the type of work that is happening and make a sound decision concerning where the power of the business lies in their organisation. Once an entrepreneur has identified the source of strength in the industry he can venture in the right direction. An entrepreneur is better positioned using Porter five forces as he will identify the competition taking place in the market and identify what is expected of him to emerge more competitive (Cheng, 2013).

Identification of where the power of the business lies helps an entrepreneur in improving his situations of weakness, and all wrong steps that could have led the business in the undesired direction are avoided accordingly. When an entrepreneur wants to know if a business is profitable as he perceived, the use of Porter five forces can be of great use in gauging whether products and services produced are of better quality. The balance of power can be well understood from the use of Porter five forces by an upcoming entrepreneur (Dobbs, 2014). This paper explains how an entrepreneur can use the porter five forces and the disadvantages of using them as well.

Figure 1: A Graphical Representation of Porters Five Forces. Source: (Dobbs, 2014)

The bargaining power of the suppliers

Whenever and entrepreneur uses Porter five forces, he gets to understand better about the five forces that make a business more competitive as expected. An entrepreneur has to access how easy it is for business suppliers to drive up prices. One of the most important aspects of the luxury goods industry is suppliers. They are the business entities that take part in the manufacture of different products sold by various industries; hence, the entrepreneur should consider them accordingly (Dobbs, 2012).

For these products to be valued, it is important that they maintain a very high build quality, remain aesthetically appealing and most importantly have an element of uniqueness. An entrepreneur ought to ensure that suppliers have the ability to produce goods that meet such specifications and at the same time do them at a cost low enough to leave room for profit. Whenever suppliers are few, they will have the courage that they are in high demand, and they will tend to increase their bargaining power (Grigore, 2014). However, when suppliers are many the entrepreneur will be sure that their bargaining power is very low in the market.

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The Threat of Substitute Products

An entrepreneur has to know that substitute products accessible to the market are those which customers can use in place of what a particular brand has to offer. The middle and the high-income population of the market seeks out goods that help to portray their status and wealth. As such the demand for products like high-end electronics, designer perfumes and also designer clothes is only bound to remain (Kirchner, 2012). An entrepreneur ought to know that a company producing products that are found in other companies will reduce the threat of substitutes and make more sales.

Demand for accessing items will, therefore, remain sustained for a long time as the middle income to high-income segments of the population will maintain the need to display their affluence through these products. The majority of customers are youths who are concerned with luxury goods; hence, an entrepreneur ought to focus more on internet marketing to attract the youths who are active on social networking sites.

An entrepreneur should use the porter five forces to develop an attractive, and an appealing website that can help the youths to sell their product by taking advantage of the internet selling platforms (Sutherland, 2014). The use of porter five forces will make the entrepreneur ensure that the given company continues developing unique brands that are appealing to the youths and sell them in small quantities that are affordable to the youths.

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The Customers’ Bargaining Power

The entrepreneurs should make use of the Porter five forces analysis to ensure that the customer bargain power is reduced. An activity like this will mostly take place where major companies employ the mergers and acquisition program. They will end up merging with smaller companies and make them more powerful than before. After merging and acquisitions of various companies has taken, place customers bargaining power will be reduced and the formed company will now have the power to determine prices of different goods in the market (Wilson, 2015).

The company will now determine the market price whereby; the customers will have no say rather than purchasing goods and services at the given price. The competition will be reduced to such a level as the competitors will have now emerged; hence, work towards achieving the same goal of success. Any entrepreneur should not let the customers determine the prices in the market, but he ought to struggle to be the determinant through reducing the competition taking place. When the bargaining power of the customers is very high, then it will imply that the industry is less attractive, and this should not be the case.

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The Competitive Rivalry within the industry

The fact that there is a group of about 10 to 15 companies that have established themselves in the accessible market is a clear indication that this industry is subject to a very high intensity of the competitive rivalry between the players. An entrepreneur must ensure that his company is involved in the supply of certain products is keen to put its best foot forward to reduce the competition from its rivalry. Different companies, however, have different strengths in different aspects of the accessible market.

A well enticing entrepreneur will have a lot of success in the American market; since, it is spreading its tentacles to Asian markets such as Japan and China whose middle-high income populations are increasing fast. An entrepreneur ought to ensure that his company has the considerable market to emerge best in the supply of goods and services that are in high demand in the market (Alrawashdeh, 2013). An entrepreneur must take note of the upcoming opportunities through the use of Porter five forces in the market to reduce the competition rivalry that is highly evident.

Production of quality products helps a company to have lower competition rivalry. People will tend to love products that are durable and of high quality; hence, such an organisation will emerge successful in with fewer competitors. If a company makes many products and services that cater to the needs of its consumers at any given time, it will be more competitive due to its reliability.

The cost of products also determines if a company will be more competitive in its production whereby; if its prices are too high such that people are struggling to afford them, the customer will be very few (Fitzpatrick, Anh-Nguyen & Cayan, 2015). The entrepreneur ought to consider some potential factors that will make the industry more competitive like; having a powerful competitive strategy and a high degree of transparency.

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The Threat of New Entrants

An entrepreneur ought to make use of the porter five forces to ensure that the company invests in millions of dollars on various aspects of the operation that will be more productive in the very end. At the same time, the company needs to develop brand recognition in the market for better recognition (Prasad, 2010). While the former is difficult to achieve, the latter is even more complicated given its abstract and intangible nature of the task to block new entrants in the industry.

Middle to high-income earners will be attracted by brands that are perceived to be more famous and attain better quality. The only way that a new entrant can achieve fame and market access of established names is by having a virtually unlimited financial budget. An entrepreneur ought to use porter five forces analysis to motivate smaller players are increasingly finding it possible to circumvent these barriers and instead employ web-based platforms such as Facebook and Amazon sell their products (Rajasekar & Raee, 2013).

The presence of established companies controlling the larger market shares the possibility of others entering the market is very minimal; since, the established firms will fight back to protect their market share. An entrepreneur should struggle to ensure that the industry has a higher threat to the entrant to reduce the completion and many people from entering the industry anyhow.

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The limitations of using the Porter five forces

Porter five forces were established in a more different environment as compared to the one that the industries are operating in today. In the current world, the pace of change is more rapid, and this fact affects the use of the porter five forces. The porter five forces is a model that provides the entrepreneur with only a snapshot of what is expected yet, there is still more that he does not know.

The use of porter five forces makes it more difficult for an entrepreneur to define the industry that he is handling and make the better specialization of the outcome results. An entrepreneur should know that all the non-market forces that are taking place are not considered in the use of porter five forces. Porter five forces in most case are not well applicable in for the analysis of simple market structure rather they only cater for big markets alone.

It is prudent for an entrepreneur to know that porter five forces majors its argument on competition matter, and this shows that it is narrow not much wide as required (McCann, 2011). An entrepreneur might find it hard in analysing simple markets using the porter five forces as it does not cater for smaller markets. Technology is changing too fast to extend that shopping and marketing are done online; hence, an entrepreneur must perfect this to accommodate everyone with his or her needs and capture the market.

An entrepreneur should be aware that the use of porter five forces in the current world has contributed to only very few market structures remaining static as they were before. The use of porter five forces has made an entrepreneur learn that there are needs required in changing radically to suit the market position of any given company. The use of porter five forces has led to technology, reducing the length of a time of any given product to reach the market. Most of the products get to the market before the maturity time is near to cater for the needs of the fastest growing population.

Technology that is used in different industries makes these products get to the market immaturely, thus the increased cases of disease like cancer among others. An entrepreneur should be aware that the use of porter five forces is contributing to technology that affects the production of goods in industries (McMillan, 2010). An entrepreneur must know that use of porter five forces has increased the burden of information as the response of the organization is done for more than just the market forces.

There is a high need for all organizations to respond to the country’s legislation, corporate ethics and all the required social responsibilities to cater for the needs of all in the society. The use of porter five forces makes it more difficult to incorporate all the required implication of strategic alliances like sharing of skills as well as responding to given opportunities.

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An entrepreneur should be aware that the use of porter five forces has reduced the rate of change in most industries leading to changes in the stability of the market structure and industry experiences. Regular updates are necessary in making sure that the knowledge obtained through the use of porter five forces is transferred to other generations, failure to which it will be eroded completely.

An entrepreneur ought to be aware of the fact that the use of porter five forces has led to difficulties of integrating complexities that are evident in the market today with the use of product groups of organization and various interrelations taking place (Ortega, Jalón, ,M.Luisa & Menéndez, 2014). Also, an entrepreneur should be aware that if his organization defines the market segment to be very slow, then some of the key elements of prosperity might be overlooked.

The legislation that exist among buyers and sellers ought to be looked accordingly in making sure that all activities are well coordinated. The use of porter five forces has changed the way transactions between sellers and buyer were transacted to extend that most of the communications and transaction are done online.

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Conclusion

When an entrepreneur wants to know if a business is profitable as he perceived, the use of porter five forces can be of great use in gauging whether products and services produced are of better quality. This paper explains how an entrepreneur can use the porter five forces and the disadvantages of using them as well. Demand for accessing items will, therefore, remain sustained for a long time as the middle income to high-income segments of the population will maintain the need to display their affluence through these products. The merged companies will now determine the market price whereby; the customers will have no say rather than purchasing goods and services at the given price.

References

Alrawashdeh, R. 2013, “The Competitiveness of Jordan Phosphate Mines Company (JPMC) Using Porter Five Forces Analysis”, International Journal of Economics and Finance, vol. 5, no. 1, pp. 191-200.

Cheng, D.S.Y. 2013, “Analyze the Hotel Industry in Porter Five Competitive Forces”, Journal of Global Business Management, vol. 9, no. 3, pp. 52-57.

Dobbs, M.E. 2012, “Porter’s Five Forces in Practice: Templates for Firm and Case Analysis”, Competition Forum, vol. 10, no. 1, pp. 22-33.

Dobbs, M.E. 2014, “Guidelines for applying Porter’s five forces framework: a set of industry analysis templates”, Competitiveness Review, vol. 24, no. 1, pp. 32-45.

Fitzpatrick, B.D., Anh Nguyen, Q.Q. & Cayan, Z. 2015, “An Upgrade To Competitive Corporate Analysis: Creation Of A “Personal Finance Platform” To Strengthen Porter’s Five Competitive Forces Model In Utilizing”, Journal of Business & Economics Research (Online), vol. 13, no. 1, pp. 54-n/a.

Grigore, A. 2014, “Book Publishing Business in Romania – An Analysis from the Perspective of Porter’s Five Force Model”, Revista de Management Comparat International, vol. 15, no. 1, pp. 31-47.

Kirchner, M. 2012, “Porter’s Five Forces in the Finishing Industry”, Products Finishing, vol. 76, no. 12, pp. 52-53.

McCann, J. 2011, “China’s Textile and Apparel Industry and the Global Market: Five Competitive Forces”, S.A.M.Advanced Management Journal, vol. 76, no. 1, pp. 33-42,54,2.

McMillan, C. 2010, “Five competitive forces of effective leadership and innovation”, The Journal of business strategy, vol. 31, no. 1, pp. 11-22.

Ortega, A.G., Jalón, ,M.Luisa Delgado & Menéndez, J.Á.R. 2014, “A strategic analysis of collective urban transport in Spain using the Five Forces Model/Un análisis estratégico de transporte urbano colectivo en España usando el modelo de las Cinco Fuerzas”, Investigaciones Europeas de Direccion y Economia de la Empresa, vol. 20, no. 1, pp. 5-15

Prasad, A. 2010, “Strategy as “Inferior” Choice: A Re-interpretation of Porter’s “What is Strategy?””, Journal of Management Research, vol. 10, no. 1, pp. 15-24.

Rajasekar, J. & Raee, M.A. 2013, “An analysis of the telecommunication industry in the Sultanate of Oman using Michael Porter’s competitive strategy model”, Competitiveness Review, vol. 23, no. 3, pp. 234-259.

Sutherland, E. 2014, “Lobbying and litigation in telecommunications markets – reapplying Porter’s five forces”, Info : the Journal of Policy, Regulation and Strategy for Telecommunications, Information and Media, vol. 16, no. 5, pp. 1.

Wilson, R.C. 2015, “Mayhem: A Hands-on Case Playing Activity for Teaching Porter’s Five Forces to Undergraduate Business Students”, Small Business Institute Journal, vol. 11, no. 2, pp. 48-59

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The importance of selecting a business location

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The importance of selecting a business location

Business location selection is a practice that entails finding a new business facility site. The business location is critical for any venture to realize growth as well as experience successful operations (Hair Jr et al., 2015).

The criterion for selecting a business location

Choosing a business location requires precision in market research and planning. Location selection entails assessment of the needs for a new venture and measuring them against the advantages of the potential sites. Therefore, it is imperative to put into consideration several factors when making a choice for the company’s location. The selection procedure involves steps such as; definition of the business idea, evaluation of the communities, real estate site analysis, tax incentive negotiation and finally acquisition of the site.

Several aspects are involved such as assessment of the supply chain, observation of the demographics, understanding state legislature, staying on budget and scoping the competition. Some other factors to focus on in the research include; the company needs, employees, customers, the equipment required to deliver services among others (Cavusgil et al., 2014).

Company and customer needs assessment

Talking of the company needs, most enterprises make a location choice that gives them accessibility to their customers. On this note, it is vital to consider the brand image and ask whether the location is going to be consistent with the intended brand. Establish whether the companies around are complementing or competing for the venture. It is very necessary mostly where shopping comparisons are common.

If the competitor is likely to make the environment tougher then it is advisable to shift the location. There is a need to find out whether the target area has potential employees and the rates of labor. If the business has a prospect of growth, then one should look for a building that offers room for expansion. The business should also be located at a place where suppliers can quickly find you. In cases where the customer base is local one is required to find out whether the population matches the customer profile for the business support.

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Find out whether the community has a stable economy for the company’s well-being. It is vital to be cautious with a community that solely dependent on a particular company for their economy since this could lead to a downturn that is not healthy for any business. One has to think also of safety too, thus, questions about the crime rate in the select area need be asked. (Cavusgil et al., 2014).

Business style of operation and the legislature

The business location should be consistent with one’s style of operation. There is a need to determine whether the intended operation is going to be formal or informal. Having the knowledge about the legislature on businesses in a given location is very essential. Look into hidden costs because not many spaces are business ready thus requiring a lot of initial work be done before start-up.

Determine also whether the select location qualifies you to access the government economic incentives. Zoning regulations; these help determine whether one may conduct their type of venture in a given building or location. This may be found out through holding the local planning agencies (Hair Jr et al., 2015).

References

Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014. International business. Pearson Australia.

Hair Jr, J.F., Wolfinbarger, M., Money, A.H., Samouel, P. and Page, M.J., 2015. Essentials of business research methods. Routledge.

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Porter’s Five Forces Model

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Porter’s Five Forces Model

Introduction

Starting a business or developing an existing business, it is necessary to consider the porter’s five forces to answer questions that may arise from competition. The five porters model help to determine whether a business will be profitable or not when comparing with other businesses within the same field of operation. Magretta (2013) the importance of comprehending the competitive forces and their fundamental reasons, will disclose the base of the market’s present productivity and will provide the procedure for forecasting and inducing competition overtime.

Purpose of porter’s five forces model.

The porter’s five forces study helps a company to comprehend the issues affecting productivity in a given market, help to update judgments connecting to: whether to entre a given market, whether to maximize volume in a given market and developing the competitive strategies, (Magretta, pg. 87, 2013). For example, threat of new entry to a given market is a strong force to the existing marketers in that market.

This is because a market which is productive will attract new entrants and this will eventually corrodes profitability. In order to maintain profitability, the given market will be protected by solid and long-lasting barriers to entry such as economies of scale, patents, government policies or capital requirement. Unless this barriers are implemented, the market will experience a competitive decline rate of profitability.

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Also, the buyer power is a weak force to determine the profitability and competition in a given market. This is because, it is easy for the buyers in a given market to drive the prices down. To do so, several factors such as importance of each buyer in the market, the cost of buyer switching from one supplier to another or number of buyers in the market, (E. Dobbs, pg. 43, 2014). If in a given specific market has few and influential customers, they are in a position to command their own terms.

References

E. Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.

Magretta, J. (2013). Understanding Michael Porter: The essential guide to competition and strategy. Harvard Business Press.

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Product Vision Essay Paper

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Product Vision

In an existing and competitive market, the need to develop a compelling and innovative product is important. The new product should meet the needs of all the stakeholders, and be part of the company’s mission and vision. To ensure that the new product creates customer traffic, an intensive feasibility study is essential in determining the expectations of the market.

Moreover, a business model that showcases the qualities needed for business to succeed would be created about the company’s business and corporate values. To succeed in the competitive market, a well-articulated product vision acts as a motivator to stakeholders and is key to bringing growth and profitability to the business. The new market is in food and beverage industry, and it seems viable due to low restrictions to entry, low start-up capital, and a high market share.

Product vision and organizational values

Product vision is an outline of the expectations of the product. According to Tim (2015), a good product vision incorporates the needs of the customers, the value the product will add to the customer, and how it will gain a competitive edge. To develop a persuasive product vision, one should illustrate the elements of motivation towards the new product, make the vision be an inspiration to all stakeholders, integrate all parties to the product, and make sure the vision gives guidance towards decision-making processes.

For a start up, a compelling product vision goes a long way in ensuring the business gets a substantial market share. If the vision does not meet the standards of the product and market competition, the business is bound to fail. For the new product, the product vision will be “Our vision is to improve the lives of people daily. Our organizational goal supports the vision by making sumptuous and natural foods and beverages that help people preserve their health.”

Business and corporate values define and support product vision and mirror the company’s image (Wendy, 2013). These values incorporate internal and external structures of the business, assist in decision making and are used by customers and potential investors to evaluate the company.

Thus, there is a dire need to come up with business and corporate values that will help the new business realize its goals. The business and corporate values that I intend to create are: commitment to a quality product and other aspects of the business, exercising utmost integrity towards all stakeholders, innovation for product and brand improvement, corporate social responsibility, and having a balanced work life for the employees.

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Need for the product and market overview

As a start-up company, there is a need to diversify the product portfolio to ensure that the business is sustained. Depending on one or a few products is risky thus it is important to develop the new product so as to tap a new target market for increment in revenue generation. There is a market gap in the form of unsatisfied customers who are ready to exploit new products thus if the necessary components are incorporated into the product the potential for business success is high. Thus, the need for a new product is to increase product portfolio for the business, increase market share, increase revenue and profits and increase value to customers.

The new market is in foods and beverage industry. Though it’s one of the most competitive industries in the world, entry is free and restrictions are few, initial capital set up is low since raw materials are easily and cheaply accessible, a high number of potential customers and operational costs are low. Though competition is high due to a high number of substitutes, customers go for healthy and nutritious products which most competitors haven’t been able to provide.

Currently, most customers have filed complaints regarding the service and quality of products offered by most of the existing businesses thus creating a golden opportunity for the business to introduce the product. Customers will flock in the firm to try out the new product and will be looking forward to a product that satisfies their needs. Therefore, since the business is committed to the provision of a quality product as per the product vision, customer traffic, and revenue will increase leading to sustained growth for the whole organization.

Business model

The business model is the layout that a business uses to describe what it intends to offer in the market, project profitability and market expectations. A great business model is one that attracts customers to the new product, retains the customers, increases value to the customers, and generates revenue to the business. On the other hand, a business model that makes it hard to satisfy customers does not position the product in the market, and does not provide required capital for growth should be avoided.

Thus, for a business model to qualify for application, it should bring value to the customer and the business (Andrea, 2015). Some of the elements of the business model include a statement describing what the business has to offer that the competitors do not have, product choices in the form of a menu, the targeted customer base, profitability and financial forecasts, and strategies the business will use to penetrate the market.

By using the example of Amazon, the applicable business model will be price cut so as to first penetrate the market for long-term sustainability at a later stage. The first thing to do is to get market share, and since the industry is already over-populated, provision of quality products at low prices to the target market.

Afterward, given that the company will grow, supplies will be engaged so that they can reduce the price for the supplies, more investment will be made on capital structures and technology so that service and product delivery will be enhanced. As a result of reduced product costs, the business will continue to provide the products at low prices and market share will increase.

Feasibility analysis

The main reason for carrying out a feasibility study is to identify root issues that relate to a particular product or service. At the end of the analysis, the business idea should be termed as viable or be rejected (UWCC, 2013). Most importantly, the feasibility study should identify potential roadblocks for the business idea so that necessary precaution measures can be undertaken. For the analysis, the areas covered include market, financial, and organizational analysis.

Market analysis: Competition is intense in food and beverage industry due to low start-up costs and not restrictions on entry, market is in existence for the product due to high number of unsatisfied customers, raw materials are readily available since most of them come from nearby town that is agricultural based, the target population for the product is the working population since it the premises are within the town centre.
Technology and organizational analysis: Since the company is partnership form of business, the partners will take full control of managing the business thus it will be possible implement the idea. It is easy to plan and execute the idea when owners of the business are the ones involves since they have undivided interest towards the business. To tap into technology, use of online marketing tools would serve as an innovative tool to access a market share.
Financial analysis: initial set-up costs and operating costs will be funded by partners from the capital contributed during the start-up process.

From the feasibility analysis, the business idea is feasible since most of the required resources are available. However, some of the roadblocks the new product may face are competition from substitutes, financial problems since it’s hard to source for revenue without enough security, and conflict of interest among the partners.

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Future financial position of the company

The future of the company depends on the success rate of the new product line. Getting into a new venture is usually a risky process, and it requires proper implementation and dedication to succeed. Based on the feasibility analysis, there is a high chance that the product will succeed and bring profits both in the short-term and long-term. If all the stakeholders have a common goal and use the product vision and set up business and corporate values, the future financial position of the business will be high.

From the market analysis, it is evident that a market gap exists in the form of value addition to the customers. It, therefore, calls for the business to acquire quality materials and manufacture products that meet the desires of the customers, which will drive sales and profits thereby. Additionally, supplies are available from the nearby community thus costs will reduce and make it possible to offer the new products at low prices.

The premises are based within the town center, and the target market is composed of the working people who have specific times for accessing the stores. Thus it makes it easy to plan for processing, packaging, and sales. The use of the online platform is meant to increase awareness of the new products and increase market share. Though competition will be high due to existing substitutes, financial success is likely to be realized in the short term.

Penetrating a new market and get a consistent flow of customers usually takes time but if a proper feasibility analysis is carried out and right resources put in place, success is guaranteed. Food and beverage industry is one of the most competitive due to few restrictions to entry and low start-up capital requirements. However, it takes a compelling product vision and company values to be able to make right decisions that will see the business satisfying the needs of the customers and generates profits.

If all the needs of the stakeholders are met and every employee works towards realization of the product vision, a business is guaranteed of future financial growth if the right resources are matched with the market needs. The business already has enough capital to implement the idea, the owners will take responsibility for managing the resources, a gap exists in the market for possible product penetration, and fresh and quality raw materials are readily available.

References

Andrea O. (2015). Business model, 2. Retrieved from https://hbr.org/2015/01/what-is-a-business-model

Roman P. (2014). Tips for creating a compelling product vision. Retrieved from http://www.romanpichler.com/blog/tips-for-writing-compelling-product-vision/

Tim F. (2012). Product vision. Retrieved from https://www.quora.com/What-are-some-good-examples-of-a-product-vision

UWCC (2013). Conducting a feasibility study. Retrieved from http://www.uwcc.wisc.edu/manual/chap_5.html

Wendy (2013). Company core values: Why to have them and how to define them. Retrieved from https://7geese.com/benefits-of-having-core-values-and-how-to-set-them-in-your-organization/

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Company Acquisitions Essay Paper

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Company Acquisitions

Issue and Case Analysis: Company Acquisitions

Question 1: Merge the acquired company into your company. The result of this strategy will be one company containing the elements of both companies.

Since 1990s, there has been an accelerated pace of global mergers and company acquisitions as companies use them as a tool for competitiveness and to expand to global markets. A strategic manager must carefully look into both the pre-acquisition phase and the post-acquisition phase to execute a successful acquisition (Lasserre, 2003).

When the value of operational synergies of the companies operating in similar business contexts is expected, the absorption mode is appropriate. This enables necessary consolidation and rationalization necessary, to occur in the soonest time possible. The company is able to evaluate the best business practices to be adopted and find sources of savings by absorbing the competencies and competitive products of the other company (David, 2012).

The challenge in absorption occurs when there’s rationalization by the company being acquired hindering the process due to resistance to change and difference in culture. A SWOT analysis of the new merger would help to identify the areas to strengthen and areas of potential threats that may hinder successful acquisition (Lasserre, 2003).

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Question 2: Operate the acquired company as a separate business entity. The result of this strategy will be two separate companies under one senior management “umbrella” (the senior management team that is responsible for running both companies).

Where the company is allowed to operate as a separate business entity, Preservation Mode, is when very few operational synergies can be gained. This is important when large autonomy of decision making in the acquired business is required. The existing management is kept in place while the parent company learns the ‘rules of the game’ of the new business. The benefits accrued include enlargement of products and markets and also the transfer of new competencies or resources.

The disadvantage is the acquired company could behave opportunistically by ‘siphoning off’ resources of acquirer if there’s ‘weak’ management (Hitt, Ireland & Hoskisson, 2011). A balanced scorecard could be used to measure the acquisition in terms of customers’ opinions and views, financial position and advantages, improvement and value creation through growth and learning among others.

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According to David (2012), research shows twenty percent of all mergers and acquisitions are successful, approximately sixty percent produce disappointing results, and the last twenty percent are clear failures. Continuous evaluation and correction after acquisition is a critical factor to avoid the pitfalls that result in failure of acquisition (Lasserre, 2003).

References

David, F. R. (2012). Strategic Management: A Competitive Advantage Approach, Concepts and Cases (14th Ed.). South Carolina: Pearson Prentice Hall

Lasserre, P. (2003). Global mergers and acquisitions. Global strategic management. New York, N.Y: Palgrave Macmillan.

Hitt, M. A., Ireland, R. D. & Hoskisson, R. E. (2011). Concepts-strategic management: competitive & globalization (9th Ed.). Natorp Boulevard Mason, USA: South-Western Cengage Learning

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