New Product Development

Global new product development process

With the traditional product development process, functions were specialized and segmented: the marketing people examined customer needs and perceptions in developing product concepts; the R&D engineers selected the appropriate design; the production engineers put it into shape; and other functional specialists carried the baton at different stages of the race (Takeuchi and Nonaka, 1986).

The global new product development process requires a constant interaction between various departments so that problems can be identified in the early stages of the process; the traditional process will not work. Instead, the new product development team has members from engineering, marketing, and management who work hand-in-hand in developing global new products.

Idea generation and screening – revised

Good communication skills and empathy for customer needs are the skills a successful engineer can bring into the new product development. The engineer should thus get more involved in the idea generation process, especially with a global product, in order to avoid disparities between concept and design. Engineering must assess the technical feasibility and the production resources required to implement the ideas (Bingham and

Quigley, 1989). Manufacturing requirements cannot be incorporated without identifying the different worldwide target markets. Marketing and marketing research can make useful contributions regarding the nature and size of the target markets, the relevant product-related cultural factors, the usage situations and lifestyles.

For example, Japan makes right-hand drive cars for the European market and left-hand drive cars for the US market, even though technically the product is standardized. The success of McDonald’s in Moscow only proves that global products can be standardized but adaptation to different cultures is essential for success.

At this stage ideas are eliminated and narrowed down based on three interacting factors:

(1) Feasibility in terms of product design (engineering),

(2) Suitability of the product for the desired target markets (marketing), and

(3) Adherence to company objectives (management).

Concept development and testing – revised

In the traditional development process, target markets are identified only after the generation and screening stages have demonstrated the product’s suitability. But in a highly competitive international market, target markets are already identified in the previous steps. Steps become overlapped, which shortens the product development process. This stage involves marketing research, engineering, research and development, and management working together to develop preliminary models (Bingham and Quigley, 1989); or drafts of those initial ideas that have feasibility at face value.

Market strategy development and business analysis

A company’s approach to global marketing depends, first, on its overall business strategy. In many multinationals, some functional areas have greater program standardization than others. Headquarters often controls manufacturing, finance and R&D, while the local managers make the marketing decisions. Marketing is usually one of the last functions to be centrally directed (Quelch and Hoff, 1986). Many multinationals are coordinating their marketing programs through headquarters in spite of testing the product in all representative markets. While working to achieve global coordination, some companies are also trying to tighten coordination in particular regions (Kodak, Proctor & Gamble) (Quelch and Hoff, 1986).

Products that enjoy high scale economies or efficiencies and are not highly culture-bound are easier to market than others (Quelch and Hoff, 1986). Manufacturers’ and R&D scale economies can result in a price spread between the global and the local product that is too great for even the most culture-bound customer to resist.

Product development and market pretest

Product development is achieved by adopting all the previous steps, because

R&D and engineering actively participate right from the early stages of the product development process. If there are certain components that can be outsourced at lower costs, these possibilities might be considered at this stage.

Laboratory pretest models designed to forecast sales and market share for new products have been implemented in many organizations (Urban and Katz, 1983). Laboratory pretests are essential, especially in global marketing, to reduce chances of failure. If major problems are detected, it is not necessary to go through the expensive and tedious process of a market test. The product can be dropped at this stage without incurring heavy losses.

Market testing

If the product passes the product development and pretest successfully and still seems a profitable prospect, then it is put through the test market process. Testing the product in all representative markets is an expensive but essential step in global product development. The products that successfully pass the laboratory pretest should be subjected to international test markets.

If the product is not feasible in certain nations, then the target market can be narrowed down by eliminating such markets. This type of market test in each representative market would help prevent extensive losses in the long run.

Product introduction

The final step in global product development is the decision as to whether or not to introduce the product in each of the markets considered. At this point, with the intense involvement of engineering in process development, it should be clear to the global marketer whether to introduce the product; and which markets should receive a concentrated effort.

Successful product innovations introduced into diverse markets require constant monitoring if a firm hopes to maximize the product’s contribution to the overall performance of the firm. Where the new introduction enjoys a great deal of acceptance and popularity, it becomes necessary to follow the introduction with improvements in production and distribution processes. Failure to achieve heights of efficiency offers an opportunity for competitors to gain in the battle for market share.

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