CHAPTER 4:

PRODUCT/SERVICE DEVELOPMENT
4.1 INTRODUCTION
In Entrepreneur’s business, product/service development is the term used to describe the
complete process of bringing a new product or service in the market and it's an ongoing practice
in which the entire business is looking for opportunities as new products provide growth promise
to businesses that allow them to strengthen their market position. The new product development
process involves the idea generation, product design, and detail engineering; and also involves
market research and marketing analysis. Intense global competition, short product and
technology lifecycles, unpredictable consumer buying patterns and possible market stagnation
makes new product development a critical activity in most businesses. Hence, this chapter
explores the new product development process and at the same time sketch outs the product
development procedure in reality where consideration of real life situation and consumer insight
are the main concern.
Chapter Objectives
After completing this chapter, students will be able to:

 Describe the Concept of Product and Services;

 List Product/Service Development Process; and

 Discuss the Intellectual Property Protection.

4.2 The Concept of Product/Service
Many entrepreneurs find it difficult to identify a new product/service or a new market
opportunity. To start and expand a small venture, an entrepreneur needs to identify opportunities
for domestic and/or international expansion.

As the new venture grows and matures a need for different management skills can occur as well
as for a new infusion of the entrepreneurial spirit (corporate entrepreneurship). Entrepreneurs
like Richard China or Mal Mixon, CEO of Invacare, understands this axiom and effectively
manages change by continually adapting organizational culture, structure, procedures, strategic
direction, and products in both a domestic and an international orientation.

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Organization's success is dependent on customer satisfaction and delight. Customer satisfaction
is achieved through the development of product and service, which have all attributes required
by the customer. A success product or services do not only have an attractive package design but
should be also able to provide robust performance. Thus, product design must be practical
enough for production and powerful enough to provide a competitive advantage.
4.3 Product/Service Development Process
Once the opportunity is selected, and a business model has been designed, the next step is to
develop a commercial version of the opportunity which in most cases is either a product or a
service. One of the essential characteristics of a successful business is exemplified by its ability
to continuously and rapidly develop new or improved versions of existing products that deliver
values more than customers expect (Palgrave, 2019.)

Product development is the process through which companies react to market signals, respond to
changes in customer demand, adopt new technologies, foray into new areas, and ensure
continuous growth. It is a core process in achieving strategic objectives, renewal of the company
business model and deterring competition from displacing the company from its market position.

Product/service development process is part of the overall new-venture creation process. Even
though there are many models that advocate what the product/service generation process should
look like, for this purpose we shall adopt four distinct stages.
These stages can be referred to as:
1. Idea Generation
2. Incubation
3. Implementation
4. Diffusion

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The various stages of new product development process are explained next:
1. New Idea Generation
The new product development process starts with search for ideas. Companies have to encourage
any new idea coming. The key to successful domestic and international entrepreneurship is to
develop an idea that has a market for the new product/service idea conceived.

Some of the more fruitful sources of ideas for entrepreneurs include consumers, existing
products and services, distribution channels, the federal government, and research and
development.
2. Idea Screening
In the 2nd stage, the purpose is to lessen the number of ideas to few vital/valuable ideas. The
ideas should be written down and reviewed each week by an idea committee who should sort the
ideas into three groups- Promising Ideas, Marginal Ideas, and Rejects: Each promising idea
should be researched by committee member.
3. Concept Development and Testing
Attractive ideas must be refined into fast able product concepts since people do not purchase
ideas but they buy concepts. Any product idea can be turned into several product concepts. The
questions asked probably include:-

 Who will use the product?

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  What benefits should the product provide?

 When will people consume the produced?

Concept Testing: - calls for testing product concepts with an appropriate group of target
consumers/customers, and then getting the consumers’ reactions. At this stage, the concepts can
be in words or picture description.
4. Marketing Strategy Development
After testing the new product the concerned body must develop a preliminary marketing strategy
plan for introducing the new product into the market. The marketing strategy will undergo
further refinement in subsequent stages.

The marketing strategy plan consists of three parts: (1) Market size, structure, behavior ;( 2)
Planned price, distribution strategy, and marketing budget of the 1 st year; and (3) Long run sales
and profit goals, marketing mix strategy.
5. Business Analysis
After management develops product concept and marketing strategy, it can evaluate the
proposals’ business attractiveness. Management needs to prepare sales, cost and profit
projections to determine whether they satisfy the company's objective or not.

Estimated Total Sales: - Management needs to estimate whether sales will be high enough to
yield satisfactory profit.

Estimating Cost and Profits: - After sales forecast the management should estimate the expected
cost and profit at various levels of sales volume.

The company can use other financial measure to evaluate the merit of a new product proposal.
The simplest is breakeven analysis.
6. Product Development
If product concept passes the business test, it moves to R&D or engineering to be developed to
one or more physical version of the product concept. Its goal is to find a proto type that the
consumers/customers see as embodying the key attribute described in the product concept
statement,

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7. Market Testing
After management is satisfied with the products’ functional and psychological performance, the
product is ready to be dressed up with the brand name.

The goals are to test the new product is more authentic consumer/customer settings and to learn
how large the market is and how consumers/customers and dealers react to handling, using and
repurchasing the actual product.

Most companies know that market testing can yield valuable information about buyers, dealers,
marketing program effectiveness, market potential & other matters.

Test Marketing yields several benefits include more reliable forecast of future sale, and
pretesting of alternative of future sale.
8. Commercialization
When (Timing):- In commercializing, market entry timing is critical. If the company hears about
a competitor nearing the end of its development work, it will face three choices. The 1 st choice is
First Entry. Under this category, the firm usually enjoys the "first mover advantage" of locking
up key distributors & gaining reputation. The 2nd choice goes with Late Entry Strategy- which
has three advantages include:-
 The competition will have borne the cost of educating the market;

 The competing product may reveal fault that the late entrant can avoid; and

 The company can learn the size of the market.

4.5 Intellectual Property Protection/Product/Service Protection
4.5.1 What is Intellectual Property?
Intellectual Property which includes patents, trademarks, copyrights, and trade secrets represents
important assets to the entrepreneur and should be understood even before engaging the services
of an attorney. Too often entrepreneurs, because of their lack of understanding of intellectual
property, ignore important steps that they should have taken to protect these assets.

Intellectual property is a legal definition of ideas, inventions, artistic works and other
commercially viable products created out of one's own mental processes. In the same sense that
real estate titles establish ownership of tangible items, intellectual property is protected by such

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legal means as patents, copyrights, and trademark registrations. In order to enjoy the benefits
arising from the exclusive ownership of these properties, the entrepreneur needs to protect these
assets by the relevant law. This is the reason why’ experts strongly recommend that those in
creative fields seek protection through official registration of their intellectual properties.
4.5.2 Patents
An entrepreneur who invents a new thing or improves an existing invention needs to get legal
protection for her invention through a patent right. A patent is a contract between an inventor and
the government in which the government, in exchange for disclosure of the invention, grants the
inventor the exclusive right to enjoy the benefits resulting' from the possession of the patent.

Utility Patent: A utility patent protects any new invention or functional improvements on
existing inventions.

Design Patent: This patent protects the appearance of an object and covers new, original,
ornamental, and unobvious designs for articles of manufacture. Like utility patents,
design patents provide the inventor with-exclusive right to make, use and/or sell an item
having the ornamental appearance protected by the patent. This patent is appropriate
when the basic product already exists in the marketplace and is not being improved in
function but only in style. These patents are particularly important to companies such as
shoe producers and product package design firms that need to protect their ornamental
designs.

A patent provides the owner with exclusive rights to hold, transfer, and license the production
and sale of a product/process. It is an intellectual property right and It is issued by government to
the inventor. This exclusive property right can be granted for a number of years depending on the
countries laws and type of property. Patents are property rights that can be sold and transferred,
willed as well as licensed and at times used as collateral.
What Can Be Patented Then?
 Processes: Methods of production, research, testing, analysis, technologies with new
applications.

 Machines: Products, instruments, physical objects.

 Manufactures: Combinations of physical matter not naturally found.

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 Composition of matter: Chemical compounds, medicines, etc.
4.5.3 Trademarks
A trademark may be a word, symbol, design, or some combination of such, or it could be a
slogan or even a particular sound that identifies the source or sponsorship of certain goods or
services.

These are distinctive names, marks, symbols or motto identified with a company’s product or
service and registered by government offices. Unlike the patent, a trademark can last indefinitely,
as long as the mark continues to perform its indicated function. Trademarks unlike patents are
periodically renewed unless invalidated by cancellations, abandonment, or other technical
registration/renewal issues.
Benefits of a Registered Trademark
 It provides notice to everyone that you have exclusive rights to the use of the mark
throughout the territorial limits of the country.

 It entitles you to sue in federal court for trademark infringement, which can result in recovery
of profits, damages, and costs.

 It establishes incontestable rights regarding the commercial use of the mark.

 It establishes the right to deposit registration with customs to prevent importation of goods
with a similar mark.

 It entitles you to use the notice of registration (®).

 It provides a basis for filing trademark application in foreign countries.

4.5.4 Copyrights
Copyright is a right given to prevent others from printing, copying, or publishing any original
works of authorship.

Copyrights provide exclusive rights to creative individuals for the protection of literary or artistic
productions. It protects original works of authorship including literary, dramatic, musical, and
artistic works, such as poetry, novels, movies, songs, computer software, and architecture. They

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pertain to intellectual property. Usually copyrights are valid for the life of the inventor plus a few
decades.
4.6 The Intellectual Property System in Ethiopia
Ethiopia became a party to the convention establishing the world Intellectual Property
Organization (WIPO) in February 1998 right after some time the Country had joined the Nairobi
Treaty on the Protection of the Olympic Symbol in 1981. It is a member of the Treaty
establishing the Common Market for Eastern and Southern Africa (COMESA) which was
formed in 1994, the Partnership Agreement between members of the African, Caribbean and
Pacific (ACP) Group of States and the European Union (EU).

The Ethiopian Government established the Ethiopian Intellectual Property Office in the year
2003 containing the understated Objectives:-

 To facilitate the provision of adequate legal protection for and exploitation of

intellectual property in the country;

 To collect, organize and disseminate technological information contained in patent

documents and encourage its utilization;

 To study, analyze and recommend policies and legislation on intellectual property to the
government; and

 To promote knowledge and understanding of intellectual property among the general

public;

The existing laws and directives in Ethiopia in the field of Intellectual Property (IP) are the
Patent Proclamation and the Implementing Regulation, the Copyright and Related Rights
Proclamation and The Trademark Registration Directive.

According to the proclamation in order to be granted a patent, an invention must fulfill three
conditions- (1) it must be new- It should never have been published or publicly used before; (2)
It should be capable of industrial application- It must be something which can be industrially
manufactured or used; and (3) It must be "non-obvious”- It should not be an invention which
would have occurred to any specialist working in the relevant field.

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The proclamation excludes the following from patentability:-

 Inventions contrary to public order or morality;

 Plant or animal varieties or essentially biological processes for the production of plants
or animals; and

 Schemes, rules or methods for playing games or performing commercial and industrial
activities and computer programs;

 Discoveries, scientific theories and mathematical methods; and

 Methods for treatment of the human or animal body by surgery or therapy as well as
diagnostic methods practiced on the human or animal body.

Rights of a patentee include making, using and exploiting the patented invention in any other
way. Any person who wants to use the patented invention has to get the authorization of the
owner/inventor. The patentee does not have import monopoly right over the products of the
patented invention in Ethiopia.

There are certain limitations of rights of the patentee included in the proclamation such acts
done for non-commercial purposes; the use of the patented invention solely for the purposes of
scientific research and experimentation; the use of patented articles on aircraft, land vehicles or
vessels of other countries which temporarily or accidentally enter in to the air space, territory or
waters of Ethiopia; acts in respect of patented articles which have been put on the market in
Ethiopia by the owner of the patent or with his/her consent; the use of the patented invention for
national security, nutrition, health or for the development of vital sectors of the economy, subject
to payment of an equitable remuneration to the patentee; the duration of a patent is 15 years
which may be extended for a further period of five years if proof is furnished that the invention is
properly worked in Ethiopia.

Trademark Directive is issued in the country in 1986 with the following objectives in that it
helps:-

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  To centrally deposit trademarks which are used by local and foreign enterprises to
distinguish their goods or services;

 To distinguish the products or services of one enterprise from those of other enterprises
and prevent consumers from being victims of unfair trade practices;

 To provide information on trademark ownership and right of use when disputes arise
between parties;

 To provide required information on trademarks to government and individuals; and

 Protection is granted after publication of cautionary notice;

Copyright is protected on the basis of the copyright and related rights proclamation issued in
2004. The proclamation gives protection to literary, artistic and scientific works which include
books, pamphlets, articles, computer programs and other writings; speeches, lectures, addresses,
sermons, and other oral works; dramatic, dramatic-musical works, pantomimes, choreographic
works, and other works created for stage production; musical works, with or without
accompanying words; audiovisual works and sound recordings works of architecture; works of
drawing, painting, sculpture, engraving, lithography, tapestry, and other works of fine arts;
photographic and cinematographic works; illustrations, maps, plans, sketches, and three
dimensional works related to geography, topography, architecture or science; derivative works;
and collection of works, collection of mere data (databases) whether readable by machine or
other form.
The Proclamation gives protection to:
 Works of authors who are nationals of or have their habitual residence in Ethiopia;

 Works first published in Ethiopia; or works first published in another country and
published within thirty days in Ethiopia;

 Audio-visual works whose producer has his headquarter or habitual residence in

Ethiopia; and

 Works of architecture erected in Ethiopia and other artistic works incorporated in a

building or other structure located in Ethiopia.

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The author of a work shall be entitled to protection, for his work upon creation where it is an
original work; and written down, recorded, fixed or otherwise reduced to any material form.
Quality of the work and the purpose for which the work may have been created is not taken in to
consideration.

The rights of performers, producers of phonograms and broadcasting organizations are also
protected by law. Copyright is protected for the life of the author plus fifty years. Fifty years for
the rights of performers and producers of sound Recordings and 20 years for the rights of
broadcasting organizations.
4.7 Chapter Summary
 Entrepreneurs must always remember that marketing, advertising, or promotional activities
are completely worthless, regardless of how clever, expensive, or perfectly targeted they are,
unless one simple thing is accomplished--ask for the sale. This is not to say that being a great
salesperson, advertising copywriting whiz or a public relations specialist isn't a tremendous
asset to your business. However, all of these skills will be for naught if you do not actively
ask people to buy what you are selling.
 Your business is all about your customers, or clients, period. Everything you do in business
must be customer focused, including your policies, warranties, payment options, operating
hours, presentations, advertising and promotional campaigns and website. In addition, you
must know who your customers are inside out and upside down.

 Laws and regulations exist to protect competition, consumers, people in the workplace, and
intellectual property; to allow bankruptcy; and to establish contracts.

 Too often entrepreneurs, because of their lack of understanding of intellectual property,

ignore important steps that they should have taken to protect these assets. This informs will
describe all the important types of intellectual property which have become unique problems
to the Patent and Trademark Office.

 Patents, copyrights, and trademarks are legal way to protect intellectual property. A patent
grants an inventor the exclusive right to make, use, and sell

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 Since all business is regulated by law, the entrepreneur needs to be aware of any regulations
that may affect his or her new venture and will need legal advice.

4.8 Questions for Review and Discussions

1. What advice would you give to a business colleague who is about to start a new high-tech
firm that has developed a new accessory for computer tablets? Would you recommend that
s/he seek a patent immediately?

2. Imagine that you have developed a unique formula for a soft drink that, upon entering a
person’s mouth, analyzes the drinker’s DNA to determine his/her favorite flavor, and then
the drink instantly realigns its chemical composition become that flavor. Describe as how
you can best protect this trade secret? Will you patent it? Why or why not?

3. What factors should s/he consider in the process of debating whether a patent would
be appropriate?

4. What rights does owning a patent protect? How do you get this protection?

5. What tests must an invention pass to receive a patent?

6. What is the difference between a copyright and a trademark? Between a trademark and a
brand?

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