Page 528 - Business Principles and Management

Chapter 19 • Product Planning and Production Management

technology, provide more effective treatments for diseases, and result in im-
proved prediction and control of the weather.
Applied research is research that studies existing product problems or pos-
sible design improvements for current products. Improvements in electric battery
storage and the mechanics of engines are resulting in a new type of fuel-efficient
automobile that combines a small combustion engine with a battery that can
recharge while you drive. Fiber-optics research continues to increase the amount
of voice and data communications that can move on the same transmission line
while maintaining security and quality. Digital video technology improves the
quality of the images we see on our televisions and allows us to select from among
hundreds of channels to develop a personal viewing package at any time of the
day or night.
To be successful for a long time, products must be constantly changed and
improved. Many types of improvements result from product research. Changes
can be made in the physical product, or new features can be added to existing
products. Researchers may discover new uses for the product or ways to make
the product easier to use. Sometimes changes in the package itself—without ac-
tual product changes—can improve a product.

DESIGNING NEW PRODUCTS

In planning and producing a new product, businesses should involve all major
departments, including production, finance, human resources, and marketing.
The product should be designed to meet customer needs. Customers should be
able to identify features of the new product that are different from and better
than those of competing products. Also, products must be safe and easy to use.
They must meet all state and federal laws for product quality and environmental
and consumer safety.
If research results in a new product idea that has a good chance for con-
sumer acceptance, the company begins to design the product. In this step, engi-
neers and researchers build models of the product and test them to be sure that
the company can produce a quality product. The design process should include
factors such as durability, ease of use, and a pleasing appearance. Usually a great
deal of testing is conducted to ensure that the product meets all requirements for
success before the company makes the large investment needed to produce it.
Once a model has been built and tested, the company must determine what
resources it will need to produce the product in large quantities. It may have to
buy production facilities and equipment or modify those it is currently using to
produce other products. If the company can use existing facilities and equip-
ment, it must develop a production schedule that shows how it can produce the
new products without disrupting the production of current products.
The company will have to determine the costs of producing the product and
compare those costs to the price it will charge for the product. It is possible that
the product cannot be sold at a price that will cover all the research, design, and
production costs. In this case, the company will decide not to produce the prod-
uct. If the company makes the decision to halt development at this point, it will
incur less financial loss than if it produces a large quantity that goes unsold or
must be sold at a loss.

CHECKPOINT
List the three steps a business must perform in order to offer
new products to consumers.

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