Product Development Strategy
This strategy has the aim of a company increasing sales by developing products for its existing market. New product development is a generic term which also incorporates innovative products and modifications and improvements to existing products. Therefore, the product development strategy of the company could develop new product features through attempting to adapt, modify, magnify, minify, substitute, rearrange, reverse or combine existing features. It could also create different quality versions of the product and develop additional models and sizes.
Appropriatness of Product Development Strategy
A company might show a preference for product development strategy for the following reasons.
1. It holds a high relative share of the market, has a strong brand presence and enjoys distinctive competitive advantages in the market.
2. There is a growth potential in the market. for example, Boston Consulting Group recommends companies to invest in growth markets.
3. The changing needs of its customers demand new products. Continuous product innovation is often the only way to prevent product obsolescence.
4. It needs to react to technological developments.
5. The company has a strong organization structure based on product divisions.
6. For offensive or defensive motives, for example responding to competitive innovations in the market.
However product development strategy does have its downside and there ares trong reasons why it might not be suitable for a company. For example, the process of creating a broad product line is expensive and potentially unprofitable, and it carries considerable investment risk. Empirical research reveals that companies enjoying high market share may benefit in profit terms from relatively high leves of R&D expenditure, while companies in weak market positions with high R&D expemditure fare badly.