Chap 5, Lesson 1 New Product Strategy

CHAPTER 5, LESSON 1: NEW PRODUCT STRATEGY What Is a Business Model?  Refers to the mode by which the product concept seeks to make money so that it can have a sustainable operation  Should therefore involve a way of making money that best fits the nature of the product idea

Some Alternative Forms of Business Model •

Advertising

One gets to consume the product with no cash outlay and with the costs of providing the product being covered for by a number of third party advertisers. •

Sponsorship

Alternately, instead of constantly finding a number of small advertisers to support adbased businesses, one may opt to focus on a few big sponsors instead. •

Donations

This is often the business model of choice for non-profit organizations but also the model that fuels a number of online and mobile products such as games and productivity apps. •

Rent or Lease

For expensive assets, such as machinery or vehicles, they sometimes become more attractive for the market to consider through renting rather than outright ownership. •

Subscription

Certain products and services lend well to a subscription model, wherein, rather than consumers buying the product at stores, a subscription business sends the products regularly to their door in exchange for a fixed monthly fee.

Critical Part of Business Modeling •

Balancing act between the target number of consumers

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The profit margin goal per unit sold

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The acceptability of the resulting price

Important Elements That Make up a Business Plan •

Statement of Opportunity

This refers to the identified market opportunity that the proposed business seeks to address, which may be in the form of an untapped market, growing demand for an existing product category, or even a potential market for an untried product offering.

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Environmental Analysis

Key issues and trends in the environment, both macro and micro, should be noted when assessing the business proposal. •

Market Estimates and Market Segments

This refers to the estimated size of the total potential market along with descriptions of the different possible market segments and their estimated sizes. •

Competitive Analysis

This pertains to a roundup of the existing competition along with existing substitutes and potential substitutes together with their strengths and weaknesses. •

Business Strategy

This refers to the details of the proposed business including the product concept, the logistics required for its mobilization, the organization structure needed, and the methods for product distribution among other things. •

Risk Analysis

Informally speaking, this is a list of things that could go wrong along with a corresponding list of safeguards and contingency actions to address these. •

Financial Forecasts

This refers to the estimates of financing required for initial capitalization, asset acquisition, working capital, overhead, and inventory.

Generic Competitive Strategies •

Least Cost

This strategy involves producing goods or services at the least possible cost, and then passing these to consumers through low-priced, affordable products. This strategy requires an obsessive attention to operational efficiency— finding the cheapest ways to produce a product or service, investing in the most economical production methods and technologies, and constantly doing research on even more economical ways of offering the products in order to sustain this low-cost leadership for the long run. •

Differentiation

This strategy involves a lot of brand-building, with an effort to get the market to associate the brand with particular benefits that, hopefully, will be distinctly associated with the brand. •

Niche

A niche strategist is one that focuses on the needs of a very specific target market, usually a market that is small enough or specialized enough that it requires particular expertise.