Chapter four

PRODUCT DEVELOPMENT
 Chapter Objectives
After completing this chapter, students will be
able to:
• Describe the Concept of Product
• List Product Development Process
• 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.
 Cont…
• 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).
• Organization's success is dependent on
customer satisfaction and delight.
 Cont…
• Customer satisfaction is achieved through the
development of product and service, which
have all attributes required by the customer.
• A success of product or services do not only
have an attractive package design but should
be also able to provide robust performance.
• A successful startup depends on its distinctive
and compelling proposition.
 Cont..
• The merchandise or service will succeed most if
it either eliminates an existing pain or adds
significant tangible benefits.
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.
 Cont…
• 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
adopt four distinct stages.
• These stages can be referred to as:
 Cont…
• 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
Cont.
1. Idea Generation
2. Incubation
3. Implementation
4. Diffusion
 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.
 Cont…
• 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
• 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?
What benefits should the product provide?
When will people consume the produced?
 Cont…
• 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 plan
consists of three parts:
1) Market size, structure, behavior
2) Planned price, distribution strategy, and
marketing budget of the 1st year
3) Long run sales and profit goals, marketing
mix strategy.
 5. Business Analysis
• At this stage 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.
 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.
 Cont…
• Scientists must not only design the products’ required
functional characteristics but also know how to
communicate its psychological aspects through
physical cues and how will the consumer/customer
react to different colors, sizes, weight & other physical
cues.
• Functional tests 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
bringing consumers/customers into laboratory to
 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.
 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 1st choice is First Entry. Under this
category, the firm usually enjoys the "first
mover advantage" of locking up key
distributors & gaining reputation.
 Cont…
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.
 Cont…
• The 3rd strategy- Parallel Entry- can be also
chosen by the company to get in the market.
• The strategy to work, a prospective
businessman can take the advantage of opting
for the latest technology and production
process and operate at higher volume of
operation.
 Cont….
• Where (Geographical Strategy):-The
company must decide whether to launch the
new product in a single locality, a
region/several regions, in the national or
international market.
• To Whom (Target-Market-Prospect):-
Within the rollout markets, the company
must target its distribution and promotion to
the best prospect group.
 Cont…
• Prime prospects for a new consumer/customer’s
product would ideally have the following
characteristics:
• They would be early adapters
• They would be heavy users
• They would be Opinion leaders
• Could be reached at low cost
 Cont...
• How (Introductory Markets Strategy):-To
sequence and coordinate many actives
involved in launching a new product may/can
use network-planning techniques such as
Critical Path Scheduling (CPS)
 4.4 Legal and Regulatory Frameworks for
Entrepreneurs
• Since there are many options that an
entrepreneur can choose in setting up an
organization, it will be necessary to understand
all the advantages and disadvantages of each
regarding such issues as liability, taxes,
continuity, transferability of interest, costs of
setting up, and attractiveness for raising capital.
• Legal advice for these agreements is necessary to
ensure that the most appropriate decisions have
been made.
 4.5 Intellectual Property 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.
• Intellectual property is a legal definition of
ideas, inventions, artistic works and other
commercially viable products created out of
one's own mental processes.
 Cont...
• 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.
• This patent is appropriate when the basic
product already exists in the marketplace and is
not being improved in function but only in style.
 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.
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.
Read benefits of a Registered Trademark
 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
 Reading assignment

 Read about the Intellectual Property System in

Ethiopia from your module and other related
sources