Business Analysis

Business Analysis

The fifth stage of the NPD process is business analysis. This is where it is decided whether the product is actually technically feasible, whether the product has potential within the market and whether the product will create a genuine financial contribution (Tzokas et al. 2004).

        Kotler & Armstrong (2012) suggest that business analysis reviews certain key elements to ensure the NPD process can be ran effectively:

• Demand Projections - How the product sells in terms of the set price (elasticity of demand); the speed of the sales i.e. if the product is seasonal then determining the peak sales times and also how often the product will repurchased.

• Cost Projections - Analysing total costs alongside per unit costs; the start-up costs for a business alongside the on-going running costs; if the business can gain economies of scale leading to decreased costs and also considerations of the products’ break-even point. McDaniel et al. (2011) suggest that cost projections are essential because costs significantly rise once the product enters the product development phase.

• Competition – SWOT analysis of closest competitors and how an organisation’s product will differentiate in comparison to a competitor

• Investment required – Planning how much money will be needed for engineering, patent, development, testing and all promotional and distributional activities.

• Profitability – How long until the product will turn a profit; determining what the return on investment will be. A risk assessment should also be undertaken.

This was seen in ‘RA Concepts’ – a golf club manufacturer – in their business plan in
2012.  They took into account their competition within the golf club industry to construct forecast plans in regards to costs, demands and the required investment amount. The organisation drawn up forecasts on projected market share of the industry within its first 5 years; 2% projections for the American female market, 1.5% male and 0.5% juniors. Their price projections state that price will increase on an annual basis, allowing them to draw-up a sales forecast (Appendix A) (RA Concepts, 2012).

This is also seen in David Lloyd gym. Their aim is to deliver results to their stakeholders; therefore they research to determine projections on price, costs and demand. This has allowed them to become the UK’s market leader Health and fitness club provision (Customer Insight, 2011).

Regarding the Cricket Spike idea that has matured throughout the NPD process, business analysis has been undertaken. Demand projections shown that – due to the price being set relatively close to competitors prices – it will be extremely high when the product first comes to market. Demand will peak in January and April, when the winter training and summer playing season respectively begin. Analysis of costs, competitor’s action and the need for investment has allowed a cash flow forecast for Year 1 to be drawn up (Appendix B). This shows the product breaking even after 12 months, an ambitious but highly achievable projection.. After business analysis in regards to the cricket spike idea, it has therefore allowed the product to enhance further through the NPD process.

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Appendices

Appendix A

Appendix B

Reference List

Customer Insight. (2011) Case study – David Lloyd leisure. Available at: http://www.customer-insight.co.uk/article/936 Last accessed 9th December 2013.

Kotler, P., & Armstrong, G. (2012) Principles of Marketing. 14th Edition. London: Pearson Education.

McDaniel, C. D., Lamb, C. W., & Hair, J. F. (2011) Introduction to marketing. 11th Edition. Ohio: South Western Cengage Learning.

RA Concepts, (2012) Golf Club Manufacturer Business Plan. Available at: http://www.bplans.com/golf_club_manufacturer_business_plan/executive_summary_fc.php#.UMYeioPtTwY Last accessed 9th December 2013.

Tzokas, N. Hultink. E& Hart, S. (2004). Navigating the new product development process. Industrial Marketing Management. 33 (7), pp. 619–626.