Importance of Developing New Products - Essay Example

? Marketing Referral Assignments Contents Question 3 Reference 9 Question Discuss the view that it is not worth the huge investment that is necessaryto develop new products when it is much easier to copy the market leaders’ products. Give examples of market leaders and market followers. Product development is a phase in which the organization tends to determine if the firm is technically feasible to produce and whether it can involve low cost so to make the final price reasonable for the target customers. The development phase involved in a new product involves huge budget and at the same time is lengthy. The development of new product is of course risky, time consuming as well as expensive. Firms need to produce dozen of ideas regarding new products where only one idea might result in successful product. The failure rate of new product is much higher than the success rate, as high as 80% and the reason for failure are numerous, like inadequate market survey, poor screening, market orientation, product defects, and some inadequate launching effort (Boone & Kurtz, p.398). Due to high investment which is needed to produce the products and various other steps needed to take care of by the manufacturers to ensure success of the new product, most of the firms think that new product development is not worth huge investment because of the rate of failure, and believes that it is much more feasible and easier to copy the market leaders product. Market leader are referred to as those organization which poses the largest market share in a particular market and the market followers are those organizations which imitates the top market leaders but at the same time do not upsets the ongoing balance with respect to the competitive power of the respective industry. These market followers prefer to avoid the direct attack and reap the product benefits of innovations which are made by the leaders of the respective market through imitations. To imitate the market leader and avoid making huge investment, the market followers adopt four major approaches, Counterfeiter strategy is adopted by the market followers when they aim to duplicate the products of market leaders and packaging style and therefore sell in the black market. The strategy of counterfeiter has plagued brands like Apple and Rolex mostly in Asia. Secondly, cloner strategy is being used to emulate the market leader’s product name and packaging one such example of cloner is Ralcorp Holdings which sells off imitation of brand cereals in lookalike containers at a much lower price. Thirdly, the market followers adopt imitator strategy where some features are copied from the market leader while retaining few features of its own. The last strategy used by market followers is the adapter strategy which involves adoption of owns product as that of market leader and sells the product into different market. S&S Cycle supplies engine to the firms which builds bikes like Harley. The company buys, every year Harley Davidson and takes off the engine apart and finds out what to be improved. The followers earn or make profit at a lower rate than the market leaders. One such example s the food processing industry which revealed that only the top two companies were profitable (Kotler, p. 194). Among the mobile phone manufacturer, Philips a well known European brand also fall under the category of market followers. There are other Asian companies which operate on the European mobile market such as Sharp, Haier, Pantech, NEC, Innostream and Sanyo (Anonym, p. 15). Market followers is the runner up organizations in the industry whose major intentions are to hold the market share without investing and also providing challenges to its strong competitors. But however this does not mean that the market followers lack any kind of strategies in fact it is believe of the followers that it is much more advantageous to remain follower and pursue the ‘me too strategy’ rather than being the market leader. The strategy to remain market follower is believed to be effective because the follower has the edge of learning from the market leader without any cost or huge investment made on new products. Further Kotler (1999) has also explained the concept of imitating the products from the market leader as the innovator usually bears the huge amount of expense needed to develop the new product, the distribution and in generating awareness about the product in the market. The reward involved in the process id the market leadership. Another firm can however copy the new product and launch it under its own banner. The firm will not overtake the leader but can achieve high rate of profits because of the fact that it does not bear any expense involved in the innovations of the product (Sahaf, p. 204). This concept is mainly true for homogeneous products like chemicals, cement, food grains, steel and other products. Business in these industries usually has low opportunities to differentiate the offer, sensitivity with regards to price is also high and the quality of service is also quite similar. Therefore the market followers prefer to copy the market leader and present a similar kind of products to its customers maintaining the market share. The followers try to acquire new as well as retain its customers but tend to avoid any moves which eventually attract its competitors. The above mentioned strategies are being used by the market followers to copy the products invented by the market leaders. In the consumer durables section, LG is the market leader in manufacturing television and the follower of LG is Onida; market leader in washing machine is also LF and the follow is Godrej and is the similar case with respect to refrigerator also. Another example of market leader and market followers is that of P&G and Unilever, after many years of challenging P&G in its laundry detergent market in US, Unilever decided to become the follower of P&G. P&G which had a market share of about 57% as compared to Unilever’s 17% has managed to outmuscled its competitors in every step. For example, more than $100million is spend only on advertisements for Tide with a steam of improved and new products. As a result Unilever has decided to cut down its price and promotional activities on its detergent and rather focus on profit making rather than capturing the market share in US. A market follower has many advantages as it does not invest into innovations and R&D but rather has the advantage to learn from the experience of the market leaders. Another example of market follower is Dial Corporation which contains brands like Tone, Dial and Pure & natural soaps, Purex laundry products, and Armour Star and Renuzit air freshers. The company followed the strategy of fast followers and it follows the market leader, Procter & Gamble. Dial instead of investing on marketing and R&D, it leaves to the market leaders. P&G which had launched concentrated detergent powder in the year 1990, Dial Corporation followed with its concentrated version and launched it about a year later and named it Purex which was priced one third below the price of P&G’s Tide (Kotler & Armstrong, p.156). In addition in the automobile industry, two wheeler sectors, Bajaj was once regarded as the market leader in the Indian automobile sector, but due to lack of innovations and R&D, the company lost its market leadership status to Honda Motorcycles. Globally, General Motors along with Toyota holds the top position and maintains the largest amount of market share. The global sale of General Motors rose from 7.6% to about 9million in the year 2011 (Hirsch, “Business”). The next set of companies is making progress in the era of globalization and has build upon a significant amount of experience. Companies such as Haier which deals in household appliances, Infosys technology in India in IT services and in the BPO sector along with Bharat Forge, the automotive equipment company and Koc Holding of Turkey are fast followers and have signalled the global ambition towards the investment community (BCG Report, p. 12). Market followers often stand out to lose the moment when they try to compete directly with the market leaders and the reason for the consequences it usually takes a lot of time, promotional activities to actually erase the image that the consumers which they have about their favourite companies or towards the brand loyalty. To this market followers can employ differentiation strategy and emphasis on the issue with respect to quality and in addition make the products easily accessible. The market followers should identify the gaps left by the industry players and fill them with its products and in the process should develop sound marketing strategies. The market followers emphasize more on its promotional activities and advertisements on those products which are purchased at a frequent interval but reducing the price as compared to the market leaders. Therefore it can be concluded that in the competitive environment there tend to exit four types of marketers the market leader, market challenger, market follower and the nicher where one in order o stay at the top most position would invest into R&D and marketing and capture the market share whereas other set would remain to be the followers copying the product of the market leader and selling it to the customers without investing in R&D. But market leaders always have an edge over the market followers with respect to profitability, loyalty and also market share but still firms find it profitable to adopt the market follower strategy without disturbing the balance of the market and gain a minimum amount of profit. Reference Anonym. Nokia Case Study: How Can Nokia Maintain Its Market Position in the Mature European Market? GRIN Verlag. 2008. Print. BCG Report. The New global Challengers. The Boston Consulting Group. 2006. Web. 27 July 2012. Boone, Louis. E, and David L. Kurtz. Contemporary Marketing. USA: Cengage Learning, 2011. Print. Hirsch, Jerry. General Motors recaptures top spot for global auto sales. Los Angeles Times. 2012. Web. 27 July 2012. Kotler, Philip, and Armstrong Gery. Principles of Marketing. South Asia: Pearson Education India, 2008. Print. Kotler, Philip. Framework for Marketing Management. South Asia: Pearson Education India, 2007. Print. Sahaf, Musadiq. Strategic Marketing: Making Decisions For Strategic Advantage. PHI Learning Pvt. Ltd, 2008. Print. Read More