Small Business Management, 18e

Longenecker/Petty/Palich/Hoy

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Product Development and

Supply Chain Management

Chapter 15

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service or otherwise on a password-protected website for classroom use.

Learning Goals:

? Recognize the challenges associated with the

growth of a small business.

? Explain the role of innovation in a company’s

growth.

? Identify stages in the product life cycle and

the new product development process.

? Describe the building of a firm’s total

product.

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service or otherwise on a password-protected website for classroom use.

Learning Goals (cont.):

? Understand product strategy and the

alternatives available to small businesses.

? Discuss how the legal environment affects

product decisions.

? Explain the importance of supply chain

management and the major considerations in

structuring a distribution channel.

© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or

service or otherwise on a password-protected website for classroom use.

To Grow or Not to Grow

? Growth sufficient to maintain the status

quo is a goal of some entrepreneurs.

? Growing a business too quickly can be

stressful for the small firm.

? A “growth trap” may occur when a firm’s

growth soaks up cash faster than it can be

generated.

? Growth also puts pressure on a small

firm’s personnel. 15–5

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

Innovation: A Path to Growth

? Competitive Advantage and Innovation

?Innovation and entrepreneurship often go

hand-in-hand.

?Coming up with and perfecting new products

or services is often not easy.

?The risk of failure increases when innovation

is the goal.

?Innovation is a means by which a firm can

sustain its competitive advantage.

15–6

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

Reducing the Risk of Failure

While Innovating

? Base innovative efforts on your experience.

? Focus on overlooked products or services.

? Be sure there is a market for the product

or service you are hoping to create.

? Pursue innovation that customers will perceive

as adding value to their lives.

? Focus on new ideas leading to more than one

product or service.

? Raise sufficient capital to launch the new

product or service.

15–7

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

Achieving Sustainability

? Sustainable Competitive Advantage

?A value-creating position that endures over

time

?Is difficult to imitate

?Creates high barriers to market entry

?Can be patented or copyrighted

?Is renewable at higher performance capabilities

15–8

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

Achieving Sustainability (cont.)

? Stages in the Competitive Advantage Life

Cycle

?Develop: invest resources

?Deploy: boost performance

?Decline: competitors overcome advantage

15–9

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

The Competitive Advantage Life Cycle15.1

The Product Life Cycle and

New Product Development

? Product Life Cycle

?A detailed picture of what happens to a

specific product’s sales and profits over time

?Promotion, pricing, and distribution policies must

be adjusted to the product’s position on the curve.

?It is important to revitalize product lines before

they lose their commercial potential.

?The life cycle of a product rises then falls—

innovation is necessary for a firm’s survival.

15–11

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

The Product Life Cycle15.2

New Product Development

Process

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password-protected website for classroom use.

Idea

Accumulation

Business

Analysis

New Product

Development

Product

Testing

New Product Development

Process ? Idea Accumulation

?Increasing the number of ideas under

consideration

?Sources for ideas:

? Sales, engineering, or other personnel within the firm

? Government-owned patents

? Privately owned patents listed by the U.S. Patent Office

? Small companies available for acquisition or merger

? Competitors’ products and advertising

? Requests and suggestions from customers

15–14

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

New Product Development

Process (cont’d)

?Business Analysis

? Testing to determine if an idea can be

profitable.

? Key factors to consider:

1. Product’s relationship to the existing product line

2. Cost of development and introduction

3. Available personnel and facilities

4. Competition and market acceptance

15–15

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

New Product Development

Process (cont’d)

? Development of the Physical Product

?Branding, packaging, pricing, and promotion

? Product Testing

?Proving the product design through

consumer reaction to the product.

15–16

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

Building the Total Product

? Branding

?A verbal and/or symbolic means

of identifying a product.

? Brand Name

?A brand that can be spoken (tangible)

? Brand Mark

?A brand that cannot be spoken (tangible)

? Brand Image

?Symbolic (Intangible)

15–17

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

Components of a Brand Identity15.3

Building the Total Product

(cont’d)

? Rules for Naming a Product:

1. Select a name that is easy to pronounce and

remember.

2. Choose a descriptive name.

3. Use a name that is eligible for legal protection.

4. Select a name with promotional properties.

5. Select a name that can be used on several

product lines of a similar nature.

15–19

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

Building the Total Product

(cont’d)

? Designing a Logo:

1. Be simple.

2. Design for visibility

3. Leave it open to interpretation.

4. Be relentlessly consistent.

5. Recognize the importance of logo design.

6. Get good advice.

7. Don’t expect miracles.

15–20

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

Protecting the Product Offering

? Trademark

?An identifying feature used to

distinguish a manufacturer’s product

? Service Mark

?A legal term indicating the

exclusive right to use a

brand to identify a service.

15–21

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

Building the Total Product

(cont’d)

? Packaging

?Color, design, and protection for the product.

? Labeling

?Shows the brand and informs the consumer

about product features, correct use, and care.

15–22

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

password-protected website for classroom use.

Building the Total Product

(cont’d)

• Warranties

?A promise that the product will perform at a

certain level or meet certain standards.

?Implied and written warranties

?Policy considerations: Cost, service capability,

competitive practices, customer perceptions, legal

implications

15–23

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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a