Executive summary

The new product development and sustainable competitive advantage through portfolio
management based on Ansoff’s product market matrix and BCG matrix the relative
market share of the company will be improved. The environment friendly value of
Heritage Lanka International creates goodwill and maximizes the shareholder wealth.

This report discusses about the new product development processes and case for the
selected strategic option. Assess the resource requirement of the process to be introduced
and their sources. And planning and implementation steps are discussed.

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CONTENTS Page

Introduction………………………………………………………………. 3

Background information………………………………………………… 4

New Product Development Process…………………………………….

5

The product life cycle and the product development

process………… 7
Feasibility study…………………………………………………………. 8

The cost and resources requirement for the proposed product development 9

Training and development requirement………………………………. 10

Plan and implement the product process……………………………… 11

CONCLUSION…………………………………………………………. 13

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Introduction

The process of new product development includes research and development, trial
product test, production flow planning, procure machinery and equipment, production
process, packaging, marketing and sales. Before introduce the product to the market there
have to be a pilot run and market research need to be done with regard to identifying the
potential of the market of the newly developed product.

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Background information

Heritage Lanka International is the newly born Export organization

which deals in the Textile handicrafts, Clay, Metal and Jewellery, Hand
knitted carpets ,Stone Crafts, Glass, Ceramic and Onyx, Camel and
Snake skin products, Pottery, Costume dolls, Shell and bone products
and woodwork. The purpose of building such an export organization is
due to the fact that the handicrafts market has been largely ignored by
the Sri Lanka exporters.

Mission of Heritage Lanka International

The mission is to provide customers with the highest quality unique

products with antique Sri Lanka styles reflected and to provide them
with responsive and caring
customer service. The online presence of Heritage Lanka International
is meant to
further this mission.

Short- and long-term goals

The short-term goals of Heritage Lanka International are to generate

enough
revenue to keep the business running smoothly and to avoid fiscal
crisis along with taking care of customers in satisfying their needs and
demands. The long–
term goals include fiscal planning, inventory turnover, variety and
magnitude of
goods for sale, and attention to customer service, Sustain the
competitive advantage the company has, and growth internally by new
product development and customized service according to the
customer preference. The main competitive advantage the company
has over the others is uniqueness of its products (differentiation) Both
the short- and long–term goals are in keeping with Heritage Lanka
International’s Mission Statement.

The Heritage Lanka International values that all of their processes are
environment friendly.

Under these circumstances the Heritage Lanka International carried

out a detailed audit of the organization and some of the factors cited
by them were downturn in retail sales in end of the 1990’s with the

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economic changes, static sales over the years, reducing profit margins
etc. As recommendations for future strategies they suggested and
focused attention for the areas such as production orientation process,
reactive managerial philosophy, long term product & marketing
planning, new product launching strategies and increasing the power
of brand name as well as strong promotional campaign etc. Moreover
they cited their attention to the strategic importance of relationship
marketing.

Against the background of the above findings, a strong marketing

orientation, a far stronger and more effective planning culture for the
organization and a structured and proactive new product development
process cited by the board as the key focused areas, the greatest
priority and the immediate attention needed.
Gaining competitive advantage in marketing is a continuing process.
An important part of this challenge is analyzing and strategically
responding to changing environment opportunities and threats.

New Product Development Process

New products are the future of any company, but new product
development remains a risky and complicated process. A successful
product sets everything from product excellence to cost-effective
production to compatible distribution channels and effective
marketing. And while nothing can ensure product success, a
comprehensive, interdisciplinary development process can help any
company to avoid some of the most common pitfalls.

As consumers’ needs and wants evolve as a result of changing

attitudes, demographics and lifestyles, they actively seek out new
products on the shelf. The ‘time poor, cash rich’ consumer is placing
unprecedented demands on manufacturers and retailers. The increase
in the number of working women, the growth in single person
households and the increased interest in and awareness of health,
nutrition and the environment are to mention but a few of the distinct
segments that companies can target with new and innovative
products. These segments have distinct needs and requirements in
terms of the products and services they seek out. Manufacturers need
to understand the changing consumer and develop products to fulfill
their requirements in order to remain relevant and profitable.

Similarly, retailers are demanding innovation and proactive new

product development programs from their suppliers as they
continuously seek to differentiate themselves from their competitors
and be first to market with new and exciting products. With the advent

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of Efficient Consumer Response and Category Management, integrated
working relationships between retailers and their favored suppliers
appear to be delivering results in terms of additional business.
Suppliers need to invest heavily in these relationships through
dedicating staff resources towards meeting the innovation and new
products demands of their trade customers.

There are many reasons for new product development failure. It is

important to examine the reasons for new product failure in order to
provide some direction, recommendations, and a model of best
practice of the company. The main reasons for failure can be attributed
to a variety of factors including:

-Poor marketing orientation and research and development

-Lack of consumer and trade market research
-Poor product performance
-High marketing costs, particularly for branded launches
-Inadequate distribution, often reflecting weak links with retailers

Therefore is it important to carry out proper product development

process in Heritage Lanka international. The need of the product
development process is to controls the costs and time taken to develop
a new product. More importantly it helps to the organization to look on
product development as investment rather than risk.
The proposed new product will be antique style wooden furniture and
the target market will be big hotels which are 5 star graded.

When you examine companies such as 3M, Toyota, Sony, Black &
Decker, Polaroid that succeed in product development have one thing
in common, the development is divided into a number of stages. The
proper product development process should carry out the following
steps.

Creativity
How do you continually come up with new ideas for your business?
How do you develop new ways of attacking problems? How do you
capture and assess these ideas and distil them down to the ones that
are worth investing more time and effort in?
Heritage Lanka international did a market research about its present
products. The survey includes the present and potential customers,
who are hotels, restaurants and tourists resorts. The outcome of the
research showed that there is a high demand for oriental wooden
furniture, doors and window frames with antique touch and carving
works.

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Defining the Concept
How do you turn an idea into a real business opportunity and
determine the necessary investment and expected return? This
requires a number of questions to be answered. What is the market
potential? Is it technically feasible? What are the timescales? How will
it effect existing products? How will the competition react? And so on.
On this information the decision to go ahead and invest will be made.
In this company already they are producing wood worked handicraft,
the introduction of the new product will complement the present ones
as well by joint promotions. And the reputation the company has will
help them in marketing the new product in the existing market.

Developing the Concept

Typically the early part of this stage looks at defining the customer
requirements, followed by the translation into some form of prototype
or pilot service. The key is that perceived customer needs are
translated into a possible solution to these needs. In reality the design
or development of the product or service will continue into subsequent
stages as the product or service is refined to the point that is released
to the market.

Testing and Finalizing the Concept

This is sometimes referred to as alpha and beta testing of products. It
is the controlled release of the product so that the sales, customer,
manufacturing and support organizations can test and modify the
product. One outcome of this stage could be that the concept was
wrong, there is no market, and the product should stop prior to
committing to the expense of releasing it into the market.
There could be pilot product acceptance survey amongst the top 25- 5
star tourist hotels and restaurants.

Full Product Launch

This is probably one of the most difficult and expensive stages. It
includes developing the market, the correct sales channels, ramping
up the volume of business and supporting the product.
The production facilities and the expertise must be acquired and the
production run have to be there. The strong marketing campaigns,
advertisements and promotions could help simplifying the process of
marketing the new product.
Managing the Life Cycle
Managing the decline of a product, or extending its life with a "mid life
kicker", is often not considered. Unfortunately when this activity is not
planned the need to develop new products is often triggered by falling
sales. At this point there may not be enough time for new products to
be developed.

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There are number of benefits associated with implementing a new
product development system which can reduce the risks in financially
supporting a new product too. They are

Faster new product introductions Higher success rates at launch

Earlier detection of failures Being on time and on budget
Greater customer satisfaction Better launch plans
Cycle time reduction Less recycling/rework
Improved teamwork Improve market share in the long
run

The product life cycle and the product development process.

The concept of the industry life cycle can be used at the level of product offering and
even then can be used at a number of levels. For instance, we could consider the product
life cycle of the automobile, or the product life cycle of diesel power cars, or of leaded
petrol cars or convertibles. The model presents a generalized account of the stages
through which a product passes from its initial launch until its final withdrawal from the
market due to obsolescence.

The product life cycle can be used in a number of ways.

-To determine appropriate strategies for each product in the portfolio
-Each stage brings with it a number of strategic prescriptions.
One great strength of the product life cycle is that it encourages managers to look beyond
present returns when deciding on product investment strategy.

To evaluate investment in products-Investment in products should be taken on the basis

of the forecast net revenues of the product over the life of the investment asset. The stage
of the product life cycle gives an indication of whether these revenues may be expected
to grow or not and also the likely level of further investment needed.

To develop performance measures for each product-Traditional financial control

measures are of greatest use in the mature and decline stages where the most appropriate
management style is one of critical use of resources and maximization of cash flows.
During the introduction and growth stages, the factors that should be controlled are ones
related to the product's market success because these will determine its future financial
value.

Heritage Lanka international must maintain the product introduced in the growth phase
for a considerable period to yield more returns.
It can find outsource vendor companies for doing its marketing and promotional function
where they can acquire expertise and save on costs along with concentrating on their core
business activity.
Feasibility study

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The marketing research has to be conducted to find out the probability of success in
regard to the new product development. The research procedures would be as follows,
 Developing the concepts, methods and design
 Collection of data
 Processing and editing of data
 Production of estimates and projections
 Data Analysis-Interpretation
 Review procedure
 Information dissemination
The concept here is introducing new product of furniture targeting the high class market.
A questionnaire could be developed and tested for correctness and suitability by doing a
pilot survey using it and them it will be revised according to the suggestions made in the
pilot survey and to provide complete details of market information what ever not
provided in the pilot survey. The corrected questionnaire could be circulated among the
interior developing companies of high class hotels, tourist attractions and homes. The
details will be collected with regard to the following factors,
Current trend and style preferences of the market will be assessed and the percentage of
antique wooden furniture requirement could be identified.
The development and circulation of questionnaire could be done through a market
research firm, where they have the experience, expertise, staff ,detail statistics and
addresses, contacts of the targeted population of the survey.

Potential buyers identified- the questions can include a part like asking them if there is a
penetrating pricing strategy (still it will be high, since they are targeting high class
market) , which is offers a comparatively reduced price their potential forecasted value of
purchasing .

The gathered data will be tabulated by the outsourced firm, where they have analytical
staff experts and the final out come could be interpreted in order to assess the market
condition together with the qualitative data collected . The detail report of the market
condition will be shared with finance, designing, production, purchasing, marketing and
human resources division enabling them to start planning the functions with regard to this
introduction of new product.

The secondary information will be the past trend analysis of the styles and fashion of the
product category, the customer preference and demand for customized products and cost
of producing them.
The environment scanning could be done in order to identify the competitors and existing
players in the market and through a competitor analysis their strategies, strengths,
weaknesses, promotional campaigns, potential direction of moving ahead etc could be
analyzed.
The other market conditions such as political climate, spending pattern, cultural norms,
styles and trends of furniture market, substitutes to wooden furniture such as plastic and
synthetic material , fiber products, Granite products and the potential new entrants who
will copy the strategy of Heritage Lanka international could be identified.

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Since the production process involves cutting trees, the company should take care of the
environment by replanting the removed trees and maintaining forests as a good corporate
citizen of the society.

The cost and resources requirement for the proposed product development

Financial estimation resource-production for 6 months-projected

Description Amount
LKR
900,00
Staff costs( 6 months) 0
600,00
Office and administration costs (6 months) 0
1,500,00
Total Office costs 0

500,00
Market research 0
50,0
Customer survey and group discussion 00
1,000,00
Promotional campaigns 0
2,500,00
Production facilities and machineries 0
Consultancy charges for expert trend analyst 70,00
in designing 0
2,000,00
Raw materials 0
800,00
Labor charges 0
900,00
Environmental refurbishing activities 0
7,820,00
Total operational costs 0

Total costs for projected production of 6 9,320,00

months 0

Resources needed
-Financial resources needed to implement the whole product development process.
-Expertise in designing the furniture with wood carving and antique look.
-Market research firm and expertise to outsource.
-Wood, timber and wood pulp which is preserved and protected from natural factors such
as sun light, water, air and insects.
-processing plant with facilities such as cutter for large logs, crane to lift them,
ergonomically designed workspace to the creators of the actual wood carvings and a large
factory space, which has the easy accessibility and transport infrastructure to transport
raw material and finished goods.

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- Distribution facilities, with electronic marketing platform , where the company can
display its product designs and choices. The computer aided designing technology could
be used in involving customer suggestions and ideas in to the designing process, which
will satisfy the customer.

Training and development requirement

The staff who are working in wood work could develop their skills in wood carvings and
designing of antique furniture.
The existing staff need to be trained in e marketing. The supply chain management
electronically needs training the staff in IT facilities. This could be outsourced to a IT
consultants with a cost of LKR 100,000.
The HR staff need to be trained in dealing with outsourced vendor companies.

Sources of resources required for the new product development.

-Financial institutions, bank loans and reserves carried forward of the company could be
the source of financial resources.
- IT service providers to design, implement and train in the e marketing process.
-Raw material, mainly wood could be obtained from government timber corporation
licensed wood cutting contractors.
-Labor, skilled in furniture making wood carving, could be identified and recruited form
the vocational training institutions of handicraft and wooden furniture making.
-Designing and creativity- Designing people from arts university, who has a degree in
designing and arts.
-Market research facility- outsourced to the expert firm.

Plan and implement the product process.

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Market and product testing flow

Market survey, group discussions to identify market preferences

Sample designs and test product development

Identify suitable timber and corrective measures

For flaws in quality

Review trend analysis and style preference

Globally as well as locally

Production

Customer satisfaction surveys and modification to the

Product and process

Monitor and control the implementation steps

Even the planned strategy of product development adopted the company should watch
out for the other opportunities arises in the market and exploit them immediately, before
the others do.

Production flow
Computer designing of the product according to

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 Customer preferences

Preparing wood for processing

Cutting and making of furniture

Wood carving and cutting the designs

Dyeing

Washing

Preventive measures from natural factors

Finishing coat of spraying the wood flavored die

Finishing

The product design adopted and the finished good produced with unique differentiated
features of customer preferences and designs. This will increase the margin of profit to
the company by creating a cushion of differentiation which is the competitive advantage
of the company.
The Heritage Lanka international has the value of environmental friendly , which requires
a tree replanting expense and a firm to implement it or can donate funds periodically to
the timber corporation and forest ministry.
Even though it involves high costs it will increase the value of the company by increasing
the share value. The mission of satisfying the customers contributes towards achieving
the ultimate purpose of the existence of the company, which is generation of high profit
margins.

The implementation of the development process need to be reviewed and modified

periodically to avoid flanker attacks from the competitors through converting weakness
in to strengths and building on strengths.

Marketing and positioning strategies needs to be developed in detail in refining the

marketing mix of the offer. Heritage Lanka international can extensively advertise and
promote the product with discounts penetrating prices to capture the market and position
them selves firmly in the local as well as global market.
Positioning Strategy

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Heritage Lanka International will position it as a premier Handicrafts
Company, Who would create an image of “Sri Lankan Heritage”. Its
innovative hand made crafts will really serve the purpose of real sense
of satisfaction among the customers.
Heritage Products are pure handmade, quality, natural, beautifulness,
creative and innovative handicrafts from Sri Lanka. And the new
product also adds value to the portfolio.

Better relationships with international distributors and freight forwarding and shipping
companies by entering in to outsourcing vendor partnership agreements.

Adopt resource based view and build on core competencies and outsource the non core
activities, provided the staff and organizational structure facilities are capable in
managing and handling the core business activities without interruptions.

The throughput accounting helps in identifying bottlenecks of internal processes starting

from designing, ordering the raw materials and supply chain management, production
processes and sales and marketing.

And the secondary activities of the value chain could be developed and improved in
handling the challenges of the new product development process.

Human resources functions could be modified and empowered in recruiting, selecting,

training and orient new staff for the process.

Procurement functions could be developed and the staff involved could be trained in new
technology adoption and just in time systems could be introduced , where the stock
holding , lifting and transporting stocks from stores to factory will be reduced. However
in order to have an uninterrupted supply the links in the supply chain have to be strong
and reliable with regard to timely, quality supplies.

Finance functions could be trained in costing the customized products and provide
realistic estimates.

CONCLUSION

The successful new product development ensures the going concern of the company by
adding value in to the product portfolio. Having wide range of products in the portfolio
boils down the risk of over dependent nature in few products and markets. The product
development of Heritage Lanka international gives a sustainable competitive advantage
of differentiation which is focused in to high class customers with comparatively high
prices. As a result the overall profitability increases. And by the corporate social
responsibility value it has it has a good image amongst the market players.

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