Product Development

Product development refers to the process of creating new goods and services or modifying existing goods and services. Why do companies develop products? Companies have financial, sales, and market share goals; products can be developed to reach these goals. In addition, companies can initiate product development to respond to rivals' actions, to commercialize an invention, to get benefit of a new technology, to get involved in global markets, or to modify the product with respect to its life-cycle phases. Being a source of revenue, and thus profit, goods and services are the heart of any business. Nowadays, technologies have been changing very quickly, and this rapid change brings new technologies that ultimately result in changes in products by shortening their life span. Therefore, product development is crucially important for both domestic and international companies, because successful new products increase company revenues.

To be successful in developing new products and modifying existing products, companies need to be able to answer various questions: Does a new or modified product satisfy customers' perceived needs? Is it likely to survive in the competition? How will the competitors fight back? What is the size and growth of the (target) market? Is the company a market leader or follower? What are the monetary and engineering requirements to develop the product, and how capable is the company in meeting these requirements?

Marketing plays an important role in answering some of these questions, and in product development. Technology will be used to create products that consumers need and want; in addition, products should be positioned and competitively priced in a way to meet market needs and expectations. When a marketing element in product development is missing, products may not be effectively engineered and priced. Therefore, marketing helps effectively design and develop products.

Product development can be classified into two categories, the development of new goods and services that were not available earlier and the development of the existing products through modifications. For instance, cell phones and laptops with new features that were not available earlier can be examples of the second category of product development. Both types of product development are important. The first type introduces a new product and service, and if these are successful, the company is expected to lead the industry. However, this leadership is contingent on how successfully the company develops, upgrades, and modifies the new product through time against the attacks of rivals.

In today's business environment, competition becomes more and more intensified every day. Companies struggle to decrease production costs, increase productivity, develop new products, modify existing products, acquire or partner with other companies, construct close relationships with their suppliers, expand across national borders, and follow and adopt the latest technology. The major goals of these practices are no doubt to survive in a competitive business environment and to create and sustain competitive advantage over rivals.

Although all these practices are important, perhaps product development is more important than others, because products are the sources of revenues and are crucial to successful and increased company growth and profit. Companies can get the latest technology, hire good employees, expand overseas markets, and engage in partnerships with other companies. In these instances, money is important. However, developing products requires much more than money.

...