Page 525 - Business Principles and Management

Unit 6

19.1 Developing New Products

Goals Terms
• Describe the steps in new-product • product development • repetitive
development. • consumer panel production
• Describe the differences between • pure research • intermittent
alternative manufacturing • applied research processing
processes. • custom
• manufacturing
manufacturing
• mass production
• continuous processing

Product Development

Laresa’s experience demonstrates that businesses are constantly trying to find
better ways to please customers. As consumers, we are offered a growing
number of choices of products and services to satisfy our wants and needs.
Businesses compete to develop and sell the products that consumers want. If
consumers in Laresa’s city decide that the new business offers them a better
shopping experience, other stores will have to change in order to compete.
As shown in Figure 19-1, before a business can offer new products to con-
sumers, it must do the following:
1. Develop an idea for a new product that consumers want to buy.
2. Turn the idea into a workable product design.
3. Produce the product and make it available to consumers at a price they
are willing to pay.
If any one of the steps cannot be completed successfully, the product will fail.
Developing new products for sale is a very difficult and expensive task. For
example, a national fast-food restaurant spent over a million dollars on research
to develop a new sandwich for its menu. Then it spent additional millions of
dollars developing a production process that would maintain a consistent taste
and quality for the sandwich, no matter where the customer purchased it. In this
case, the sandwich was popular with consumers as soon as it was introduced, so
the company was able to recover all of its costs and make a profit. However,
companies sometimes spend that much money and more, only to find that not
enough customers want the product. Their new product fails, and they lose all
of the money they spent to develop it.
Only a small number of new product ideas ever reach the market. Even for
those that do, over half do not survive in the market for five years. Therefore,
producers risk large amounts of money in buildings, equipment, materials, and
personnel to provide the products that we consume.
Product development is the process of creating or improving a product or
service. As a result of many factors, products are continuously changing—old
products go out of use or are improved, and new products appear. Most of the
products you will be using in 10 years are not available today. For a company to

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