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New Perspectives in New Product Development and International Market Entry

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Title: New Perspectives in New Product Development and International Market Entry


1
New 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

2
Some 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?

3
Success 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

4
A 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.

5
Factor 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
7
LecSFNPD.htm
8
Which 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)

10
Dominant 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)

11
Conclusions 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.

12
Functional 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.

13
High 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

14
Strategic 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.

15
Strategic 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.

16
Managerial Perception
  • Differences between Objective and Subjective
    evaluation of Performance product meeting
    customer needs, dedicated human resources,
    technological proficiency, reduced cycle times,
    cross-functional integration.

17
Managerial 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.

18
Qualification
  • 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.

19
New 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

20
Background
  • 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

21
Third 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

22
The 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.

23
The 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.

24
Fourth 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.

25
Idea 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.

26
Idea 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.

27
Voice 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

29
Working 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.)

30
The Value of Scenarios
  • A range of Scenarios
  • Relevant Dimensions of Scenarios
  • Follow with key Decisions

31
Harnessing the Entire Organization Creativity
32
More 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

33
Coopers 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

34
Coopers Critical Success Factors Contd.
  • Build an international orientation into your
    new-product process
  • The role of top management is central to success

35
International 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

36
A 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

37
International Operations
  • of international revenue
  • Median 30
  • Mean 38.4
  • Number of countries entered mean10, median6
  • Years before first international sales mean 2.2
    median2

38
Theoretical Bases for Explanation
  • Process (Stage) Theory
  • TCA (Transaction Costs Theory)
  • OC (Organizational Capability Theory)

39
Hypotheses
  • 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

40
Hypotheses 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.

41
Hypotheses 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.

42
Hypotheses 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

44
Variables
  • Experience of managers a dummy
  • Industry specific effect-a dummy
  • Degree of Customization
  • Domestic distributors channel

45
Models
  • 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.

46
Hypotheses 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

47
Hypotheses 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.

48
Hypotheses 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

49
Hypotheses 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

50
Hypotheses 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.

51
Hypotheses 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

52
Hypotheses 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

53
Managerial 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

54
The 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

56
Classification of Exporters
  • Based on the four sons of the Hagadah
  • Would be exporters
  • Too Young to ask
  • Simple exporters
  • Evil exporters
  • Wise exporters

57
Gaining Entry
  • Contributions of both importer and firm
  • Often by initiative of the retail buyer or
    commission agent
  • Full marketing Guidance by importer
  • Zionist commitment

58
Gaining 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

59
Gaining 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

60
Advantages of Israeli Firms
  • Superior Use of Technology
  • Quick adaptability
  • The Jewish connection

61
Penetration 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

62
The 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

63
The 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

64
Special 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

65
From 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.

66
Importers Faults
  • Vague specification
  • Taking in more suppliers than the importer can
    chew
  • Being too forgiving
  • Not taking the lead in communication checks

67
Importer Perceptions of Israelis
  • Blunt and aggressive
  • Ultra positive without checking the situation
  • Disruption in middle management

68
Management Israeli Style.
  • Israeli managers prefer
  • personalization rather than organization
  • assertion rather than justification
  • Inspiration rather than reasoning and
  • Improvisation rather than planning

69
Management 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

70
Conflict Resolution
  • Forgiveness for the Israeli firm
  • Classical cooperative and non cooperative
    conflict resolution solutions
  • Learning International marketing
  • Termination of relationship with an evil exporter

71
Conditions 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

72
Conclusions
  • 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.

73
Conclusions 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.

74
Conclusions
  • 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

75
Conclusions 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.
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