New product development strategy of samsung

Project Report on
NEW PRODUCT DEVELOPMENT STRATEGY OF
SAMSUNG R&D
In partial fulfilment of requirement for the
Award of Degree of M.Com
Subject:
Marketing Stratergies & Plans
Submitted By:
Mr. Hitesh Rohra
Roll No. 25
M.Com. Part – I, Semester - II
Under the Guidance of:
Prof. Mr. Prakash Mulchandani
SMT. CHANDIBAI HIMATHMAL MANSUKHANI COLLEGE
ULHASNAGAR – 421003
UNIVERSITY OF MUMBAI
2014 – 2015

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New Product Development
Strategy Of Samsung
R&D

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This is to certify that, Mr. Hitesh Rohra of M.Com Part – I, has successfully
completed the project in Marketing Strategies& Plans titled “New Product
Development Strategy Of Samsung R&D ” under my guidance for the
academic year 2014-15. The information submitted is true and original as
per my knowledge.
Mr. Prakash Mulchandani
(Internal Guide)
Prof. GopiShamnani
Dr. Padma V.Deshmukh
(Coordinator, M.Com) (I/C Principal )
________________
External Examiner

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DDEECCLLAARRAATTIIOONN
I, Mr. Hitesh Rohra student of SMT. CHANDIBAI HIMATMAL
MANSUKHANI COLLEGE, ULHASNAGAR studying in M.Com Part – I,
Semester – II, hereby declare that I have completed this project on “New
Product Development Strategy Of Samsung R&D” for the subject
“Marketing Strategies & Plans” in the academic year 2014-15.The
information submitted is true and original to the best of my knowledge.
_______________
Mr. Hitesh Rohra

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ACKNOWLEGEMENT
To list who all have helped me is difficult because they are so
numerous and the depth is so enormous.
I would like to acknowledge the following as being idealistic
channels and fresh dimensions in the completion of this project
I take this opportunity to thank the University of Mumbai
forgiving me chance to do this project.
I would like thank my Principal, Dr. Padma V. Deshmukh for
providing the necessary facilities required for completion of this
project.
I would also like to express my sincere gratitude towards my
project guide Prof. Mr. Prakash Mulchandani whose
guidance and care made the project successful.
I would like to thank my college library, for having provided
Various reference books and magazines related to my project.
Lastly I would like to thank each & every person who directly or
indirectly helped me in completion of the project especially my
parents & peers who supported me throughout my project.

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Executive Summary
Samsung is in nature a diversified company with a large portion of its turnover is
contributed from electronics in which they manufacture wide range of products. This
evaluation emphasize about the segment of smartphone which is the big contributor to
Samsung’s profits .In the USA market Samsung is the second largest smartphone
company to run its business although it is the first worldwide it has a steady growth in its
highly penetrated market in which Apple being the market leader and has a resonance of
a high end brand image and high perceived quality compared with Samsung.
The purpose of this audit is to find out a way to build its image out of android its highlyn
dependent operating system and only the secondary data’s were reviewed to seek out a
way from darkness that Samsung will face in the mere future. The audit modules used to
audit Samsung’s performance in the US market are mostly Keller and Kapferer’s mainly
brand positioning, pods and pops, CBBE, Brand mapping, Brand value chain, BAV,
Brand mantra, Five dimension prism etc. The audit analysis was based on the secondary
data gathers thus supporting the modules elaborating accordingly.it was categorized to
three parts as demographical and physiographical analysis, association analysis, profit
growth, manufacturing process analysis which will give out a clear picture to the reader
about the brands pros and cons.
The conclusion is based on the analysis and the audit modules which clearly depicts the
lack of brand image luxury effect and self-recognition that Samsung provides although it
has numbers in its accounts and ratings in its graphs. This was due to its own fault of
manufacturing various models to grab all the segmented markets which made models
unidentified when kept alongside. Recommendation is to give away solution to increase
Samsung sale volume and to gain its brand value.

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Content
a) Introduction To New ProductDevelopment………….....… 02
b) Types Of New Products ……………….06
c) The Role Of ProductDevelopment In The Enterprise ………… 09
d) The Development Of New Products …………………….13
e) Entrepreneurial New ProductDevelopment ……………… 14
f) Invention Verses Innovation……………………. 24
g) New ProductDevelopment By Technology …………………….. 31
h) Introduction Of Samsung Company ……………………………34
i) History Of Samsung Company ……………………………. 36
j) Objectives Of Samsung Company ………….……………… 40
k) Methology Of Samsung Company ……………………… 41
l) Data Collection, Analysis & Findings ………………………… 43
m) Samsung’s Investment For R&D ………………………….. 45
n) Comparative Analysis Of Various Brands ……………………… 47
o) Conclusions ………………………………. 50
p) Bibliography/Refrences ………………………………. 51

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Introduction
New product development is one of the most important aspects of a new enterprise start
up and is the activity that will most influence and guide the direction of the firm
throughout its life. The process of new product development and the success of the
product in the market will primarily determine how well the company will sustain itself
and be the key to developing any competitive advantage of the firm over others. The new
product development function has been neglected in entrepreneurship literature, yet it is
an extremely important key to success in the new venture and an extremely difficult
process considering new entrepreneurs may not as yet developed the all round expertise,
experience and resources of large companies. Another area of neglect in new product
development and entrepreneurship literature is the actual formulation, design, packaging
and manufacturing process development of a new product, which is the link between
technology and the market in any new venture creation.
One of the keys to successful new product and process development is the design and
production of a new product with the minimal resources possible without sacrificing any
quality of the finished and marketable article. For the entrepreneur, this process must be
undertaken in a heuristic manner (discussed later), rather than through any strict
disciplinary approaches, advocated and practiced by large companies. This is one of the
ways a new venture can gain competitive advantage over larger companies, if the product
and process can be designed and built for a fraction of the cost that more established
enterprises can achieve. Thus product development is one of the most important
processes of new venture creation. New product development is a discipline where the
technical aspects are learned as you go along the process, as most of these aspects are not
in any text books, but come from people’s lives and experiences. This is a reality of new
product development that even MNCs have to face. New product development is both a
manifestation and extension of strategy in terms of what the company puts into the
marketplace, steering the direction of the enterprise and at the same time, an influence
upon strategy or a restraint upon strategy because founder and/or team capabilities limit
the set of options available to the new venture in terms of what can be done in the
marketplace in terms of product.
The new product development process is so close to the concepts of idea, opportunity and
decision to start up a new enterprise, as well as where you will go in the marketplace –
you cannot by definition have a start up without beginning the new product development
process.
One can observe in the marketplace that some new companies almost seem immediately
to make a high impact on the market. Others enter the marketplace and seem to go
nowhere, while others grow gradually over a long period of time. The difference in these
companies comes back to the initial new product development process, where some are

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able to quickly develop a new product and make profits despite of high costs and design
flaws through generating high revenues. Others do the same but fail to generate profits
and revenues to sustain their venture, while yet others can internally sustain themselves
while their idea manifested into a product slowly develops recognition, distribution and
sales in the marketplace, where revenues eventually flow over the breakeven point to
generate profits to sustain the venture. New product success depends on many factors
which will influence the destiny of the new venture. In later venture life the decisions
about future investment of profits and the strategic soundness of those decisions will
determine long term sustainability of the firm. New product development is one of the
most important aspects of long term sustainability.
In the early life of the new venture the conventional rules of management and strategy are
discarded in a scramble to develop a product and get it quickly into the marketplace to
generate enough sales to survive. This is a very haphazard time where best practices and
production efficiencies are almost irrelevant in the minds of any founder, particularly in
the SME. The jump is made with primarily intuition backing the strategy and it is the
faith in this strategy that keeps the founder and the firm going forward. This adds great
risk and pressure of which statistics of new product failures lend support. This chapter
will look into the issues involved in new product development and the strategies
underlying the process to assist the new venture creator develop some form of roadmap
across this critical period in the new venture and following periods of growth and
development of the enterprise.
New Product Development in the Malaysian Perspective
There are many estimates and statistics presented by various authors about new product
failure rates in the marketplace. Robert Calvin in his book Entrepreneurial Management
claims that 80% of new products fail after being launchedi. Observing new product
launches here in Malaysia tends to confirm this, even those launched by MNCs. Failures
take slightly longer to acknowledge in Malaysia due to the distribution driven approach
to the market in the consumer products arena, where products are pushed to consumers
from the shelves to customers through the heavy use of in-store promotions and
promoters. This figure of 80% would be accurate in the cosmetic sector, slightly less in
the household product sector and even less in the agriculture sector, as competing
products tend to have similar functions and benefits to what is already in the market and
market fragmentation and distribution gaps influence sales very heavily. In Malaysia, the
perceived risk of launching radical new products tends to stifle innovation, where many
companies tend to prefer being product followers, allowing others to innovate to reduce
risk.
This mental encapsulation prevents companies coming out and differentiating themselves
from the competition and expanding their position in the market as a trend setter, where

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they resign themselves to being trend followers. This attitude and perception makes the
Malaysian market less innovative than perhaps some other countries in the region, which
has to change if Malaysia is going to take its rightful position in the global market as an
innovative country. This situation if skilfully studied can potentially lead to numerous
new product opportunities for a new venture. If differentiation can be developed and
accepted by consumers, then there is plenty of room for new ventures in this country.
Likewise, due to the emphasis by companies on being followers, there is plenty of
opportunity to develop new brands, which can be protected by creating a source of
competitive advantage that has barriers developed to prevent competitors emulating the
product quickly. This is of course very easy to say, but with the right perspectives, it is
possible to exploit the strategy of product differentiation and enhance a position in the
market through the correct use of branding. This originates in the new product
development process.
New product development is approached differently by firms. In Malaysia, larger firms
tend to either develop a very bureaucratic and formal procedure or act upon the whim of
the managing director, or more so combine the above, which leads to a less than effective
process. In a discipline which is talking about the need for faster new product
development processesii, Malaysian companies still lag behind, which opens up even
more opportunities for SMEs.
SMEs in Malaysia, at least those in consumer products lack potential exit strategies or
contingencies for failed products that SMEs in many Western countries have available to
them; that of a channel of discontinued stock (i.e., $2 or ₤1 shops), where failed products
can be disposed of at a heavy discount. The cost of new product failure in Malaysia is
writing off inventory completely, along with the development costs, customer ill-feeling
and almost certain closure with a deep sense of failure. Secondly, if the product is
successful, it will most likely lead to copying by competitors, some of which will be
much larger firms with greater resources, brand image, salesforce, larger promotional
budgets and greater distribution capability. The advantage that being the innovator has
and incumbency in the marketplace is lost due to a wide gap in market power (based on
distribution ability) between small and large companies. These are central issues that the
new venture founder must consider before start up.
While looking at the Malaysian perspective, one other issue provides the SME or the new
venture with an opportunity. As many commentators see globalism as one of the largest
influences on markets in this new century, especially with MNCs developing and
launching products for the ‘Malaysian’ market based on extensions of international
brands with slight modifications, more reflective upon that MNC’s history in the
Malaysian market rather than modifications made to suit the Malaysian market, the
Malaysian market remains very complex and heterogeneous, often very difficult to
understand. Malaysia is one of a number of few countries with a significant makeup of a

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number of racial groups. The complexity does not stop there, as within each racial group
there is great diversity. The Malays are far from a homogeneous consumer group, with
different influences upon their historiesiii, thus providing them with different orientations
and consumer tastes. The Chinese are also diverse, some coming to Malaysia long ago,
adopting Malay customs (the Babas), while others migrated from various regions in
China to Malaysia and primarily maintain their Chinese cultureiv. Some live partly
integrated into the ‘Malaysian’ culture, while another group rarely mix from school
through their working careers with other ethnic groups. Some are English educated, while
others are Chinese educated, thus the Chinese cannot be seen as one coherent groupv or
market.. There is also a vast difference between urban markets and rural marketsvi where
consumer tastes and preferences vary significantly. Even with the rapid development of
the new middle class in Malaysia, it still remains divided along ethnic linesvii, thus
developing into two distinct markets in many product areas, ethnically segregated shops,
banking, entertainment, pop music, food, fashion, reading materials, etc. This is
reinforced by the segregation in education and careers of the various ethnic groupsviii.
Thus Malaysia within the context described above can be seen as a number of sub-
markets within the Malaysian market as a whole. This runs contrary to the concept of the
cosmopolitan man and agrees with Crawford’s observation that there is little market
homogeneity, even within a nationix. Even with the increasing number of foreign
competitors launching into the Malaysian market, local SMEs still have great
opportunities if they are able to understand the various consumer needs and wants of each
ethnic group and find these niches to be large enough to sustain a new business. The
downside of this issue however is that targeting specific ethnic niches may not provide a
market large enough to develop any economies of scale and the firm will not be able to
grow past a certain point.

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Types of New Products
Amongst the large number of products coming out onto the market each year, it is
sometimes very difficult to distinguish what is really a new product. One could not claim
that a new chilli sauce or sambal balacan launched into the market to be a new product
unless there is some form of differentiation from what already exists in the market. Even
if there was some differentiation, this must be recognised by consumers. What is
important according to Rogers and Shoemaker is that the product is perceived to be new
by consumersx, i.e., the product is perceivably different, relative to what is already on the
market. The overwhelming majority of products launched onto the market are usually
variations of existing products, with changes in either the brand, level of service,
technology, features, packaging, price, or quality dimensions, or a combination of them.
Only about 10% of new products introduced are both new to the company and the market
– an item not sold by that company before or an item not sold in the market beforexi. Thus
there are many ways of classifying new products, given the many forms they can take.
 New to the world products are the first of their kind in the market. They are
usually something invented or enhanced by a significant change or advance in
technology, such as a new discovery or different method utilising modified
processes, materials or methods in producing a product. These products would
revolutionise the market segment or even create a new market, which may require
significant consumer learning to become familiar with the new product. Examples
of this would be the new micro-chip processors, Intel has just announced, which
will make computers more energy efficient, light weight and smallerxii, the
progression from land line based telephones to mobile phones and now hand
phones, the progression from typewriters to electric typewriters to word
processors and personal computers, the change from wood, to gas to electric and
microwave cooking and the Sony walkman and Ipods. New to the world products
make up only a small proportion of new products and they are perceived as the
riskiest types of new products to launch as manufacturers have to deal with
consumers inexperience with the new concepts and incompatibilities with their
prior consuming experiences, which act as barriers to consumer adoptionxiii.
New Product Lines (New to the Firm) are not new to the market but new to the firm
launching them into the market. This is where a company would enter a market for the
first time, where success and profitability will depend upon the timing they entered the
market, i.e., as a pioneer, early follower, early or late majority or as a late follower. The
later the company enters the market, the less
 will be the concept risk taking, but the greater will be the competitive risk.
Intellectual property value decreases as more firms enter the market with similar
competitive products, leaving little room for product differentiation. Figure 6.3.
below pictorially shows the situation in-terms of competition, potential

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profitability and IP value in relation to the time a firm enters a new market for that
company.
Figure 1.3. Competition, potential profitability and IP value in relation to the time
a firm enters a new market for that company
 Additions to Existing Product Lines are products that extend a range marketed by
a firm. The product is different from existing products either in function or
consumer application or as a variant of an existing product, such as a different
pack size, flavour or fragrance, etc. Companies usually introduce additions to
existing product lines to enhance their position in the market they are competing
in, consolidate their position, to fill a perceived gap where consumers aren’t
served well or to react to competitors.
 Improvements and Changes to Existing Products are undertaken to improve
quality or make the product more convenient to use by the consumer. This is often
a continuous process by companies, but when the product has been overhauled
substantially, companies may undertake a relaunch or promotional campaign to
inform consumers about the change. Sometimes products are phased out with a
replacement product to maintain their competitive position in the market. This
happens continually in the mobile phone market, sometimes a number of times
each year.

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 Product Repositioning are products that are retargeted at new consumer groups or
a larger proportion of consumers sharing the same wants. For example, a
detergent may be repositioned in a new pack size to attract new consumers, or
aspirin was repositioned as a remedy for blood clots and prevention of strokes and
heart attacks from an analgesic, which was under attack for health reasons and
heavy competition from paracetamol based product.
About 10% of new products launched are new to the world products, which increases to
around 18% in moderate to high tech industries. New product lines are about 26% of new
products, but much higher at 37.6% in moderate to high tech industries. Additions to
product lines are around 26%, but dropping to 18% in high tech industries. Product
changes and improvements are around 26% of new products, 19.8% in moderate to high
tech industries and product repositionings are 7%, but almost non existent in moderate to
high tech industriesxiv. Thus, the majority of new products are developments and
variations based on existing products.
Products can be either goods or services. The primary goal of a product is to fulfil a
service that enhances human experiencexv, which both goods and services can do. Both
have tangible components for example, a facsimile machine is a good providing a
service, cars must be serviced after purchase, a haircut provides something tangible, a
written insurance policy is something tangible, providing assistance in time of need,
people will buy a cup of coffee at the Coffee Bean, even though they could purchase a
cup of coffee much cheaper at a kedai kopi along the side of the road and a university
education produces something tangible. Looking another way, just because something
can be stored in a warehouse as inventory doesn’t mean that it doesn’t need a distribution
systemxvi, such as insurance industry.

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The Role of Product Development in the Enterprise
As mentioned in the introduction, new product development is the manifestation of the
idea to exploit the chosen opportunity. It is the centre of all strategies and the vehicle that
will get the enterprise going in the market. New product development is the chosen basis
of growth for companies like Siemens, Nokia, Sony, Apple and Glaxo of which they have
completely relied upon as a strategy. These companies are what they are today because of
new product development. The place of new product development in the web of company
strategies and operations is shown in figure 1.1.
Figure 1.1. The Relationship of New Product Development to the Enterprise
Whether an enterprise is a home based industry, a manufacturing operation or a service
business, the new product development process is paramount to developing the overall
direction of the company. In most cases, it will be the only source of revenue for the
venture and total means of survival, as new product development will set the whole
future scenario for the enterprise. If the new product fails to reflect a need in the
marketplace, it is most likely to fail, beginning heavy consequences to the enterprise. If
the new product is not differentiated from competitors’ products, this will lead to tough
competition and price cutting, which will erode potential enterprise revenues and make it
Growth
Sales
Survival
Profit
s
Marketing
Finance
Production
Purchasing
Accounting
Strategic
Management
Supply
Chain
Management
Resources
New Product
Development
Regulation Product Design
Intellectual Property
Standards
Process Development
Skills & Learning
Strategy

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very difficult for the new enterprise to survive in an industry of stronger and larger firms.
Conversely, if the product is highly differentiated from competitors’ products in the
marketplace, the new venture will have to take enormous efforts to establish it in the
marketplace, requiring a lot of time and resources to do so.
Growth to a sustainable size and direction are two of the early primary objectives of the
new enterprise. These early on override profitability, organisation and efficiency in the
early part of new enterprise development. Gibb and Scott developed a strategic small
business model which shows the factors which influence growth of the enterprisexvii.
This model provides a framework for SME development that incorporates most of the
strategic issues involved in the ‘top down’ corporate planning models of Ansoff, Porter
and Steiner, from a micro perspective. The model has been developed on the assumption
that growth is extremely important to the SME to reach minimum economies of scale,
growth is synonymous with success and growth is regarded as economically desirable
because SMEs are regarded as the basis of future large firms and generators of
employmentxviii. Gibb and Scott’s model assists the enterprise determine how to change,
accounting for the dynamic environment the new enterprise must face in developing its
strategic direction, with consideration of its internal capabilities.
Gibb and Scott’s model is broken down into five components. The performance base
represents a profile of the existing business which can be broken down into sub-
components like market trends, which would include product and marketing mix and
competition, production trends, which would include measures of utilisation, efficiency
and quality, etc. and financial and management trends, which would include issues like
net worth, liquidity and gearing. This would be very similar to the position audit in the
conventional strategic planning process as is espoused by writers like Steiner.
The base potential for development is the overall strength of the business and its
capabilities. This would include many parameters that would influence the firm to change
and grow, such as the firms liquidity, technology, physical assets, human resources,
accumulated experience of markets, customers, product development, financial and
networking, the personal objectives of the founder and influence of family and peers, his
or her personal capacities, visions and attitudes and the ideas base of the new venture or
existing enterprise for the development of existing and future products, entry into what
markets and ambitions for growth. This would equate to the resource audit in
conventional strategic planning.
The key internal and external influences on development is very similar to the strengths,
weaknesses, opportunities and threats (SWOT) analysis found in most strategic planning
text books. The Gibb and Scott model is shown in figure 1.2. below;

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Figure 1.2. A Model of Growth Through Product/Market Development
Gibb and Scott (1985)
The above model was developed on the basis of researching how 16 SMEs approached
the issue of product/market development, from where the following assumptions of how
SMEs undertake this activity were derived;
1. Planning takes place around a specific project or number of small projects,
2. Strategic planning in any formal way is unlikely to exist, but through the
development of a specific project a certain degree of strategic awareness will
develop, without it the firm will run into blind alleys,
3. The absence of formal plans may not reflect on the capability of the SME,
4. The product/market development is highly dynamic characterised by a great deal
of learning during the process by the founder/owner manager of the SME – they
will usually take the approach of coming up against problems and solving them,
5. The development process will not necessarily reflect itself in traditional indicators
like increased revenue and employment,
6. Lack of growth in the SME may not necessarily reflect a lack of ideas for
development, growth is heavily dependent upon the founder/owner manager
having time and resources available, which is an important factor in taking a
proactive approach to development,
Where the business is
currently (Performance)
The Base for Potential Development
Key Internal
Influences
On the
Development
Process
Key External
Influences
On the
Development
Process
The Process
of
Product/Market
Development
The Outcomes
(Emerging Targets)
TIME
SizeandDepthofChange
Where the Business Could Go

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7. External information is more likely to be acquired by the founder/owner manager
through friends and networks rather than from secondary data and information
and how dependable this information is will depend upon the quality and variety
of the network, and
8. Strengths and weaknesses of the base will be an important factor in the eventual
success of the new development.
9.
The Gibb and Scott model allows SMEs to fully take account of administrative and
institutional blocks and hindrances, such as ‘red tape’ and bureaucracy and incentives and
other assistance available. Internal factors such as capabilities and resources can be
matched against constraints and opportunities in the external environment to determine a
way forward for the enterprise. The model more accurately reflects the development of an
SME where the influence and attitudes of the founder/owner manager are strongly
reflected in the process.
Fundamentally the new product development process is very similar between large, very
large, SMEs and even micro-enterprises. There is very little difference in the information
required to undertake the process and the steps that need to be taken. In the new venture
however the new product development process is haphazard, flexible and almost
completely informal, while still achieving the same end result as much larger companies.
Although many academics and practitioners advocate a formal new product development
process, there is little evidence to suggest that any formal process is more effective than
the way a new venture/entrepreneur undertakes new product development. In fact many
corporate organisations are looking for ways to make their organisations more
entrepreneurial.

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The Development of New Products
Companies have a number of options to grow. A company can expand its geographical
area, i.e., launch its products in new markets, acquire new businesses and their products,
or develop their own new products. Without new product development, the option of
geographical expansion is limited because in today’s international markets, companies
usually face either the same competitors or different competitors with similar products.
Even a company with a product based on a new breakthrough technology cannot
maintain its competitive advantage forever and must continue to develop or acquire new
products in order to keep in front of its competitors who will eventually catch up with
them.
Products have a limited life and new products must be created to replace those near the
end of their lifecycle. Markets and technologies are changing quickly even in the most
stable markets, which is leading to shorter product lifecycles. If one observes the market
brands have long lives but the products under the brand umbrella are continually changed
and updated almost in a seasonally fashion. Thus companies which don’t continue to
introduce new products run the risk of becoming irrelevant to the marketplace. Markets
and industries are changing so rapidly that 40% of the Fortune 500 companies that
existed in 1975 do not exist todayxix.
New product development is an important aspect of the competitive environment. If
existing companies don’t launch new products, it is most likely their competitors will
gain advantage in the marketplace, which will eventually erode the company’s position in
the marketplace and later effect revenues, profitability and survival. New products are a
strategy that companies use to introduce enhancements into the market so they can claim
benefits over their competitors. Today on average, new products (those introduced into
the market within the last 5 years) represent 33% of a company’s salesxx. In some
markets, mobile phones, televisions, white goods, automobiles, etc., this figure is 100%.
While new product development is one of the most important aspects of competitive
strategy, it is also one of the riskiest. New product failure rates have risen from 45.6% in
1961 to over 80% todayxxi. Cooper’s definition of the new product development process
underlies it’s strategic importance to a firm as …”a defined product strategy for the
business goals and objectives clearly communicated to all, there are clearly defined users
of strategy focuses to give direction of the business total new product effort, i.e., where
you want to go. The basic new product effort has a long term thrust and focus,”xxii.
Trott’s definition “the actual development of new products is the process of transforming
business opportunities into tangible products”xxiii links new product development to the
process of exploiting opportunities in the entrepreneurial process.

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Finally, companies in the same industries, with similar products, have basically the same
strategy choices and generic themes to pursue win similar groups of customers, thus
product development is one of the major ways a firm can differentiate itself from the its
competitors.
Entrepreneurial New Product Development
No standard set of procedures or processes exist in new product development. There are
department stage, activity stage, cross functional, decision stage (stage-gate) and process
models espoused in the literature. Different industries take different orientations towards
new product development, where for example pharmaceutical companies will be
dominated by scientific, technological and regulatory issues, while food companies are
dominated by consumer research that leads to minor product changes. Yet some
industries still take a craftsman approach in the joinery, furniture, décor and kitchen
refurbishing industries. Even the moderately high tech fragrance business creates
products through more an artistic approach, rather than a scientific approach, which has
as much to do with psychology, consumer tastes, blending just as an artist on canvass
would do as it does with chemistryxxiv.
In reality, new product development has as much to do with making assumptions, short
cutting the logic process through the use of heuristics, which are little rules of thumb that
firms with experience in the industry have grown to believe inxxv, such as ‘30% of people
who hear about a new brand will try it’. Hunches, gut feeling and intuition are heavily
relied upon to progress products, contrary to what most of the literature about new
product development advocates.
Successful new product development comes from experience and with it, the individual
discipline and maturity to know when they are biased in their thinking of potential
success or failure of a product. Industry knowledge is very important, but it must be used
objectively without emotional baggage, i.e., ‘we have a long history in that market and it
is ours’, or ‘we have always been successful with new products in this market’, etc. These
are cognitive biases that can lead to failure, that some would call market arrogance. As
MNCs employ more graduate executives to fulfil managerial roles in companies without
climbing the corporate ladder so as to speak, the insider industry advantage is getting less
and less. Marketing executives without grass root industry experience, passion for the
industry and a tangible ‘feel of it’, relying primarily on data for decisions, potentially lay
open some opportunity for the entrepreneur who has passion, diligence and sound
intuition. The ‘new’ executives, often surrounded with market research and advertising
consultants with the power to sign check books, so often get things wrong and wonder
why a champaka fragrance – as beautiful as it is, is not accepted by consumers who
associate the fragrance with grave yards and jasmine is rejected by 80% of the

~ 21 ~
consumers. The facts are, agreed by the majority of all literature in new product
development is that;
 Less than 5% of new products launched on the market are successful,
 Out of 100 new ideas, less than 2 become a commercial reality,
 Most companies are followers in the market and not innovators,
 Very few really novel innovations are ever launched commercially, and
 Most new products are actually only incremental steps in enhancement of
products, rather than something completely new.
Although new product development is one of the most important strategies for
sustainability of a company, too many companies turn away from innovation and cut
costs and expenses as a reaction to declining performance, without looking into the root
causes, which may be product life-cycle based or competitive based, which require a new
product development solution. Usually a panic response further stifling innovation of the
company. The new product development option is often seen as a more difficult
alternative, as under pressure, the following problems arise;
 Finding the right opportunities and appropriate innovation necessary to develop
them,
 Reducing development times without reducing quality and innovation,
 Building and maintaining brand equity through a strong product,
 Integrating market, design engineering and production processes to produce, and
products that are considered useful and desirable by consumers.
The above is the trap for those who do not view new product development as a
continuous process, even if it is an implicit and background process, within the company
and the minds of those who manage it.
The entrepreneur, especially after start up and turning into an SME can be trapped by the
scenario above, lending support to Drucker’s postulation that entrepreneurship is only a
stage in the development of a firm and the entrepreneurial state can be grown out ofxxvi.
This is compounded by the small firm’s lack of resources, time, technology and expertise
to research new ideas and innovations to develop the businessxxvii. SMEs are even more
limited in their strategic options because of their inability to influence the environment
and marketplace, due to their size like larger companiesxxviii. Cupelled with lack of
knowledgexxix, the entrepreneur requires specific strategies and processes to take account
of these weaknesses and navigate its birth and growth in a very focused way, that adapt to
rather than change the environment and marketplace.
Strategy is the action a company takes to achieve one or more of its goals and the
strategic management process is the way in which managers develop these strategiesxxx.
New product development as discussed in the introduction is the manifestation of strategy

~ 22 ~
and will dictate how the company interacts with its environment and how successful and
sustainable the company will be in the future. Due to size and age of a start-up or SME,
the development process will differ greatly from large firms and will take place ‘bottom
up’ or by the founder him or herselfxxxi and primarily involve the skilful utilisation of
assets, skills and resources, to take advantage of their best competences in developing
new products and entering the marketplace. Thus the entrepreneur or SME will have a set
of competences that are relatively unique to him or herxxxii, which will provide the basis
of future action. This is the nexus of creativity, innovation and selected strategy,
discussed in chapter 2 that the entrepreneur uses to create a market niche or position with
some form of competitive advantage, utilising what he or she has in terms of ideas,
competences and resources. How these factors are integrated together will determine the
entrepreneur’s capability and performance in the marketplace. To achieve this, the most
important resource is skill and knowledge possessed by the entrepreneur. To a great
degree this skill can only be learned through experience and difficult to imitate from
other firmsxxxiii. This is not different from large firms which learn as they go in the new
product development process, as each product/market is unique, how to exploit
opportunities and neutralise threats. Though intangible, this is a core aspect of
competitive advantage, unmeasurable in any conventional sense, but written about
heavily by Peter Senge and Chris Argyris, outlined previously in chapter 1.
Following the above arguments and problems firms face in new product development, the
most important aspects of entrepreneurial new product development is a continual
strategic awareness of the environment by the entrepreneur and his or her capabilities in
innovation, production and management to see through the selected opportunity into an
operational reality. From the point of view of a start-up or small firm, these activities do
not require the ‘specialist skills’ advocated in many strategic planningxxxiv and new
product development processes. There is little evidence to suggest that these processes
create more success than the way a new entrepreneur does things.

~ 23 ~
Figure 1.4. Entrepreneurial New Product Development, Competencies and
Competitive Advantage
Figure 1.4 above shows the importance of personal competencies in the entrepreneurial
process, where product development is the key to developing the strategy to realise
opportunities. Performance and growth depends upon a number of factors, which are
governed by the core competencies of the entrepreneur or organisationxxxv. This would
suggest that success and growth has a lot to do with these competencies and investment
in the development of these competencies is important in establishing, maintaining or
increasing the lead over competitors, as it is competencies that enable one to exploit
opportunities. Competencies influence the ability to develop ideas and screen them for
opportunities and select the ones that can be best realised. Competencies also influence
the ability to develop competitive advantage, which ultimately differentiates the product
and venture from others in the market. Selection of the correct solution to identified
opportunities, the ability to understand and create some form of competitive advantage
and the ability to manage or organise the enterprise efforts are the factors that influence
performance. Through competencies local companies are able to fight international
companies entering the marketxxxvi due to their better knowledge of the local situation.
Ideas Opportunities Solutions Realisation Performance
Spots Evaluates Selects Targets
Creativity Innovation Strategic
Thinking
Management
Capability
Capabilities GoverningCompetitive
Scope
Competitive
Advantage
Costs: to customers
Knowledge:
Industry/market/technical/
process
Relationships:
Customers/suppliers/
distri
butors/relative power
Structure: Ability
Differentiation
Competencies
Entrepreneurial, Opportunity
Identification, Network, Conceptual,
Organisational, Strategic, Technology,
Commitment, Resources

~ 24 ~
Creativity, Innovation and Strategic Thinking in the New Product Development
Process
The initial process of contemplating the development of a new product is perhaps the
most important aspect of the whole process. It is here where new ideas are spotted,
evaluated as to their opportunity potential, the technology and competencies required
considered, various strategy scenarios mentally extrapolated out to evaluate their effect
and benefit to the enterprise, so that the best strategy solution can be realised. This is the
most fluid and unstructured part of the process where all these possibilities are sorted and
evaluated in a way that does not resemble real and tangible workxxxvii. The quality of
information used (market data, knowledge of customers, technology costs, etc) has great
bearing on the outcome and final result of the product development process.
This is a creative process (explained previously in chapter 3) to seek some type of
innovation to warrant the effort to launch a new product onto the market that will have
some competitive advantage over potential competition, whether it be through lower
costs, utilisation of better knowledge of the marketplace, better relationships and ability
to utilise a channel of distribution, a better ability to organize the delivery of product or
service or operation in the market, which will lead to product differentiation from those
competitors to provide some market advantage. Innovation is thus the source of new
products, strategy and competitive advantage of which Drucker postulates there are seven
primary sourcesxxxviii, outlined in table 6.1. below;
Table 2.1. Drucker’s Sources of Innovation
Source Explanation Examples
The
unexpected
success,
failure or
external
occurrence
Success of a revolutionary product or
the application of technology from
one industry to another, sudden or
unnoticed demographic changes
caused by wars, insurgencies,
migration, etc.
 Apple computer
 Rapid decline of
Proton’s market share
An
incongruity
between
reality as it
actually is and
what it ought
to be
A change that is already occurring or
can be made to occur within an
industry. It may be visible to those
inside the industry, often overlooked
or taken for granted.
 Sugar free products and
sugar replacements due
to concern for health
 Increasing demand for
travel and holidays due
to increasing incomes
and leisure time
Inadequacy of An improvement in process that  Caffeine free products

~ 25 ~
an existing
technology or
business
process
makes consumers more satisfied based
on an improvement or change in
technology.
 Microwave ovens
 Mobile phones
Changes in
industry or
market
structure
New ways and means of undertaking
business based on identified
opportunities or gradual shifting of the
nature of the industry.
 Health care industry
 Education industry –
private education
Perceptual
changes
Changes in peoples awareness
founded on new knowledge and/or
values or growing affluence leading to
new fashions and tastes
 Leisure and exercise
industry aerobics &
gyms
Demographic
changes
Gradual shift of demographics in
population by age, income groups or
ethnic groups, etc
 Establishment of more
retirement homes
New
knowledge
New knowledge or application of
existing theoretical knowledge into an
existing industry that can create new
products not previously in existence
 Video and VCD
industry
 Robotics
 Biotechnology
Drucker further postulates that the seven sources of innovation can be manifested into
four types of product/strategy development as summarisedxxxix in table 2.2. below;
Table 2.2. Drucker’s Four Types of Innovation for Product/Strategy Development
Type Description Examples
Invention Totally new product Wright Brothers – airplane
Edison – light bulb
Bell – telephone
Extension New use or different application of an
already existing product
Kroc – McDonalds

~ 26 ~
Wilson – Holiday Inn
Duplication Creative replication of an existing
concept
Wal Mart – Dept. Stores
Pizza Hut – Pizza Restaurant
Synthesis Combination of existing concepts and
factors into new use
Smith – FedEX
Merryil Lynch – Home equity
financing
Product and strategy innovation is the means by which markets develop. Schumpeter
termed this process creative destruction, where the market evolves through a process of
new products being launched by firms which supersede those already in the
marketplacexl. Outdated products will disappear and overtime the market will be
represented by a range of completely new products. This can be very easily seen in the
automobile and mobile phone industries very quickly. This happens in all markets, which
can be seen in Figure 1.5. showing the product evolution of the laundry detergents.
Figure 1.5. The Evolution of the Laundry Detergent
Laundry
Liquids
Detergents
Concentrated
Laundry
Powders
Detergents with
Special
Additives
Laundry
Detergent
Tablets
Laundry
Detergents
Powders
Solid Soaps &
Powders
Laundry Blue
Laundry
Detergent Bars
Pre 1900’s
Up to Late 1940’s
1950’s until present
1980’s until present
The Evolution of the Laundry Detergent

~ 27 ~
Product evolution occurs primarily through incremental product benefit improvements by
firms launching products into the market to gain advantage over competitors. This is
mostly predictable following changing consumer tastes and lifestyles. Most new products
come out of this process and firms introduce these products in other international
markets, thus intensifying competition across the globe. Then from time to time a firm
develops a new innovation based either upon a new technology or by picking up some
technology from one area and transferring it to their target market to create a completely
new form of product in that market. In the evolution of the laundry detergent the
development of the liquid laundry detergent in the late 1970’s is an example of later and
the switch from soaps to synthetic surfactants is an example of a completely new
technology influencing the form of the product. The key factors influencing the process
of product evolution in a market segment can be best illustrated by the SET diagram
developed by Cagan and Vogelxli.
Figure 1.6. The Product Opportunity Gap
The rapidly rising levels of affluence in Malaysian consumers, along with most of the rest
of the world, the opening up of the ASEAN economies to open foreign competition and
Technology
State of the art and
emerging
technology
Re-evaluating
existing technology
Product
Opportunity
Gap
Economic
State of the economy
Shift in focus on where
to spend money
Level of disposable
income
Social
Social and cultural trends
and drivers.
Reviving historical trends

~ 28 ~
exponential improvements in technology are rapidly decreasing the life cycle of products
in the market place. Malaysian consumer tastes are very different from a decade ago and
over the next decade will undergo further change as consumers respond to health, leisure
and lifestyle issues. Coupled with the improvements in products that technology, it will
no longer be able to be assumed that product lifecycles will last more than five years as
products will quickly be superseded with new models, versions and complete new
designs based on newer technologies. Advances in ICT and biotechnology will bring
many new products and even allow for the development of whole new industries, as we
have seen with the development of ipods, mobile phones, new medicines based on
biotechnology and the like Innovation will also affect the ways products and services are
presented to consumers by making products more accessible and more convenient to use
like the development of prepaid mobile phone services where accounts can be topped up
at provision stores, convenience stores and petrol kiosks. Re-organising how existing
businesses are run has brought low cost air travel to the region through Air Asia.
Products and services will be also greatly affected by Government regulation. Carbon
credits will force the development of green engines and the increased use of bio-fuels in
the transport industry. Materials used in the manufacture of products will be more heavily
scrutinized like cosmetics forcing in some cases the reformulation and even complete
rethinking of products and their redevelopment. Occupational health and safety issues
will force more consideration about safety issues. Technology development will also
create new materials that will perform better and be more cost effective than existing
ones. All the above scenarios are factors for product evolution, which will be driven
through innovation. The trends towards shorter product lifecycles over the last 50 yearsxlii
is shown in figure 1.7. below;

~ 29 ~
Rapid technology development, the ability of strong firms to exercise some degree of
control over the channels of distribution and increasing internationalization of the market
is creating greater market concentration. This can be clearly seen in the Malaysian retail
sector where chains like Giant, Carrefour and Tesco are quickly increasing their market
share over more traditional retail outlets. The effect of market concentration on
manufacturers and suppliers is to reduce their numbers and force some product
rationalization where products cater for the large consumer groups. Increasing market
concentration defines the market into more rigidity and initially creates focus on the
major market segments.
At some stage market concentration will reach a point where smaller market segments are
failed to be satisfied by the smaller number of firms operating in the market. If these
unsatisfied market segments are large enough, opportunities develop for smaller firms to
move in and exploit these segments. The market will eventually see a renaissance of
smaller firms offering niche products to unsatisfied consumers sometimes through
alternative channels of distribution. An example of this is the growing number of herbal
products and cosmetics marketed through direct marketing channels.
New opportunities occur when a market becomes concentrated, as further growth in sales
by larger firms doesn’t correlate with increased profits as the cost to service small
segments is high. Smaller firms are able to achieve better profits without direct
competition in these unmet segments by focusing on the most profitable customer niches
and keeping costs low. Companies who are able to scale down the size and capital costs
0 10 20 30
Length of Life Cycle (Years)
Cosmetics
Toys
Tools
Food Items
Pharmaceuticals
Fifty Years Ago
Today
Figure 1.7. The Product Life Cycle Has Shortened Dramatically Over the Last 50
Years

~ 30 ~
of routine technology used in the industry, may be able to develop new sources of
competitive advantagexliii. Figure 1.8. shows diagrammatically the relationship between
market concentration and level of opportunities in a marke
Invention Verses Innovation
Many people relate new product development to invention. However invention only
makes up a small part of new products and less than 2% of all patents are actually
commercialized. Inventors are usually good at developing ideas into concepts and
tangible items, but not all inventions satisfy consumer wants and needs. It is particularly
difficult for an inventor to successfully develop a product in the market by themselves
because of the tremendous resources needed to develop the market to make consumers
aware and educate them about the new product. Many inventions, although novel, fail to
solve any real consumer needs, or fail to satisfy them effectively and thus fail to gain
much interest from consumers.
An invention will remain a conceptual idea without innovation. It is only really a starting
point in the innovation process which is concerned about turning the idea into a practical
and commercial application. Inventions involve creativity, which is only part of the
whole product development process as explained by Myers and Marquisxliv
….”Innovation is not a single action but a total process of interrelated sub processes. It
is not just the conception of a new idea, nor the invention of a new device, nor the
Firms
Opportunities
Market Concentration
Figure 6.8. The Relationship Between Opportunities and Market Concentration

~ 31 ~
development of a new market. The process is all these things acting in an integrated
fashion”.
Some innovations are radical and lead to great changes in the lives we lead as did the
productsxlv listed in table 6.3. to our society. But many inventions have come by
accidentxlvi and it took innovation to determine potential commercial applications. These
examples show that the majority of these innovations are developed by organizations
rather than individuals due to the need of large resources and technical knowledge.
Technical and product innovation often leads to other forms of innovation such as
organizational change to effectively implement the firm’s strategies based on new
products developed into the market place, as can be seen in the communications and air
transport industries.
Table 2.3. Breakthrough Innovations That Changed Our Lives
1. Personal Computers 2. Microwave oven 3. Photocopier
4. Pocket Calculator 5. Fax machine 6. Birth Control Pill
7. Home VCR 8. Communication
Satellite
9. Bar Coding
10. Integrated Circuit 11. Automatic Teller 12. Answering Machine
13. Velcro Fastener 14. Touch-Tone
Telephone
15. Laser Surgery
16. Apollo Lunar
Spacecraft
17. Computer Disk Drive 18. Organ Transplanting
19. Fiber-Optic Systems 20. Disposable Diaper 21. MS-DOS
22. Magnetic Resonance
Imaging
23. Gene-Splicing
Technique
24. Microsurgery
25. Camcorder 26. Space Shuttle 27. Home Smoke Alarm
28. CAT Scan 29. Liquid Crystal
Display
30. CAD/CAM
Table 2.4. Accidents That Innovation Turned Into Successful Products

~ 32 ~
A Raytheon engineer working on experimental radar noticed that a chocolate
bar in his shirt pocket melted. He then ‘cooked’ some popcorn. The firm
developed the first commercial microwave oven.
A chemist at G. D. Searle licked his finger to turn a page of a book and got a
sweet taste. Remembering that he had spilled some experimental fluid, he
checked it out and produced aspartame (Nutrasweet).
A 3M researcher dropped a beaker of industrial compound and later noticed
that where her beakers had been splashed, they stayedclean. ScotchGard fabric
protector resulted.
A Dupont chemist was bothered by an experimental refrigerant that didn’t
dissolve in conventional solvents or react to extreme temperatures. So the firm
took time to identify what later became Teflon.
Another scientist couldn’t get plastic to mix evenly when cast into automobile
parts. Disgusted, he threw a steel wool scouring pad into one batch as he quit for
the night. Later, he noticed that the steel fibers conducted the heat out of the
liquid quickly, letting it cool more evenly and stay mixed better. Bendix made
many things from the new material, including brake linings.
Product Life Cycles
As mentioned throughout this chapter, products have a life cycle. The product lifecycle of
products is a reason why companies must continue to develop new products to replace
those in the market place that have come to the end of their useful life. It is extremely
difficult to develop strategy according to the product lifecycle because identifying its
various stages is complexxlvii. Strategy can be both a cause and effect of each stage and
thus it is difficult to forecast sales for each stage in the cycle. However, understanding a
products position in the cycle and the factors that can influence stage, consumer tastes,
technology and competition can greatly assist in strategy development.
Products take a predictable sales and profit path over a limited lifetime, which five stages
are clearly definesxlviii, as shown in figure 1.9.

~ 33 ~
1. The product development stage where an idea is evaluated and developed into a
commercial product. This is where time is spent on developing the product
without any sales revenue at all with increasing costs as time goes on. For an
entrepreneur, especially during start up this can be a very straining upon personal
resources, especially if full time is being devoted to the project without any other
source of income.
2. The introduction stage is where the product is first introduced into the market.
Usually this period takes time, especially during a new enterprise start up as
gaining access to distribution channels is also a learning experience with much
trial and error being undertaken with potential buyers. Established companies
with strong relationships with customers may be able to gain much quicker
distribution. However once distribution is established there is a period where the
product moves very slowly and sales growth is slow while potential customers
evaluate the product for potential purchase and use. The length of this period
depends upon many factors, for example how brand conscious consumers are if
the product is similar to others, etc. Table 6.4. Below shows the expected slow
sales growth time for various types of new products. Profits will be negative or
very low during this period because of the high costs of introduction and
necessary promotion required. In the introduction stage a percentage of sales
cannot be used through fund accrual, and thus must be part of the initial
investment. Many products fail due to firms not reserving funds for this purpose.
In most Malaysian cases, especially through retail channels, the firm will have to
finance the movement of stock into the channel for a long period of time, 30-180
days.
Sales
Profits
Introduction
The Product
Development
Stage
Growth Maturity Decline
Time
Sales & Profits
Losses & Investment
0
Figure 6.9. The Product Lifecycle

~ 34 ~
Table 2.4. Expected Sales Growth Time Scenarios for New Products
Type of New Product Situation/Scenario Expected Sales growth
Time
New concept products
like ultra concentrated
dishwashing liquid,
coffee creamer and
instant coffee.
Consumers will take time
to become exposed to the
concept and benefit of
using the products.
Distribution will take time
to gain into the more
conservative channels.
Products will for a period
of time move very slowly
off the shelf before rapid
sales growth will occur.
This could take up to a
year in some
circumstances.
Industrial Products and
Business to Business
Products
The introduction stage is the time when focus must be put into persuading
consumers to switch brands or in the case of a new to the world product or a
significant innovation from existing products invest in educational promotional
activities. Pioneering products although have the first to the market advantage as
an incumbent product are very susceptible to followers who gain some advantage
through learning from the pioneer’s mistakes, especially if they can exercise
stronger influence over the channels of distribution. The pioneer to maintain
market leadership must develop a comprehensive defensive marketing strategy
(pricing & promotion, etc) to fend off challengesxlix from future competitors.
3. The growth stage will be entered into if consumers accept the new product and
continue to repurchase it on a regular basis. If this becomes the case then sales
will begin to rapidly rise from faster shelf off-take and gaining new distribution
points from conservative channel outlets that held of on initial purchase and
support of the new product. New competitors will be likely to enter the market
and existing competitors likely to retaliate through discounting and more vigorous
merchandising at store level to maintain their market-share.
As the Malaysian retail sector is a supplier driven market relying on continuous in-store
activity (promotion & merchandising) the new product must be continually promoted
during the growth stage. On an initial low sales base up to 40% of gross sales are needed
for in-store (below the line) activities. The potential strain this can cause on funding

~ 35 ~
should be underestimated as these costs will be deducted from invoice revenue. However
as sales increase and promotional costs can be allocated across a larger revenue, the
percentage required on in-store funding will lower to somewhere between 10-20%. The
funding effect on a firm during the growth stage of a product is shown in the example in
Table 1.5.
Table 1.5. Effect on Sales Growth on a Firm’s Funding During the growth Stage of a
Consumer Product.
On the manufacturing side, increasing sales volumes allow the firm to purchase
larger quantities of raw materials and packaging and negotiate lower prices
leading to higher manufacturing margins and profits. The time/experience gained
also allows fine tuning of the manufacturing process to make savings through
increases in efficiency through process and labour experience. It is not unusual for
direct manufacturing costs to come down 30% during this period. Likewise the
time/experience factor allows improvement of product quality where the usual
unexpected manufacturing and packaging compatibility problems are ironed out.
The primary objective of the firm during the growth stage is to maintain steady
sales growth until the cost of increasing sales is higher than the extra profit
gained. Shelf off-take velocity, distribution and competition are the three major
factors that the firm needs to consider during the later period of the growth stage.
Shelf off-take velocity is influenced by advertising and in-store promotion and is
usually manipulated and maximized through coordinated promotional campaigns
with corresponding in-store activities, utilizing purchased shelf space from stores,
participation in gondola or block promotions along the aisles and providing
discounts at strategic seasonal times, i.e., food items leading up to major festivals.
Gaining extra distribution points in the existing channel and looking for
distribution points outside the existing channel increases marginal sales of the
product, i.e., moving to the hotel trade to gain extra customers. Competitor
activity will influence sales growth according to the effort and activity they
undertake in the market-place to counter the new product and promote their
product. Competitors can be countered to some extend by adding new product
benefits and variants to gain further competitive advantage over the competition,
hence the importance of holding back on some potential product benefits that
could have been incorporated into the original product, for some future time when
those features can be utilized for market leverage over competitors when needed.
This is a common strategy used by firms in the telecommunications, electronic,
automobile and other consumer good industries. Figure 6.10. shows the
relationship between sales, profits, shelf velocity, extra distribution and
competition during the growth stage.

~ 36 ~
4. The maturity stage is where sales slow down and plateau. Products usually enter
this stage when there are a number of competing products in the market. During
this period, competitors will use promotion and discounting to maintain sales
levels and target erosion of competitors’ sales to gain market-share. Competitors
will also launch new product variants with added features and benefits to switch
consumer loyalty towards their brands. During the maturity stage, where
competition is at it’s peak, profitability will begin to decline as extra promotion is
needed and firms begin discounting and lowering prices. In markets where the
channels of distribution are concentrated, i.e., international retailers, some of the
smaller brands will be dropped from product ranges and even a category
rationalization can take place, leaving only a small number of brands.
Firms need to employ strategies to maintain their market-share and sales level,
which mentioned above will erode profitability. Competitors will attempt to vary
and segment the market with new products with added features and benefits and
seek new customers through developing new market segments, i.e., development
of a special bleach for washing, rather than general purpose. Failure to do this
would normally result in loss of market-share in an competitive environment and
relegation to marginality and almost total forced withdrawal from the market.
5. Eventually the product falls into the decline stage where sales begin to go do
almost steadily. This can be a very gradual process in stable technology markets
like food and household products or be extremely rapid in technology based
products like media and communications. The speed of the decline stage is
usually governed by the velocity that consumers change their preferences away
from the product towards another. In food and household products this is
normally gradual, as is with insecticides, or rapid when VCRs where replaced
with VCDs and later DVDs in the home media industry, with the arrival of new
technologies.
When the cost of managing the product in the market becomes high in
comparison with the returns or the marginal utility of focusing on a new product
with higher potential returns is better, most medium and large companies with
large product portfolios will usually drop the product off. Smaller companies tend
to hold onto a product until low sales make the product uneconomic to further
produce the product.
Sometimes when all brands have been withdrawn from the market, a small
company can hold on to a minimum level of sales for a number of years without
needing to support the product with promotion and discounts. The shoes polish
market would be a good example of this situation.
The product lifecycle can be used as a tool to understand how products develop, maintain
their position and decline in markets. However it can only provide a conceptual
understanding or guide, rather than a specific basis to develop marketing strategiesl, as it

~ 37 ~
is in reality very difficult to actually determine what part of the cycle a product is actually
at and which strategies should be utilized accordingly.
The product lifecycle can be used to examine product categories, which include classes
of products like petroleum and automobiles, product forms, which would define the type
of products, i.e., in the case of automobiles, sedans, vans and four wheel drives and
brands, which are a specific or group of products marketed by a specific firm or group of
firms.
Different product categories will exhibit different life cycles. For example, petroleum
products have an extremely long product life cycle because alternative technology and
feed-stocks from renewable resources have not challenged the product category to date,
even with all the publicity and debate about renewable resource alternatives. This can be
compared to the life cycle of a brand of air freshener which is very short. However the
product form it competes in will have a longer cycle than the individual brands marketed
within the form, i.e., a liquid, aerosol or gel type or household room, cupboard or
automobile air freshener. Figure 6.10. below Shows the difference in lifecycles between
product categories, forms and brands in the recording media industry
New Product Development By Technology
Intellectual Property
Intellectual property can be defined as a legal entitlement which sometimes attaches to
the expressed form of an idea, or to some other intangible subject matter. This legal
entitlement generally enables its holder to exercise exclusive rights of use in relation to
the subject matter of the IP. The term intellectual property reflects the idea that this
subject matter is the product of the mind or the intellect, and that IP rights may be
protected at law in the same way as any other form of property.li One of the keys to
intellectual property is the concept of novelty which is something that has not been
publicly disclosed in any form, anywhere in the world The basic forms of intellectual
property of listed in the table below:
Table 1.x. Basic Forms of Intellectual Property
Term Definition
Commercialisation Commercialisation of intellectual
property is simply about planning how
you will take your good idea to the
marketplace. It involves working the idea
into your business plan, consideration of
protection options and considering how

~ 38 ~
to market and distribute the finished
product.
Patent Is an exclusive right granted for an
invention, which is a product or a process
that provides a new way of doing
something, or offers a new technical
solution to a problem.
Manner of manufacture A legal term used to distinguish
inventions which are patentable from
those which are not. Artistic creations,
mathematical methods, plans, schemes or
other purely mental processes usually
cannot be patented.
Plant Breeders Rights Are used to protect new varieties of
plants by giving exclusive commercial
rights to market a new variety or its
reproductive material.
Industrial Design An industrial design - or simply a design
- is the ornamental or aesthetic aspect of
an article produced by industry or
handicraft
Trademark is a distinctive sign which identifies
certain goods or services as those
produced or provided by a specific person
or enterprise.
Copyright and Related Rights a legal term describing rights given to
creators for their literary and artistic
works (including computer software).
Related rights are granted to performing
artists, producers of sound recordings and
broadcasting organizations in their radio
and television programmes.
Trade Secrets/Undisclosed Information is protected information which is not
generally known among, or readily
accessible to, persons that normally deal
with the kind of information in question,

~ 39 ~
has commercial value because it is secret,
and has been subject to reasonable steps
to keep it secret by the person lawfully in
control of the information.
Intellectual property must be defined widely to include trade secrets and commercially
confidential information, which can also be called proprietary technology. Patents as a
form of intellectual property rights have issues related to their scope of protection, are
sometimes hard to justify in terms of costs due to the small market the novelty will serve,
are expensive to gain registration and take a long period of time before they are accepted
through process and review procedureslii. Jaffe and Van Wijk state that in many
jurisdictions patent enforcement is very difficult due to slow court systems, bias against
foreign plaintiffs, lack of technical competence and a general inability to enforce
judgementsliii. A survey undertaken by Lessor found that companies tended not to patent
their innovations in many cases, due to the fear that waiting would allow other companies
to copy and counterfeit the product first in developing countries that had markets too
small to justify the cost of registering a patentliv. Grubb argues that in biotechnology,
patents as a form of intellectual property rights do not serve the same purpose as in the
electronics industry, where patents are used as ‘bargaining chips’ in cross licensing
agreements and patent pooling as there are common product standards imposed by
necessity and regulationlv.
There are other alternative forms of intellectual property protection used by companies
that maintain trade secrecy and advantage over competitors. Trade secrets can be guarded
and protected within an organisation by maintaining employment contracts with secrecy
agreements that can be enforced through contractual remedies. These include specifically
tailored production processes, mode and control of reactions and formulations used in the
production of products by a company. Under legal license agreements, this technology,
although unpatented can be protected as proprietary knowledge under contract law. The
rapid changing nature of technology and continual improvement upon processes and
product, is itself a mode of protection, as long as the company maintains pro-active R&D
in process and product development. Patents applications can often become redundant
before the application is even reviewed by the patent office in an environment of
continual technology change.

~ 40 ~
Introduction
Information technology and information system’s impact on many industries, one of the
industries is IT appliances industry. We choose Samsung Electronics Co. as our topic in
this industry. Samsung has been dedicated to create a better world for over 70 years
through various businesses. Today, Samsung extent advanced technology,
semiconductors, skyscraper and plant construction, petrochemicals, fashion, medicine,
finance, hotels and so on. Samsung now is the global market leader in high technology
electronics manufacturing as well as digital media. Also, this company is a responsible
global citizen, a multi-faceted family of companies and an ethical business. Samsung
Electronics’ vision for the new decade is “Inspire the World, Create the Future.” This has
reflects its commitment to inspiring its communities by leveraging Samsung’s three main
strengths which are New Technology, Innovative Products and Create Solutions. This
vision also set for the purpose of promoting new value for Samsung core networks which
are Industry, Partner, and Employee.
Over the past 39 years, Samsung Electronics Company (SEC) has evolved from a low
cost manufacturer of black and white televisions, to one of the most technologically
advanced and prestige companies of modern day time. Throughout the 1990’s, SEC’s
chairman, Kun Hee Lee, demanded that the company as a whole re-think their key
fundamentals and set the stage for long-term commitments to investment in innovative,
premium products and brand value. As a result of the recognized opportunities, Samsung
pursued a bold combination of strategies to re-define themselves. Many of these methods
were unconventional but lead to great success over the next several years (Exhibit 1). As
Samsung continued to grow, Executive VP of Global Marketing, Eric Kim, was forced to

~ 41 ~
make a difficult decision. Should Samsung continue to offer a “one size fits all” product
promotion or shift their focus towards more complex customer segmentation? The most
important factors in determining whether or not Kim should pursue more customized
devices in his marketing planning revolve around Samsung’s ability to continue to reduce
manufacturing costs and increase marketing costs, and their ability to make the brand
name more personal through customer insight and exposure.

~ 42 ~
History
 Samsung Group was
founded in 1938 as exporter
of dried fish, vegetables,
and fruits and flour mill and
confectionery machines.
 In Korean War, Samsung
lost all assetsaimed to help
rebuild Korean economy;
entered the manufacturing
industry (sugar,fabrics). It
became a leader in modern
business practices
(recruiting from outside)
 In 1960’s expansion of key industries, entered electronics and chemical
industries
 In January 1969 Samsung Electronics Co.was established.
 In 1970’s bet the future on electronicslaid the groundwork for electronics
in Korea which helped the domestic economy grow and paved the way for
exports
 In 1980’s, a more comprehensive electronics company; it established
plants in Portugal and US. It also established Semiconductor and
Communication corporation and began memory chip business
 Samsung’s Logo used so far:
The Samsung
Byeolpyo noodles
logo, used from late
1938 until replaced
in 1958.
The Samsung
Group logo, used
from late 1969
until replaced in
1979
The Samsung Group
logo (“three stars”),
used from late 1980
until replaced in
1992
The Samsung
Electronics logo,
used from late
1980 until
replaced in 1992
Samsung Electronics in 1938

~ 43 ~
Samsung's current
logo, in use since
1993
 About Businesses
 Samsung basically operates in five major divisions.
 It provides an array of devices and solutions that can be tailored across
industries.
 These enterprise solutions help you move information efficiently and
securely, integrate technology with relevant industries for a smarter
ecosystem, and facilitate the necessary collaboration of colleagues and
partners.
 Apart from these businesses, it also provides solutions also:
o Mobile Solutions
o Printing Solutions
o Large Format Display Solutions
o Hospitality Display Solutions
 Vision 2020
 The underlying principle that defines our vision for the future of Samsung
Electronics is "Inspire the World, Create the Future".
 Financial Data
The various financial data for Samsung Group is as follows:
o Revenue US$ 268.8 billion (FY 2012)
o Net income US$ 30.1 billion(FY 2013)
o Total assets US$ 590.4billion (FY 2013)
Samsung Enterprise
Business
Education Retail Hospitality Healthcare Finance

~ 44 ~
o Total equity US$ 256.3 billion (FY 2013)
o Employees 427,000 (FY 2013)
 Market Share and Penetration
o In the field of Smartphone, Samsung is the global leader with 33% market
share (2013)
 Samsung in India
o Samsung Electronics commenced its operations in India in December
1995 and is today a leading provider of Consumer Electronics, IT and
Telecom products in the Indian market.
o Samsung India is the Regional Headquarters for Samsung’s South West
Asia operations, which provides employment to over 8,000 employees
with around 6,000 employees being involved in R&D. In 2010, Samsung
India achieved a sales turnover of US$3.5 billion.
o Samsung India is a market leader in product categories like LED TVs,
LCD TVs, Slim TVs and Side by Side Refrigerators. While it is the
43%
3%
12%
8%
5%
4%
4%
4%
3%
3% 11%
India Marketshare
Samsung
Nokia
Micromax
Karbonn
Apple
HTC
BlackBerry
Lava
LG
Sony
Others
Source: Cyber media’s Voice & Data Annual Survey of the Industry 2013

~ 45 ~
second largest mobile handset brand in India, it leads in the smart phone
segment in India.
o Apart from development of innovative technology, Samsung places great
importance on acting as a responsible corporate citizen in the communities
where it operates. Its CSR programs respond to the social and
environmental needs and seek to give back to communities that support
the company. In 2009, Samsung launched the company’s Corporate Social
Responsibility initiative – ‘Samsung Hope Project’ with projects in the
areas of education, culture, sports, social welfare and community
development. Each program under the Hope Project uniquely addresses
the needs of individual communities while emphasizing on innovations for
development of the community including education, technology,
engineering and IT technical training.

~ 46 ~
Objectives
 To understand new product development strategy overview in Samsung R&D:
As new technologies are being constantly introduced to the market, speed
is essential for remaining competitive in today's digital era, and new
markets have to be pioneered continuously. Through the interplay of
creative, imaginative people; a global R&D network, an organization that
encourages collaboration and cooperation among business partners all
along the supply chain, and a strong commitment to ongoing investment,
Samsung has put R&D at the heart of everything
 To understand methodology followed by Samsung R&D in New Product
Development phase:
The popularity graph of the Samsung mobile phones shows an ascending
curve. The reason for such a rise obviously directs to the dedication of the
makers in offering a state-of-the-art technology that is cost-effective,
stylish, and most importantly user friendly. Being the owner of a wide
range of service support centers throughout the globe, the popularity of the
Samsung models of this make stems from the reason of cost-effectiveness
of the phone models.
 To study effect of Consumer behavior on New Product Development of
Samsung:
Customers are seemed to move to those products which have good balance
between style, technology and price of the product. Samsung is one of the
leaders that have sensed the pulse of the mobile phone users. Mobile
phones from this technological giant are a rare admixture of style and
functionality.
 To challenges and problems faced by the organization in the process

~ 47 ~
 Here we are considering only the Mobile Market segment of Samsung
Methodology
The methodology followed by Samsung in the New Product Development is as
follows:
1.) Planning: In this phase, Samsung plans about the type of products it has to
develop depending upon the choice and requirements of the customers. For this,
company does a market survey about the requirements of the customers.
Depending upon these data from the market, Samsung designs its new products
suiting the consumers.
2.) Research:After getting the requirements of customers about the new product,
Samsung according to its already available technologies design the product
prototype. In this phase it also searches for the appropriate patents for the same
technology.
3.) Samsung Design Lab: After these initial steps, the prototype goes to Samsung
Design Lab where the basic design and research is carried out.
Planning
Research
(e.g.
patents)
Samsung
design lab
(e.g. GUI/
Interfaces
)
Standard
Product
Developm
ent (in
Korea)
Customize
d Product
Developm
ent
Regions
(India
/US/
Vienna)
Testing
(alpha/
beta)
Improve
and
Version
releases

~ 48 ~
4.) Standard Product Development: In this phase, all the standard features of the
product are development giving a shape to the product.
5.) Customized Product Development: After the standard product development,
product is now send for customized product development where it is developed
for various advanced and customized features of the product, before sending it for
testing.
6.) Testing: In testing phase, the product is subjected to two phases viz. alpha and
beta testing. In alpha testing product is tested by the company R&D department
only. It is given to testing officials who test the various features in the products
and then it is passed for beta testing. Now in beta testing, the product is given to
few selected customers who use the product for some definite time and then the
product is qualified for launch in the customer market.
7.) Improvement: After the product is released in the market, various versions and
releases are made into the market. These releases are mostly available free of cost
to the customers.

~ 49 ~
Data Collection, Analysis and Findings
 Samsung’s meteoric rise:
A: Samsung’s growth was mainly fuelled by sales of digital TVs (in particular LCD
TVs)
B: Global sales of electronic products were affected by the economic downturn.
Samsung’s phenomenal growth was dragged down by the downturn that affected the
US and Western Europe.
C: Samsung managed to achieve stellar growth, driven primarily by sales of its
smartphones, in particular its Galaxy range.

~ 50 ~
 In a galaxy on its own:
o Samsung’s ascendance as the market leader in mobile phones was mainly
powered by sales of its Galaxy range of smartphones, especially its
flagship Galaxy S3 and Note 2 models.
o Samsung leveraged the Galaxy branding and offered a cheaper version,
the Galaxy S3 Mini for emerging markets. The combination of flagship
and cost competitive models allowed the Korean chaebol to leapfrog
Apple Inc. by a substantial 50% margin in volume sales.
o Apple Inc. insistence on a streamlined product line-up and higher profit
margins helped the company rake in record revenues, but had an adverse
impact on its market share in volume terms. Critically, the lack of a low-
cost iPhone affected its sales in the burgeoning emerging markets.
o Nokia Corp and Research in Motion Ltd continued their transition, and
struggles to offer an operating system to compete with Android and
Apple’s iOS saw sales of these two companies fall sharply.

~ 51 ~
Samsung’s Investment for R&D
In 2010, Samsung Electronics invested $ 0.01 trillion, or 6.1% of consolidated sales
in R&D. Currently, has 50,084 R&D personnel which is equivalent to 26% of our
total workforce. In recognition of R&D endeavors, Samsung Electronics was included
among the top 10 global companies in R&D investment announced by the U.K.
Department for Business, Innovation and Skills.

~ 52 ~
 Smartphones hitting new heights:
o Samsung leads the global smartphones market and commanded 40% of
retail volume in the high growth markets of Asia Pacific and the Middle
East and Africa in 2012. Its share in Eastern Europe was 27% and 31%
in Latin America in 2012. Both regions were traditionally strongholds
for Nokia.
o Samsung's market share was nearly double that of second ranked Apple
in 2012, aided by both its flagship models like the Galaxy S3 and Note
2, and low-cost variants like the Galaxy S3 Mini, developed for
emerging markets. A comprehensive suite of products allowed Samsung
to dominate the smartphone market while BlackBerry (marred by its
BB10 operating system), Nokia (transition to Windows) and Sony
(financials and change in strategy) were unable to mount a serious
challenge to the South Korean chaebol.

~ 53 ~
Comparative Analysis Of Various Brands
Landscape Samsung
Electronics
Apple
Computer Inc.
LG
Electronics
Nokia Corp. Sony Corp. Motorola Inc.
Product
Offered
Consumer
Electronics
(LCD TV’s,
Microwave
Ovens, PC’s
etc.)
PC’s, portable
music players,
Mobile
communication
devices etc.
Consumer
Electronics
(Mobile
handsets,
Front
loading
washing
machines,
AC’s etc.)
Leading
Mobile Comm.
Company
(started as
wood pulp
producers)
Electronic
games,
Motion
pictures,
Financial
services etc.
Mobility
solutions,
mobile
services,
cellular comm.
Devices etc.
Innovation
and Design
Focuses on
Reason and
feeling to
create a
design and
used global
localization
strategy to
establish as
a first class
consumer
(user
centric)
Occupies
‘feeling zone’
and emphasis
on the
simplicity of
products in
terms of design
and instability
Concentrated
on 5 areas:
Mobile
comm.,
Digital
appliances,
digital
displays,
digital media
and home
networking
and design
their
products by
using 4
values:
Theme,
Style,
interface and
finish
Adopted
telecom as its
core business
and designing
was based on 3
principles:
Simplicity,
Relevance and
Experience
Creates
Value added
products by
doping 4
principles of
design:
Originality,
Lifestyle,
Functionality
and
Usability
Focus on two
criteria’s for
products for
their
consumers:
personalization
and
socialization
Marketing Digital
convergence
using E-
Processes
and efforts
in
improving
design by
investing in
R&D
Improvement in
design and
product features
Originally
produces
electronics
for mass
consumption
but later
transformed
to produce
premium
consumer
products for
attracting
premium
Product
categorization
is done by:
Explore Live
classic, classic,
achieve and
entry and
communicating
brand value to
the customers
Do not rely
on customer
surveys and
create value
added user
experience
through
feature
design,
concept
development
and eco-
friendly
Paid attention
on
development
of new
revenue
generating
services and
technologies
and enabling
customers to
experience
media
mobility.

~ 54 ~
customers
and to gain
brand image
sustainable
design
 Findings: The next big thing
o Internal memos presented as evidence during the Apple-Samsung lawsuit
dented Samsung’s image asan innovator, but the lawsuit also showed
consumers Samsung’s relentless pursuit and obsession to mimic and beat
Apple’s iPhone while creating its smartphone range.
o The company’s sponsorship of the London’s Olympics in 2012 and the 2-
minute advertisement during the Super Bowl in 2013 reinforced the
Samsung brand image in the minds of the consumers.
o Samsung has been spending consistently on advertising and is one of the
largest advertisers globally. Ad Age reported that Samsung spent US$4.3
billion worldwide in 2012, four times more than Apple.
o Not content with its success in smartphones and TVs, Samsung has also
identified several other categories in which it intends to compete
aggressively, such as appliances, cameras, health and medical equipment
and printers.
o The five forces are:
 Relations with suppliers: It means that Samsung needs to improve their
relations with the suppliers. This can be done with Suppliers
relationship management and by bringing the suppliers on a single
platform.
 Relations with buyers: Customer is the king. There is a need to improve
their relationships with the buyers or customers by developing
appropriate marketing strategy, timely delivery of the products and
supply chain management
 New Entrants: It is important for Samsung to analyse the threats from
new entrants in the customer electronic market
 Substitutes: With the emergence of Chinese products in the market
which can act as the substitutes for Samsung products. Hence, it is

~ 55 ~
important for Samsung to implement Generic technology strategies
which includes:
o Cost Leadership (e.g. Lower/cheaper material input, logistics)
o Differentiation (e.g. Enhance features, deliverability)
o Cost focus (minimum features)
o Differentiation (niche markets)
 Rivalry among established firms: There is a strong competition between
the already existing firms like Nokia, Sony, Apple, LG etc. Therefore,
Samsung will have to improve its competitiveness in the market.
In order to sustain its position in the near future Samsung will have to consider all the
above mentioned points.
 Limitations
o Limitations:Expand into new categories
 Samsung is still not strong in cameras and laptops, which offers it
room for growth, while the company is also aiming to consolidate
its lead in mobile phones and digital TVs. While forecast growth
for cameras and laptops is lower than smartphones, these products
offer relatively high average unit prices and longer replacement
cycles than smartphones.
 - Samsung’s know-how in large-scale manufacturing and its
economies of scale give the company an advantage over
competitors like Acer in computers and Nikon in digital cameras.
In addition, Samsung can leverage its strong brand: Consumers are
likely to be willing to give Samsung’s foray into these new
categories a try.
 - However, Samsung has to be selective in its product line-up and
avoid direct competition with its rivals. For example, Samsung
should focus on high-end fixed lens cameras and compact system
(mirror less) cameras, and not try to compete with established
players like Canon in the DSLR market.

~ 56 ~
Conclusions
 Within smartphones, the South Korean manufacturer banked on its
AMOLED screen and custom UI for its Android-powered flagship
smartphone, and single-handedly created the phablet (phone/tablet)
market, with its Note smartphones sporting a large screen back in
late 2011.
 Samsung demonstrated that it was not short on ideas and was
focused on catching up with both Apple and Nokia in the mobile
arena, as well as on strengthening its lead in digital televisions in
2012. Now that Samsung is the market leader, there must be a
significant shift in its strategic direction if it is to build on its
position.
 Samsung has to show its competitors that it is confident and knows
exactly where it intends to steer the market. The market is
expecting Samsung to create category defining products, much as
Apple has done with smartphones and tablets.

~ 57 ~
References
o www.samsung.com/us/aboutsamsung/samsung_electronics/business_area/rd
_page/
o http://www.businessinsider.in/Samsung-Has-A-Totally-Different-Strategy-
From-Apple-And-Its-Working-Great/articleshow/21250813.cms-
o http://www.portal.euromonitor.com/portal/default.aspx
o http://www.businesskorea.co.kr/article/1505/samsung-group-marking-300-
trillion-won-revenue-500-trillion-total-assets
o http://articles.economictimes.indiatimes.com/2012-11-
30/news/35483331_1_samsung-targets-asim-warsi-samsung-electronics-
india
o http://www.engadget.com/2013/07/03/samsung-to-build-five-new-randd-
centers/

~ 58 ~
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