Week 6: Product Development Management (2)

Considering the diagram of page 102 of your text how do you think product development has been affected by shorter product lifecycles?  Has technology affected product development? 

There are 4 main stages of a product’s life cycle (PLC): introduction, growth, maturity and decline. Shorter product lifecycles have shortened all four stages of PLC .  In the meantime, advanced technologies, especially IT, have been helping in reducing new product introduction time.  This shorter product life cycle is a result of our faster and smaller world than ever before. The speed of information travel and process, transportation, new product replacements is unimaginable even a couple of decades ago.

The product life cycle became shorter as a category of products: personal computers, laptops, mobile phones, smart phones and just about any electronic gadget, etc.  The product file cycle as a specific article became shorter as well. People replace their old stuffs more quick than before.  Nowadays, nobody will expect they will use the same computer more than five years and expect their laptops are the latest model more than 6 months. I remember that, in the old time back in China before I left for college, our family had the same bike (used almost every day) for more than 10 years.  The electronic type writer I had 20 years ago, only lasted for less than 2 years before it became obsolete.

A Old Bike

Table1: The four main stages of a product's life cycle and the accompanying characteristics

Stage	Characteristics
1. Market introduction stage	costs are very high slow sales volumes to start little or no competition demand has to be created customers have to be prompted to try the product makes no money at this stage
2. Growth stage	costs reduced due to economies of scale sales volume increases significantly profitability begins to rise public awareness increases competition begins to increase with a few new players in establishing market increased competition leads to price decreases
3. Maturity stage	costs are lowered as a result of production volumes increasing and experience curve effects sales volume peaks and market saturation is reached increase in competitors entering the market prices tend to drop due to the proliferation of competing products brand differentiation and feature diversification is emphasized to maintain or increase market share Industrial profits go down
4. Saturation and decline stage	costs become counter-optimal sales volume decline prices, profitability diminish profit becomes more a challenge of production/distribution efficiency than increased sales

Week 6--Product Development Management

Week 6:  Product Development Management

Consider various "products" you use.  Can you think of the various levels of this product?

I think that every product I use has the various levels, from food, to clothes, to autos. People may define a product in 3, 4 or 5 levels. I like to keep it simple and  to define a  product in 3 levels: 1. Core product (the benefit); 2. Actual product (the physical existence of a product); and 3. Augmented product (the non-physical part of the product. It usually consists of lots of added value, for which you may or may not pay a premium.

As an example, there are 3 levels of  the car I am using, which is a Toyota Camry.

1)      Core product :  Providing Transportation from one place to another.

2)      Actual Product : A Toyota Camry, white color, decent quality and mileage, etc.

3)      Augmented Product : 5-year warranty, road-side assistance, etc.

Products are tools (drill) that provide consumer benefits.  If the a better tool comes along that provides the same core benefit but is easier to get, cheaper, or more fun then the old tool will be obsolete.  Can you think of cases where products have become obsolete? 

The one product that became obsolete shortly after my purchase is the Iomega Zip 250 MB USB External Drive and disks. I still have this drive and a couple of zip disks in my home. Zip drives as portable storage tools came to the market in the 1990s and became obsolete because of the appearance of flash drives. I think the lifecycle for the zip drive product in the market is less than 10 years.

Photographic films, which has a lifecycle of more than 100 years, have became obsolete  by digital photography.

 

Week 5 - Segmentation, Targeting, Differentation and Positioning

Week 5 - Segmentation, Targeting, Differentation and Positioning

Last week, I had a week meeting at our facility (Cummins Inc.) in Munich, Germany. I visited both BMW and Audi companies in Munich. After the visit, I am interested in what are their product segmentations in the European automotive industry.

This website posted the information about the segmentation. http://cometonada.tripod.com/segmentation.htm

Nine segments have been identified, and together they cover almost 99% of the European car market. Each is defined as follows :
# A segment-mini
# B segment-small
# C segment-lower-medium
# D segment-upper-medium
# E segment-executive
# F segment-luxury
# G segment-sports
# H segment-dual-purpose
# I segment-multi-purpose vehicle (MPV)

BMW has products in 2 segments: Segment E: Executive cars, and Segment F: Luxury cars.
Audi has products in 4 segments: Segment C: lower medium; Segment D: upper-medium; Segment E: Executive cars, and Segment F: Luxury cars.

BMW in Munich (April 6, 2012)

Audi Company, Munich (April 6, 2012)

Segment C: Lower MediumThis segment is the largest segment of the European car market and the most competitive one too.
It is the area where private buyers of new cars and company buyers overlap. Competition is further increased in this segment because both traditional manufacturers of small cars, and up-scale manufacturers eye this market. The sector grew by 7.3% in 1996, which is 1 %-point more than the market average.

VW is the largest company in this segment, due to its highly successful Golf model . The other leading models are Opel Astra and Ford Escort. Although the sales of these three models are on decline, they still hold on to their leading position. Several up-scale manufacturers have entered this segment in 1996, such as Audi A3 and the Mercedes-Benz A-class. This is a logical move for both companies as they are extending their range into a large market where they have not previously been represented.

The market share for this segment is relatively even across Europe. The big markets such as Germany, France and the UK are fairly near the average. Italy is relatively small be-cause it is so much stronger in small cars. Denmark, Austria, Finland and Ireland are large markets for this segment.

Segment D: Upper Medium
Segment D is the 3rd largest segment after B and C segment as it accounts for 21% of the market. It grew by 7% in 1996, more than the market as a whole, but no company dominates this sector.

In the late 1980s and early 1990s GM's Opel Vectra was the best selling car in this segment. Ford fought back with the Mondeo, and achieved leadership from 1993. By 1995 there were six models outselling the GM Vectra/Cavalier, however in 1996 the full power of the GM marketing effort was brought to bear, and the Vectra once again became the top-selling car. All its competitors slipped back in 1996 with the exception of the Audi A4 and the VW Passat.

This segment is popular throughout Europe, although it is stronger in northern Europe than it is in south. Of the four largest markets, Germany and UK are strong, while France and Italy are relatively small in the D segment. Conversely in Belgium, Netherlands and all the Scandinavian countries, D segment cars are popular. In Denmark, Finland and Norway it holds over one-third of the market shares.

Segment E: Executive carsThe executive car segment is a relatively small part of the European market, with less than 10% of the total. In 1996 it only grew by 1.6%, far less than the market as a whole. The overall share fell to 8.4%. However, it still accounts for over 1m cars each year and it is important for the prestige of the manufacturers involved. Thus performance in this seg-ment may affect performance in the other segments.

Mercedes-Benz is the dominant player, with almost 40% of the total market segment. BMW and Volvo are the other significant manufacturers. VW does not make vehicles in this category, leaving the field to Audi. Ford and GM participate in this segment too. GM has share of this market with Omega model, and Ford with its Scorpio, but in general, they are regarded as minor players.

Germany is by far the most important market in this segment. It accounts for over 45% of the market demand. The highest market share is demonstrated in Sweden. The Volvo and Saab models make the market share of E-segment cars over one-third of the market. Fin-land, Norway, Switzerland, Luxembourg and Belgium also have high proportion of the E-segment cars.

Segment F: Luxury Cars
This is the smallest of all segments in the European car market, accounting for less than 100,000 vehicles. However, it is a very prestigious and profitable segment and thus it is highly important to the manufacturers.

The market leader in this segment is Mercedes-Benz. The largest market by far is Germany, accounting for over half of all luxury cars sold. The UK is also a substantial mar-ket, while France and Italy are relatively small. Belgium Switzerland and Luxembourg are significant markets for this segment, relative to their small size.

The Mercedes-Benz has decided that they will reduce the size of its current S-class and will introduce a larger, more luxurious new class above the existing range. All the other manufactures in this segment are looking into other markets. Audi, BMW and Mercedes-Benz are all bringing out smaller cars and Jaguar is moving back into areas of the sports segment that it had abandoned previously.