Title: New Perspectives in New Product Development and International Market Entry
1New Perspectives in New Product Development and
International Market Entry
- Aharon Hibshoosh
- Department of Marketing/Decision Sciences
- San Jose State University
- Department of Inter Disciplinary Studies in the
Social Sciences - Bar Ilan University
2Some Issues in NPD
- What are the reasons for success and failure of
new products? - What type of NPD Processes should the firm
follow? - What form of channel should be employed in an
International Market entry? - What are some barriers hindering the entry of
Israeli firms into international markets and
penetration there?
3Success and Failure of New Products
- David H Henard and David M Szymanski Why some
new products are more successful than others,
Journal of Marketing Research, August 2001
4A Meta Analysis
- Based on 60 previous studies on reasons for
success and failure of new products. - 24 antecedents have been reported quite
frequently. - A taxonomy of the 24 antecedents into 4 factors
- Product
- Strategy
- Process
- Market Place.
5Factor Characteristics
- Product Elements of the offering Price,
Innovativeness, Perception of Fit. - StrategyPlanned actions that have the potential
for competitive advantage. Not including
elements of the NPD process, but include general
commitment of resources for the NPD, synergies,
and timing of entry. - Process Elements of NPD process and execution.
More of a tactical nature. Including market
place adaptation, firm proficiencies and NPD
organization. - Market potential, extent, competitive intens.
6 The Taxonomy
7LecSFNPD.htm
8Which drivers are significant? Which are not?
- The following do not significantly generalized
- Product Innovativeness (r.24)
- Technology Synergy(r.31)
- Market Orientation (r.31)
- Customer Input (r.43)
- Cross Funtional Integration (r.23)
- Competitive Response Intensity(r-.08)
- Cross Functional Communication (r.09)
9 Significant and Dominant Drivers
- The rest of the drivers are significant.
- Ten drivers are significant and dominant (rgt.40).
Within the Taxonomy, these are - Market Characteristics(r.46)
- Market Potential(r.54)
- Product Characteristics(r.43)
- Product Advantage (r.48)
- Product Meeting Customer Needs(r.50)
- Technology sophistication of the Product (r.41)
10Dominant Drivers Contd
- Strategy(r.43)
- Dedicated Human Resources(r.52)
- Dedicated RD Resources (r.45)
- Order of Entry
- Process(r.37)
- Marketing Launch Proficiency (r.43)
- Task Proficiency(r.50)
- Predevelopment Task Proficiency (r.43)
-
11Conclusions from Meta Analysis
- All four factors contribute to Performance,
though Process less than others. - The control of the factors through a few specific
of the variables is required and sufficient. - Thus for example Market Potential is
Generalizable important but Marketing Orientation
is not important. Meeting Customer needs is
generalizable but Customer Input is not. - Content is more important than format.
12Functional Diversity
- There is a marketing fad that calls for an
increased cross functional integration and cross
functional communication as a way to increase
performance of NPD. The findings rejects this
fad. - Instead, it is suggested that greater functional
diversity may be effective for increasing
creativity and in the idea generation stage, but
not past it. - Perhaps, the lack of technical knowledge and
interference in the RD development is more
harmful than contributing.
13High Tech conclusions
- Less important
- Structure less important
- Being first to market not important
- Important
- Personnel Commitment
- Fit with the nature of the market High tech in
High tech market - Distinctive Technological Advantage
14Strategic Alignment
- Matching the Product strategies and process to
the environmental context is important in the
high tech market. - Strategic Fit and Performance are related.
- Delaying entry, having less structure, having
more personnel commitment, selling more
sophisticated product with advantage over others
are important in the high tech context. I.e.
aligning Product and strategy and Process
elements with the product service context and
the technology level of the market place.
15Strategic Alignment Contd
- However, full adaptation in international
marketing is not what contribute to the success
of NPD. It is rather the adaptation along some
selected Product and Organizational
linesTechnological sophistication of the
product, Marketing synergies, market orientation,
and senior level support.
16Managerial Perception
- Differences between Objective and Subjective
evaluation of Performance product meeting
customer needs, dedicated human resources,
technological proficiency, reduced cycle times,
cross-functional integration.
17Managerial Perception Contd.
- Differences in performance differ based on
whether the data collected by the project manager
or the senior manager level. These contribute to
discrepancies in the evaluation of correlation
with performance of Order of entry, structured
approach, Marketing Task proficiency, senior
management support, Likelihood of competitive
response.
18Qualification
- Study of effect of quality on performance has
been scanty. So far the evidence is for clear
positive effect on Performance. - Separate Modeling of the effect of the idea
generation stage and other phases on NPD
performance is absent and is desired. - Need for more structurally completed model.
19New Product Development Processes
- Robert G. Cooper, Scott J Edgett and Elko J.
Kleinschmidt Optimizing the stage gate process
What best-practice companies do-I. Research
Technology Management Sep/Oct 2002
20Background
- Focus on newest development of the Stage Gate NPD
model - A PDMA study found that nearly 60 of firms
surveyed use some form of the Stage-Gate process. - Based on a work with more than 500 companies
21Third Generation NPD processes.
- The different activities are processed in
parallel. With the proportion of earlier
activity declining gradually. - Flexibility
- Focus
- Fluid Stages
- Fuzzy Gates
- Facilitation
22The Stages
- Scooping A quick investigation and sculpting of
the project - Building the business case The detailed homework
and up front investigation leading to a business
case a defined product, a business justification
and plan of action for the next stages. - Development the actual design and development of
the new product. The manufact./ operation process
is mapped out. Marketing launch and operating
plans are developed and next stage tests plans
defined.
23The Stages Contd
- Testing validation Verification and validation
of the proposed new product,its marketing
production. - Launch Commercialization of the product, the
beginning of full production and commercial
launch and selling.
24Fourth Generation
- Adding a Discovery Stage at the front end of the
process to to generate breakthrough product
ideas. - Harnessing Fundamental Research Effectively
- Improving Project Selection through effective
Go/Kill decision points and project synergy.
25Idea Capture and Handling
- Gate 1 middle level management. Cross
Functional. Frequency of meeting monthly or
bimonthly. Formal Scoring. Visible Criteria - Idea to and through Focal Person only (except for
free time) - Written feedback to assure continuation of idea
stream. - If Go is decided sub committee moves the project
to the next Scoping Stage. The committee has the
authority to authorize funds.
26Idea Capture and Handling Contd
- If Kill or Hold the idea is stored in Idea bank.
- The rejected idea is visible to employees who can
offer suggestions for improvement. - The (Rejected) Ideas Bank content is reviewed
periodically for reconsideration.
27Voice of Customer Research
- Focus on Problems not on solutions or requests.
Do not ask what new features or new products they
want. - Reverse Brain storming
- Camping out with Customers
28 Working with Lead Customers
- Products reflecting market trend are often
identified and even prototyped by lead users in
the targeted industry. Lead users are rare and
need to be tracked down ( a four steps and
process) - 1. Identifying target market and company goals
for innovations in this market. - 2. Determining the trends by talking to people
who have a broad view of emerging markets and
leading edge applications. - 3. Identifying lead users- a networking and
referral process
29Working with Lead Customers
- 4. Developing breakthrough applications by
hosting a workshop with lead users and key in
house tech and marketing people. (in this step
first meet in small groups and then as a whole to
define innovative product concepts.)
30The Value of Scenarios
- A range of Scenarios
- Relevant Dimensions of Scenarios
- Follow with key Decisions
31Harnessing the Entire Organization Creativity
32More Productive Fundamental Research
- Stage- Gate TD. Output new knowledge or
capability - Focus on strategic rather than financial
criteria - Degree of strategic fit and Strategic importance
- Strategic Leverage
- Potential for reward (return and risk)
- Likelihood of Commercial Success
33Coopers Critical Success Factors
- Seek Differentiated Superior Products
- Up-front homework pays off
- Build in the Voice of the Customer
- Demand sharp, stable,early product definition
- Plan and resource the market launch early in the
game - Build tough Go/Kill decision points into your
process_ - Organize around true cross-functional project
teams - Attack from a position of strength
34Coopers Critical Success Factors Contd.
- Build an international orientation into your
new-product process - The role of top management is central to success
35International Market entry Choice of Strat Ups in
the High-Tech industries
- Oliver Burgel and Gordon C. Murray The
International Market Entry Choices of Start UP
Companies in High Technology Industries Journal
of International Marketing Vol. 8. No. 2, 2000,
pp 33-62
36A Study of Market Entries
- A sample of 362 UK firms, independently owned and
less than 10 years old. - Retained for the study 246 firms with
international sales (67.9). - 92 operate in the technology intensive or
knowledge intensive areas - 15 of sales spent on RD.
- Typical firm
- Began with 5 employees
- Six years old.
- Have after 6 years 22 employees
37International Operations
- of international revenue
- Median 30
- Mean 38.4
- Number of countries entered mean10, median6
- Years before first international sales mean 2.2
median2
38Theoretical Bases for Explanation
- Process (Stage) Theory
- TCA (Transaction Costs Theory)
- OC (Organizational Capability Theory)
39Hypotheses
- H1 Firms that sell into foreign markets through
intermediaries are larger than firms that export
directly to end customers. - H2 Firms that sell into foreign markets through
intermediaries are more experienced in
international operations than firms that export
directly to end customers
40Hypotheses contd
- H3 Managers of firms that sell into foreign
markets through intermediaries will be more
likely to have international experience than
managers of firms that export directly. - H4 Firms will sell into foreign markets through
intermediaries rather than export directly if
they already use distributors for their domestic
sales.
41Hypotheses Contd
- H5 The production of firms that sell into
foreign markets through intermediaries are
technologically more mature than those firms that
export directly. - H6 The products of firms that sell into foreign
markets through intermediaries require less
client-specific customization than those firms
that export directly.
42Hypotheses Contd
- H7 The pre- and after sales transaction costs
of products sold into foreign markets through
intermediaries are higher than the the costs of
products that export directly.
43 Probit Analysis
- Dependent Variable distributor/ exporting
- Independent Variables
- Size
- Tech intensity measured by maturity of technology
and transaction costs - Market characteristics size of country, GDP
and country risk - Innovativeness of the technology
- Experience of firm-- in years
44Variables
- Experience of managers a dummy
- Industry specific effect-a dummy
- Degree of Customization
- Domestic distributors channel
45Models
- Probit Models
- Model 1. Current Entry
- Model 2. Unchanged Entry
- Model 3. Entries accounting to at least 10 of
the firm revenue - Results are significant at Pvalue exceeding
.0001, with a classification rate of 70 versus
55 maximum chance criterion.
46Hypotheses Testing
- H1 Firms that sell into foreign markets through
intermediaries are larger than firms that export
directly to end customers. - Accepted, though the impact is small
- H2 Firms that sell into foreign markets through
intermediaries are more experienced than in
international operations than firms that export
directly to end customers. - Rejected. No significant association with any
mode
47Hypotheses Testing Contd
- H3 Managers of firms that sell into foreign
markets through intermediaries will be more
likely to have international experience than
managers of firms that export directly. - Rejected. Just the opposite. Negatively related
to the use of intermediaries - H4 Firms will sell into foreign markets through
intermediaries rather than export directly if
they already use distributors for their domestic
sales. - Accepted. Strongly Supported. Greatest effect
on mode choice than any other variable.
48Hypotheses Testing Contd
- H5 The production of firms that sell into
foreign markets through intermediaries are
technologically more mature than those firms that
export directly. - Rejected. Curve Linear Relationship.
- H6 The products of firms that sell into foreign
markets through intermediaries require less
client-specific customization than those firms
that export directly. - Accepted
49Hypotheses Testing Contd.
- H3 Managers of firms that sell into foreign
markets through intermediaries will be more
likely to have international experience than
managers of firms that export directly. - Rejected. Just the opposite. Negatively related
to the use of intermediaries
50Hypotheses Testing Contd.
- H4 Firms will sell into foreign markets through
intermediaries rather than export directly if
they already use distributors for their domestic
sales. - Accepted. Strongly Supported. Greatest effect
on mode choice than any other variable.
51Hypotheses Testing Contd
- H5 The production of firms that sell into
foreign markets through intermediaries are
technologically more mature than those firms that
export directly. - Rejected. Curve Linear Relationship indicated.
- H6 The products of firms that sell into foreign
markets through intermediaries require less
client-specific customization than those firms
that export directly. - Accepted
52Hypotheses Testing Contd
- H7 The pre- and after sales transaction costs
of products sold into foreign markets through
intermediaries are higher than the the costs of
products that export directly. - Rejected. Insignificant effect
53Managerial Implications
- Advantage of domestic channel
- Degree of Customization rather than resource
level is affecting entry decision - Value of close cooperation with a distributor as
a risk reduction strategy
54The Israeli Experience Exporting From the
Importers Viewpoint
- Graham I. Jackson Exporting from the Importer
viewpoint , European Journal of Marketing, Vol.
15, No.3, 1981 - A Study of UK importers of Israeli products
- Emphasis on perception and culture
- Based on standard informal interviews that cover
actual experience, followed by supporting evidence
55- Interviewees Chairmen and directors of
importing companies (14), importers and agents(7)
Importers reps and managers of exporting
companies in Israel(6), variety of discussions
with Israeli Commercial Counselors in London,
Anglo-Israel Chamber of Commerce in London and
Tel Aviv, and the Israel-export industry. - Supported by Background material historical,
statistical and press material, as common in
qualitative research
56Classification of Exporters
- Based on the four sons of the Hagadah
- Would be exporters
- Too Young to ask
- Simple exporters
- Evil exporters
- Wise exporters
57Gaining Entry
- Contributions of both importer and firm
- Often by initiative of the retail buyer or
commission agent - Full marketing Guidance by importer
- Zionist commitment
58Gaining Entry Success Practices in Marketing
Orientation of the Israeli Firm
- Visit planned well in advanced and fully briefed
personnel making visit on their behalf - Came with prepared delivery terms and samples.
- Market and Product data collected before the
visit - Listen to modification suggestions.
- Ready to make frequent visits and invest time in
market study - Distribution planning process was followed
carefully
59Gaining Entry Success Practices. Contd.
- Flexible in their choice of type of importer or
customer who would serve as their point of entry - Focus on long term business creation rather than
on transactions - Appreciate the personal aspect in the
relationship with customers - Competitive Product/ price analysis with product
modification in mind
60Advantages of Israeli Firms
- Superior Use of Technology
- Quick adaptability
- The Jewish connection
61Penetration The simple and evil exporters An
Evolution of Problems and Conflict.
- Reasons for Conflict
- Inadequate quality control
- Delay due to volume
- Inadequate understanding of the terms of the
order
62The problems
- Misunderstanding in product specification
- Production Breakdown
- Crucial item of raw material was suddenly
unavailable - Confusion in the despatch department as to volume
and assortment - Quality standards deliberately ignored
63The exporter response.
- Improvise a solution, sacrificing quality
assuming the customer would not mind or would not
notice - Did not inform the importer or the customer about
his problem. The customer should not be
alarmed - The end result faulty shipment or the importer/
customer left in the dark regarding the shipment
. Hence, a complaint
64Special Problems with Export Management
- Shortage of middle management with proper
qualification in international marketing,
production, quality control and logistics. - The problem is often with a single individual
- This individual simply does not care
- Problem of key personnel not available and
replacements are not trained - Inadequate Planning
65From Complaints to Crises
- Lack of cooperation and trust lack of
communication and contact standard - The problem is especially acute close to the
entry point. - Wrong attitude of selling rather than marketing
- The exporter became an evil exporter when he
tries to avoid solving the conflict. Assuming he
knows it all he does not work to establish a
cooperative environment. - To a great degree the problem is cultural.
66Importers Faults
- Vague specification
- Taking in more suppliers than the importer can
chew - Being too forgiving
- Not taking the lead in communication checks
67Importer Perceptions of Israelis
- Blunt and aggressive
- Ultra positive without checking the situation
- Disruption in middle management
68Management Israeli Style.
- Israeli managers prefer
- personalization rather than organization
- assertion rather than justification
- Inspiration rather than reasoning and
- Improvisation rather than planning
69Management Israeli Style. Contd.
- A hypothesis may be made on the premises of the
israeli manager - Individuals are trusted more than procedures
- Winning an argument more important than being
right - Decision making more important than reflection
- Action is preferred to analysis
- Achievement is valued above theorizing
70Conflict Resolution
- Forgiveness for the Israeli firm
- Classical cooperative and non cooperative
conflict resolution solutions - Learning International marketing
- Termination of relationship with an evil exporter
71Conditions for Successful Penetration
- Focus on
- Customers tastes and buyers need
- Long Term Commitment
- Cooperation
- Intensive Communication multilevel, open,
regular - Personal Contact
- Control systems in marketing, production and NPD
based on planning procedures and organization
72Conclusions
- There are distinct challenges Gaining an entry
and Penetration. - In the entry stage success depends on marketing
skills, personal sensitivity, adaptation and
determination. - Israeli effort are supported by importers pull.
- In the penetration stage the challenge is
becoming a professional exporter. - There is a shortage of qualified personnel in
Israel.
73Conclusions Contd
- For an Israeli exporter a special challenge is
the acceptance of the process of planning rather
than its factors. - In doing so the exporter must overcome some
cultural barriers and provincialism. - The key to success is the formation of market
attitude and commitment of the export managers.
74Conclusions
- There is a clear need to distinguish between
Marketing and Selling - High tech marketing is international marketing
- Strategic organization of the distribution
channel is Critical - It is based on exporting or alliance with
distributors - Distribution design is clearly resource sensitive
and resource constrained - Distribution is a two sided decision
75Conclusions Contd.
- Organization is more important than day to day
management - Structure is both formal and informal and needs
to be design based on information and execution
needs and market and task uncertainties - Israel has an advantage in applied technologies
- The process of planning is important, not its
style. Doing the right things comes before but
must be followed by doing the things right. And
doing the things right is much more important
than doing the things neatly or with a flare.