NEW PRODUCT DEVELOPMENET

AND IMPLEMENTATION

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 Table of Contents

1 Introduction.................................................................................................................3
2 Impact of overall profitability of new product or process development.....................3
3 Plan for resources requirement for the new product development..............................5
4 Implementation monitoring and evaluation................................................................7
5 Conclusion...................................................................................................................9
6 Appendices................................................................................................................10
7 References ................................................................................................................14

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1 Introduction

New product development is a process of organizing technological

innovations and their transformation in tangible goods and services.

The companies especially in luxury automotive industry need to

generate new products to be inline with the existing market and to
increase the sales. Since the cars are considered as luxury items, the
demand will change with the new fashion and new products. So the
luxury car maker needs to be innovative and produce cars to meet the
changing customer needs.

BMW is catering for the high quality luxury car market, so the new
product development is essential for the company’s survival. And the
innovation is essential in new product development and it is the key
strategic focus for today’s most successful companies.

2 Impact of overall profitability of new product or

process development.
BMW, the world’s largest manufacturer of luxury cars, said it’s likely to
increase earnings this year, boosted by new vehicles and a rebound in
sales in the U.S. and Germany. and the company intends achieve this
earning target by introducing new products to the existing market in U.S.
and Germany.

Global auto markets are likely to grow 2 percent to 53.3 million vehicles
in 2010, as a rebound in North America offsets a drop in Western
Europe, according to IHS Global Insight. BMW suffered a drop in sales
in its two largest markets last year, with deliveries tumbling by 9.4
percent in Germany to 258,000 cars and SUVs and by 20 percent in the
U.S. to 241,700. (Chris Reiter, 2010)

The statistics shows that there is requirement for a new products form
BMW, to beat the competitors and to increase the revenue as well as
the profitability of the company. The organization has to make decisions
about how to react to market needs and customer demands with the
available resources. This leads to the use of available technical
knowledge and design resources to develop new, company-specific
innovative products. Since BMW is known for their passion for
innovation, and the leading edge technology. (ameer Kumar 2005)

BMW have a well known BMW location is the Engineering Center

(FIZ) in Munich. This institution was launched in 1987, implementing

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the idea of co-location. Co-location stands for bringing together all
people into one site, who is concerned with the product
development process, including suppliers. Nowadays about 5,000
researchers, engineers and technicians are working at the FIZ.

So the company will be able to get the innovative ideas from the existing
research staff base, further ideas for new products can be obtained from
basic research using a SWOT analysis (refer appendix 02), Market and
consumer trends, company's R&D department, competitors, focus
groups, employees, salespeople, corporate spies, trade shows, or
Ethnographic discovery methods (searching for user patterns and
habits) may also be used to get an insight into new product lines or
product features. The company needs to consider the strength in order
to capitalize the opportunity of developing the new product.

The company can develop the new product after considering the
opportunity available in the market and the company’s strength, it can
further consider about developing to new market or penetrating existing
market in order to increase the profitability. For this purpose the
company can use the Ansoff matrix referred in appendix 03.. (Neil
Botten 2007)

When considering new product development it has to make sure, the

new product is technology driven and environmental friendly. And it
needs to asses the viability of its existing products, The Company needs
to consider about the market share and the market growth rate when
considering the existing portfolio of products refer Appendix 01 BCG
matrix). Some of the old product lines are considered to as dogs, which
needs to be diversified and the company needs to focus increasing the,
market share for growing market. So the new product development will
give a good chance towards increasing market share for growing
markets. (Pamela S. Lewis 2007) when considering the about the
“question marks” products are considered to be the net cash users and
the “ cash cows “ are considered as net cash generators to the
company. So the company needs to obtain the cash from the net cash
generators to use for the net cash users to make those products
increase the market share in the growing market.

The reduction of fuel consumption and exhaust gas emissions has

become a key driving force for innovation in the automotive industry.
CO2 control through self-regulation and, increasingly, legal
requirements, has put particular pressure on producers whose market
success in the premium sector, If the company can produce unique
innovative product which will have lower carbon emissions as well as
lower fuel consumption, it will capture the target market, and can
increase the cash inflows to the company. (Antje 2007) During the
introduction stage the new products may decrease the profitability of the
company as a result of increasing depreciation due to the high capital
investment.

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 Another important thing to consider when developing new product
development is the BMW existing philosophy, which is focus on build
driving machines that respond faithfully and enjoyably to their driver's
commands while also providing the safety, practicality, style, quality,
reliability, and durability that help make long-term ownership a
rewarding experience. So the new product needs to be in line with the
existing company’s philosophy.

The company needs to consider the lifecycle of the product, when

setting the price for new product. (refer appendix 04) since at the
introduction stage the cost incurred for the product is high and may not
have adequate demand, during growth stage the company can get the
adequate sales and can make enough profits, And the company needs
to conduct a market research before setting the price. And it needs to
consider the Impact of new product on the entire product portfolio.

The next seep is to consider the breakeven analysis, that the company
needs to check the amount of unites that needs to be produced in order
to cover the fixed cost incurred for the new product. And needs to check
whether the product is financially viable for the commercial production,
before starting the new production. The cash flow forecasting is a good
technique, which can help the company to determine the payback of the
project.

Since the company is in the process of cost cutting it needs to identify

the ways to reduce the cost of the new product development, the
company’s cost cutting measures have begun to gain posted a better-
than-expected 2009 profit despite lower vehicle production.

3 Plan for resources requirement for the new product

development
Soon as the feasibility has been evaluated for the new product
development, then the management needs to allocate the resources to
the new product production. When considering new product the
company needs to whether the new product enhance the customer
satisfaction by superior value. Further it needs to consider about the
new technological changes, and the impact to the environment.

As the first step, the company needs to first appoint the project manager
for the new product development project. Project managers can have
the responsibility of the planning, resource allocation, and
implementation. and then the company needs to set the time frame for
the product development. And define the tasks which need to be carried
out in during the time frame, the company may use Microsoft project, or
milestone software in order to do the product development schedule.

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Then the company needs to plan for the work break down structure,
which shows a subdivision of effort required to complete the new
product development. It can be developed by starting with the end
objective and successively subdividing it into manageable components
in terms of size, duration, and responsibility which include all steps
necessary to achieve the objective. ( Stellman 2005)

Then company needs to consider the resource requirement for the

production. The equipment requirement for the new product line, then
the raw material requirement for the new product needs to plan in
advance and allocate the required resources. Then the next step is to
select the relevant supplier for the machineries and the raw material.
The company needs to consider about cost and the quality of the
supplier’s product.

When considering the staff requirement, the company needs to consider

about the training of existing staffs instead of recruiting new staffs, and
the staffs needs to be adequately trained.

The next step is the resource requirement for the sales and marketing,
the company needs to do proper marketing in order to make the
customer awareness. The company needs to properly communicate the
additional features available in this new product to the customer, so that
the customer will evaluate the product and order the product. For
example during the introduction of i-phone by apple, there was huge
marketing campaign during the fist day after the product launch there
was millions of i- phones was sold.

Then the company needs to consider about obtain the patent right for
the product, since if the models have been copied by the competitors,
then the company may not be able to get the forecasted demands.

When planning for the resources for new product development, it needs
to plan the resource requirement form the initiation stage to the
evaluation stage. The company needs to monitor the performance of the
project, and measured regularly to identify variances from the initial
product development plan, if the company unable to deliverer the newly
produced product on time, then the entire effort will be waste. So when
planning for the resource requirement, the company also needs to plan
for the resource required to monitor the throughout the development
cycle.

During the product development cycle the management can consider

about the “project management triangle” in order to understand the
constrains, and the importance of the constrains. These constraints
have been listed as "scope," "time," and "cost". These are also referred
to as the "Project Management Triangle," (refer appendix 04) where
each side represents a constraint. One side of the triangle cannot be
changed without affecting the others. A further refinement of the

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 constraints separates product "quality" or "performance" from scope,
and turns quality into a fourth constraint. (Chatfield 2006)

When allocating the resources for the product development it needs to

consider about designing the project control. Project control is that
element of a project that keeps it on-track, on-time and within budget.
Project control begins early in the project with planning and ends late in
the project with post-implementation review, having a thorough
involvement of each step in the process. The product development
should be assessed for the appropriate level of control needed: too
much control is too time consuming, too little control is very risky. If
project control is not implemented correctly, the cost to the Product
development can not be controlled, and there is a possibility of errors, or
may be frauds during the product development.

Control systems are needed for product budget, quality, communication,

time, procurement of raw materials as well as machineries, and human
resources.

4 Implementation monitoring and evaluation

When considering the project management of this new product

development throughout the period of development, it needs to be
planned, organized, and the resources needs to managed efficiently in
order to be successful. Implementation process involves coordinating
people and resources, as well as integrating and performing the
activities of the project in accordance with the plan.

When considering the implementation of the new product process which

typically requires both engineering and marketing expertise, cross-
functional teams are a common way of organizing new projects. The
team is responsible for all aspects of the project, from initial idea
generation to final Commercialization of the product.

Before launching the product the pilot testing is required, and the testing
needs to done properly. And if there any small defects it needs to be
rectified. The company needs to have independent audit verification
throughout the product development process. So that it can make sure
the objective are achieved as planed.

The company needs to focus on the quality of the product, so the total
quality management philosophy can be adopted during the new product
development, it emphasis uniform commitment to quality in all areas of
an organization promotes an organizational culture that meets
consumers' perceptions of quality. To be effective in improving quality,
TQM must be supported at all levels of a firm, from the highest

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executive to the lowest-level hourly employee. TQM extends the
definition of quality to all functional areas of the organization, including
production, marketing, finance, and information systems.

The TQM philosophy focuses on teamwork, increasing customer

satisfaction, and lowering costs. Organizations implement TQM by
encouraging managers and employees to collaborate across functions
and departments, as well as with customers and suppliers, to identify
areas for improvement, no matter how small. Teams of workers are
trained and empowered to make decisions that help their organization
achieve high standards of quality. Organizations shift responsibility for
quality control from specialized departments to all employees. Thus,
total quality management means a shift from a bureaucratic to a
decentralized approach to control.

So when considering the implementation, the team needs to plan the

customer demand for the project. And the project manager is
responsible for anticipating the demand for the new product and team
needs to work together to make the new product launch successful. Due
to the growing business competition and changing consumer trends,
BMW needs to have a marketing program.

The company can consider about relationship marketing. This will allow
the effective combination of various communication channels to satisfy
the needs of the customers. The company needs to identify the most
useful and appropriate methods in communicating and establishing
good customer relations, including good relationships with stakeholders
like the employees, investors, suppliers, interest groups and the public
in general. The aim of applying relationship marketing for the newly
developed BMW product is, to build the brand. In addition to brand-
building, this tool will also be used for obtaining customers from the
luxury market. Using various media forms will increase customer
awareness as well as sales possibilities.

Then the company needs to consider about the product assistance, this
can be done by assigning trained and skilled salespersons in every
showrooms of the company, and the customer service needs to in a
good quality and the sales agents needs to personally explain the main
features of the new product to the customers so that the, customers can
be convinced easily to purchase the new product. Helping the
customers with their product choices can elicit the positive emotional
response, which could contribute to customer satisfaction and good
company-customer relation.
Then the company needs to focus on developing a Customer service
hotline facility, since it is the communication tool which can by the
customers in voicing out their concerns with the new product, which will
be handled by competent customer service staff. And proper solution
needs to be given on time.

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 Soon after the implementation of the company needs to set the
measurement to monitor the product launch. Measuring performance
based on financial indicators provides a more direct assessment as
compared to other performance indicators. This in turn, results to a
better and easier evaluation for the new product.

The financial indicators may be an effective tool to measure the

progress of the new product throughout its lifecycle; where as the non
financial performance measures like Product quality, customer and
employee satisfaction, business operations as well as shareholder
satisfaction, collectively known as non-financial indicators, have become
important measures in performance as well, and will helpful in selling
the company’s future products to the existing customer. And the
satisfied employees will help the company to produce quality products.
And keeping its shareholder happy, they will trust the company and will
provide finance for company’s future ventures.

It needs to measure the performance of the product development

project. Conducting a project evaluation will be useful not only in
ensuring that its outcomes are aligned with the objectives but also in
identifying the strong points of the strategy as well as its problem areas.
This will then facilitate immediate resolution of the problems as well as
the development of better product development in the future. The
company needs to obtain the feedback from the product development
team and try to implement if any changes required for the process.

Monthly sales report of the new product can be used as the main
financial indicator for monitoring the success of the program. This can
directly represent the total amount of new products purchased by the
consumers. Records of repeat orders can also be used to determine
consumer loyalty. On the other hand, the customer satisfaction must
also be measured to determine product success. For this, a non-
financial indicator in the form of customer feedbacks can be utilized.

5 Conclusion
For the success full launch of new product, the product team needs to
plan the new product development and needs to monitor the product
development form the initiation stage to the implementation and
evaluation stage. BMW’s inherent strengths, the company will be able to
successfully launch its new product and achieve both customer
satisfaction and loyalty. The inclusion of the performance indicators to the
project can also contribute in ensuring the success of the new product
development. Once the product development is finished then the
company needs to consider proper marketing strategy to market the
newly developed product. and needs to make appropriate measures to
monitor and evaluate the success of the product.

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6 Appendices
Appendix 01

BCG Matrix

Appendix 02 SWOT analysis for BMW.

Strengths

• BMW is well-established and strong brand name within the automobile

industry, which has been achieved mainly through quality production.

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 This strength is particularly useful in market positioning, gaining new
buyers as well as increasing profit margins.
• The company holds a significant share in the global and is considered
the number 1 brand in the for the luxury cars in the world.
• This has been stressed further as BMW models continue to attract
several customers.
• The models introduced by the company had been supported
continuously by the customers. the company’s 4WD which still outsells
rivals’ models. The BMW X5 is another famous model within the Sports
Activity Vehicle line; the model had been enhanced with high-tech
features, yet the model remains unchallenged mainly through BMW’s
pricing tactic.
• BMW has an access to major distribution channels which allows it to
market its products in the most effective way as well as distribute its
designs to several foreign markets.
• Years of successful business operation strengthens its capability to
overcome past and even new challenges with tried and tested
strategies. This capability also allowed the company to introduce its
new products and implement strategies at the right time and place.
• The company have a good research team with 5000 quality
researchers,
• It have an A design studio in California, which provides trendy designs
from one of the most creative places of the world.

Weaknesses

• The development of new product models of the company produces

indefinite outcomes. BMW continuously strive to produce new models
that would meet the needs and satisfaction of the customers; however,
it is not certain whether these designs will make it to the market. It is
then likely that company is wasting its valuable resources to a model
that will not elicit significant return of investment.
• The price of the product is another weak factor. Although the company
has obtained a significant market share in the industry, the luxury
market is relatively smaller as compared to the general masses.
• Even if the BMW cars have been equipped with the latest technology,
the final product will be very expensive for the customers to buy.

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 Moreover, manufactured vehicles are shipped from its main factories in
Germany, the shipping rate further adds to the cost of the cars.

Opportunities

• The company can make use of other marketing means, which could
promote greater customer satisfaction and loyalty.
• The ability of the company to produce quality products can be an
effective marketing tagline that could support future market growth.
• Based from its strengths, the company has the resources and channels
that could help in developing and conducting various marketing efforts.
• There is a good opportunity for the environmental friendly low fuel
consumption cars.

Threats

• BMW is operating within a highly competitive industry. In addition, the

industry is made up of equally strong brand names such as Mercedes
Benz and Jaguar.
• Various marketing risks are also considered as threats for the
company. Though BMW can apply any marketing strategy, its effect on
the market can vary.
• Unexpected crisis in the economy can greatly affect the profitability of
the introduced models; this could also affect the marketing efforts of
the company.
• New product development by the competitors like Honda Civic Hybrid
cars.

Appendix 03 Ansoff matrix

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Appendix 04
Product life cycle:

Appendix 05. the project management triangle

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7 References
1. Antje Blocker and Ulrich Jürgens, (2007), Changes in the German Car
Design and Development Sector and the Challenge of Sustainability
Social Science Research Center Berlin (WZB) page 1-3
2. Chris Reiter ( 2010) BMW Targets Profit Growth in 2010 Business
week, January 29, 2010, page 13
3. Pamela S. Lewis, Stephen H. Goodman, Patricia M. Fandt 2007)
Management challenges for tomorrow's leaders, 5th edition, Thomson
higher education Page 168-172
4. ameer Kumar, Promma Phrommathe ( 2005), an empirical study of the
effects of innovation, springer science and business media Inc. Page
134.
5. Chatfield, Carl (2006). "A short course in project management".
Microsoft.
6. Stellman, Andrew; Greene, Jennifer (2005). Applied Software Project
Management. O'Reilly Media
7. Neil Botten, Adrian Sims(2007) Management Accounting - Business
Strategy, Elsevier Ltd,p 278-282

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