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.
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.

Most companies apparently are introducing a wide variety of smaller, more efficient, and more
intelligent products, coupled with a leaner, more efficient approach to operation. The goal is to
create products and services by identifying an emerging trend and to match that trend with the
right technology and understanding of the purchasing dynamics.

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.
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. The essence of product design is to satisfy customer and maximizes the value
for the customer at minimum cost.

Most companies apparently are introducing a wide variety of smaller, more efficient, and more
intelligent products, coupled with a leaner, more efficient approach to operation. A successful
startup depends on its distinctive and compelling proposition.
A successful startup depends on its distinctive and compelling proposition. This is how
merchandise or services stand out from the competition and are compelling to the young
company‘s customers.
4.3 Product/Service Development Process

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.

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

The various stages of new product development process are explained next:
Product Development Process

Product development process is part of the overall new-venture creation process. There are 8 stages of
new product development process:

1. Idea generation 5. Business analysis

2. Idea screening 6. Product Development

3. Concept development and testing 7. Market testing

4. Market strategy 8. Commercialization

1. Idea generation

The new product development process starts with search for ideas. Companies have to encourage any new
idea coming. 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.
Sources of new product ideas:

I. Internal sources

Employees: - successful companies have established a procedure that encourages every employee coming
with new idea. Top management, Research and development etc.

II. External sources

Customers-may the best idea comes from asking customer to describe their problems with current
products.

Distributes:- they are good sources of new product idea. They have first hand exposure to customers'
need and compliant

Competitors: - companies can also find good ideas by examining their competitors’ product.

Idea generating techniques

Attribute listing: - calls for listing an existing products major attributes and then modifying each
attribute in the search for improved product.

Forced relationship: - several objects are considered in relation to one another to create a new product. In
this we also take two or more needs and the relationship between these needs is identified so that to
develop new product that satisfy those needs.
Brain storming: - People from different sections (customers, dealers and others) are invited and in
informal way asked to discuss on particular matter.

2. Idea screening

In the 2nd stage the purpose is to minimize the number of ideas to few valuable ideas. The ideas should
be written down and reviewed each week by an idea committee

Which should sort the ideas in to 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 in to fast able product concepts people do not purchase ideas but they
buy concepts. Any product idea can be turned in to several product concepts. The questions asked
include.

 Who will use the product?

 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, 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 manger 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 1st year

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

Estimating cost and profits:- After sales for cast the management should estimate the expected cost and
profit at various levels of sale.

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 see as
embodying the key attribute described in the product concept statement,

Scientists must not only design the products required functional characteristics but also know how to
communicate its psychological aspects through physical cues. How will consumer react to different
colors, sizes, weight & other physical cues.

When the prototypes are ready, they must be put through regroups functions and consumer test.
Functional test are conducted under laboratory & field conditions to make sure that the product performs,
safely and effectively (Durability, speed, cost etc) Consumer testing can take variety of forms, from
braining consumers in to laboratory to giving them samples to use in their homes.

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 settings and to learn how large
the market is and how consumers and dealers and dealers react to handling, using and
repurchasing the actual product.

Most company know that market testing can yield valuable information about buyers, dealers, marketing
program effeteness, market potential & other matter.

Test Marketing yield several benefits

 More reliable forecast of future sale

 Pretesting of alternative of future sale

8. Commercialization
The new product if the company goes ahead with commercialization it will face its larges cost to date.
The company will have to contract for manufacture or build or rent a full scale manufacturing.

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:

First entry:- The firm usually enjoys the "first mover advantage" of locking up key distributors &
gaining reputation parallel entry:-

Hate entry:- This strategy has three advantages.

 The competition will have borne the cost of educating the market.

 Competition product may reveal fault that the late entrant can avoid.

The company can learn the size of the market.

Where (Geographical strategy):-The company must decide whether to launch the new product in a
single locality, a region, several regions, the national market or international market.

To whom (Target-market-prospect):- With in the rollout markets, the company must target its
distribution and promotion to the best prospect group. Prime prospects for a new consumer product would
ideally have the following characteristics:

 They would be early adapters

 They would “heavy users

 They would Opinion leaders

 Could be reached at low cost.

How (introductory markets strategy):- To sequence and coordinate many actives involved in launching
a new product might can use network-planning techniques such as critical path scheduling.

Where (Geographical strategy)

 Single location, a region, several regions, national market or international market.

To whom (target Market prospect)

 Company should target is distribution and promotion to the best prospect group early
adopters, opinion leaders, heavy users & those reached at lower cost.
How (introductory market strategy)

 Net work planning technique, Critical path method.

4.4. Product protection Issues

4.1. Legal and Regulatory Frameworks for Entrepreneurs

LEGAL ISSUES FOR THE ENTREPRENEUR
One of the challenges the novice entrepreneur will face as she goes into business
understands the regulatory environment which is made up of numerous laws and
regulations. To operate as a legal businessperson and protect the business from
unnecessary suits and liabilities, the entrepreneur needs to understand the various
laws that govern her Business. Following are the key legal issues for the
entrepreneur.
INTELLECTUAL PROPERTY
'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 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.
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.

 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.
 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;
1. Processes: Methods of production, research, testing, analysis, technologies with
new applications.
2. Machines: Products, instruments, physical objects.
3. Manufactures: Combinations of physical matter not naturally found.
4. Composition of matter: Chemical compounds, medicines, etc.
Trademarks
These are distinctive names, marks, symbols or motto identified with a company’s product or
service and registered by government offices.
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.

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.
 They pertain to intellectual property.
 Usually copyrights are valid for the life of the inventor plus a few decades.
4.5 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.
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.
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 ben
industrially manufactured or used.
(3) It must be "non-obvious”- It should not be an invention which would have occurred to any
specialist working in the relevant field.
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:-
 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 inEthiopia.
Works of architecture erected in Ethiopia and other artistic works incorporated in a
building or other structure located in Ethiopia.
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.
Review Questions
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?