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Foreign Policy Analysis
Lec 03 Product Policy of An Organization and Selection of Profitable Products

Lec 03 Product Policy of An Organization and Selection of Profitable Products


welcome to this third lecture on this course
on product design and development as we are aware that we have already finished two series
or two lectures already on this in this week one on the topic of introduction to the course
on product design and development as well as we have also covered the product life cycle
as we are aware that in product life cycle we have seen that there are four phases or
four stages four major stages usually you will find product development also as one
of the stages but in general there are four stages of product life cycle that is the introduction
or the launch then the growth the maturity and finally the decline
now for every product there is a product life cycle and based on the product life cycle
the organizations have to take decisions now these decisions may vary from withdrawal of
the product from the market to redesign a product or to launch a variable product or
different type of a product then the already existing product in the market so means a
company can take different types of decision they can withdraw the product from the market
they can reinvent or do incremental innovation add some additional functions to the product
or additional feature and launch it as a new product or they can finally come up with a
completely new product by eliminating this product from the market
so different opportunities exist for the company to come up again in the market in order to
capture or to maintain the market share or to capture the market share with a different
type of a product now what should be the policy of an organization in order to be successful
related to the product development and design although there will be number of dimensions
in which the company can focus and have strategy for being successful but our topic is limited
to product design and development so our focus area will be to see what company can do in
context of the products it is manufacturing so that it can be successful
so we are not going into delve more into the marketing aspects or the financial aspects
we are going to delve more into the product design aspects so the title of todays lecture
as you can see on your screen is product policy of an organization and selection of a profitable
product should i say or must i say that there is no thumb rule or no standard process which
can help a company to find out a successful product that it should launch and it becomes
successful it is more or less based on the estimates forecast and some need of the people
as well as the brand image of the company so there are so many combination of parameters
which affect the success of a product but we will see as we i had told you in the previous
two sessions that our focus will be to learn more and more techniques that can help us
to make systematic decisions or logical decisions so our focus would be to learn skills which
can help us to take decisions which are more logical and scientific in nature in that regard
we will cover today swot analysis that is strength weaknesses opportunities and threat
and we will try to relate it to the product development process so with that background
let us start with the presentation we will first go through the product policy of an
organization and then we will go to the selection of a profitable product so first part the
todays presentation is divided into two major part part number one is the product policy
of an organization and the part number two is the selection of a profitable product
now as per the product policy of an organization you can see the product policy is the top
management decisions must i tell you that there are three levels of decision making
or three levels of planning in or any organization so let me ah explain this with the help of
a diagram so usually there are three levels of planning in any organization if we take
y axis x axis and if on x axis we take time and on x axis we take responsibility
maybe we can say responsibility to take decisions then there are generally three levels of planning
just i am drawing it for you here and this is
and this is high risk now the first level of planning is the strategic
planning second level of planning is the corporate
planning and third level of planning is the operational
planning so you can see that there are different levels
of planning and the risk involved is also different so you can see at the strategic
level planning you have high risk at the operational level planning you have low risk so the time
dimension also the strategic dimension is a long term decision so long term decision
mean you may be planning for the next five years or the next ten years whereas in corporate
level planning you maybe planning for the next three to five years and in operational
level planning you will be planning for the next one or two years
so you can see the very first point this diagram came to my mind ah in context of the first
point that product policy is the top management decision which means the product design decision
that what type of product the company is going to launch will depend upon the strategic level
of management or that we see as the top management decision so this is the top management decision
the responsibility regarding that decision lies with the ah strategic level of management
and the risk involved is also higher because if the product fails the company will fail
or you will suffer huge losses which we have may lay at a later stage become difficult
to compensate for so we can see here the point number one that
the product policy is the top management decision i have tried to explain with the help of this
diagram due to the strategic decision every organization has its own product strategies
or policies we will see in the subsequent slide but what factors govern these strategies
and policies each company will have their own policy we will see ah with some examples
that what are the policies of the organizations then these policies becomes the unique selling
proposition of the company now the usp of a particular company now you
can see there is a brand maybe a brand of a mobile set i will not name on this public
platform as soon as we are come up with a new product there are huge lines outside their
stores right from the midnight of the day day or the next day when it is to be launched
so you can understand that people have such confidence in that brand that people line
up to buy the product so you can see so these policies becomes the usp so if the policy
of that company is that the product will be very very durable it will be reliable it will
have high quality maintenance free service free
so with that usp the company has a advantage in the market the same company can opt for
different policies for different products now there is a automobile company in india
which may probably be selling the costliest car in india and the cheapest car in india
so they have different policies in respect of different products so the costliest car
the policy will be different and for the cheapest car the policy will be different so these
points just to summarize once again let us see the product policy is the top management
decision every organization has its own product strategies or policies these policies becomes
the usp of the company and the same company can opt for different policies for different
products now what can be the product policies at least
one or two examples i have already taken now one of the polices can be their company will
target the lowest price for that particular product for example the napkins or the tissue
papers that we use the company may make a policy that our product has to be cheapest
in the market but with a certain level of quality or performance so the companys focuses
lowest price next focus can be highest quality there can be another company where the target
is that quality has to the top class they will not bother much about the cost of the
product but they will only be focusing on the quality of the product then there can
be a third the most of the companies will fall in category number three that is compromise
between the cost and the quality so very few companies will fall have this
two polices but majority of the companies may have this policy that is compromise between
the cost and the quality and then there can be a product policy of safety all these companies
may also have safety as one of their features but there may be companies which will have
safety as their main feature and all other parameters miss these given slightly less
weightage as compared to safety for certain specific companies so we will see some examples
of these policies being followed by different organizations
now let us take one by one first is the lowest price the lower cost is the main criteria
used to compete in the market as i have already explained the company may take this decision
that whatever is the existing competition we will come up with a product which we will
have the lowest price in the market and we will compete in performance with the competitors
so that is the first point that is the main criteria that cost is the main criteria and
this will become even more relevant will when we move into the next week and we will talk
about while you engineering and there we will see that for keeping the cost constant what
else options are available or what other options are available with us in order to the competitive
in the market so from lowest point lowest price point of
view first is the lower cost second is the company offers the product of an at a cheaper
price than its competitors i have already explained this point then the profit is less
but the company makes the substantial profit by large volume that is example is sanitary
paper carry bags so companies manufacturing these products may focus on the lower costs
so the cost maybe low cost maybe low but the number or the volume of sales is very very
high so the even a profit made on single volume a single product will multiply by the number
of products sold and then that will act to the revenue of the company
so their target is that profit per component or per part or per product can be less that
they are going to have a huge volume or the target is to manufacture huge volume so that
the volume multiplied by the minimal profit adds to the huge revenue so that can be the
company policy of any organization next is the highest quality you can see some organizations
or for highest quality products irrespective of the cost so cost is not at all important
for these companies though focus primarily on the quality of the product so it is you
fulfill the need of a special class of customers who value the quality as the only criteria
to purchase the product so if i ask you may be in an assignment you
will give you this problem that you have to write maybe five products or the names or
brands where the quality is the most important criteria and cost is maybe secondary or tertiary
criteria so you can do this as assignment just look around you just focus your attention
on the products where the quality is the paramount importance maybe one one industry i can ah
just share with you is the aircraft industry in aircraft industry cost is nowhere are paramount
criteria the most important criteria in aircraft industry is the quality of the product because
the human life is involved in aircraft industry because a airplane has to take off and land
and so many passengers it is carrying so in that case you cannot compromise on the quality
of an equipment or part that goes into the manufacturing of the aircraft
so that is the example other example is medical equipment again here the human life is involved
in medical equipment also so the quality has to the top class otherwise there can be a
miss happening so two criteria we have seen first one is the cost has to be lowest maybe
some companies may opt for this policy than the other companies may go for the highest
quality then what can be then the third criteria the compromise between the two the quality
and the cost so let us go the compromise between the cost and the quality some organizations
offer the product with the optimum blend of quality and cost to capture the larger section
of the customers so in both the cases you will see low cost
maybe large customer base large volume of production high quality very selected customers
very specialized customers very specialized type of products first most of the companies
will have a compromise between the cost and the quality any company you see around you
ah maybe your ah normal day to day life you will see there might major companies focus
on this ah between the cost and the quality so the products are reasonably of good quality
in proportion to its price or cost so you will not find maybe the jacket i am wearing
a reasonably good quality optimum level of cost so your it is not ah cheapest product
may not be the cheapest product may not be the best in quality but it is intermediate
so a compromise between the cost and the quality and the last part is the organizations try
to give good value to the customer for his money so this word value we will see in the
next week how to define a value what is value engineering and how the compromise between
the quality and the cost is achieved using the technique of value engineering so three
types of policies for the companies we have seen first one is lowest cost second one is
highest quality and third one is the compromise between the cost and the quality the last
is the safety safety is a in any case taken care by other three criteria other three policies
also but many companies will be there which we will only be focusing on quality or sorry
the safety a safety is the main criteria on which they
compete in the market so the examples can be electrical gadgets medical instruments
and home appliances so these are the ah application area where safety may be the most important
criteria for designing that product or the most important usp for that product so other
things are also important cost is important quality is important compromise between the
cost and quality is important but you can say that the major criteria is the safety
in this particular case ok so we have seen the four important product policies by various
organization so just to recount what we have already discussed the four policies are the
lowest cost policy the highest quality policy and a compromise between the quality and the
cost and the last fourth one is the safety now let us see another dimension of the product
policy now product policy is not only concerned with the product but also with the functions
the product fulfills so from the functional point of view we see that the products can
be classified according to various features some of which are important in preparing the
product policies now suppose we are preparing or designing a product or a concept for a
product which has to be lowest cost then some of these parameters will help us to design
the product accordingly for example durability reusability recyclability and the way of production
so suppose the product is lets take an example of a product which is to be customized as
per the customer requirement and it has to be features have to be incorporated in that
design which are specific to a specific customer and the customer has very high hopes from
the quality point of view for example he wants a car to be manufactured as per his requirement
so there we can see the way of production it cannot be mass production or standardize
it has to be a craft made good for example craft made furniture i have taken an example
of a craft made car so you can get your car designed but it cannot be manufactured by
mass production it can only be manufactured by a craft production or it can only be manufactured
by customized production similarly suppose there are sanitary napkins or there are tissue
papers or you can say paper bags to be used so there they have to be produced in mass
production because the criteria is lowest cost so when the lowest cost has to be achieved
you cannot go for craft made goods you will go for mass production only so the initial
four policies that we have seen lowest cost highest quality compromise between cost and
quality and the safety will certainly depend on some of these features now let us take
these features one by one and quickly try to understand the policies of various organizations
the first one is durability now it can be a non durable product or a durable product
example can be hair spray if you buy a hair spray you would like to use it for a month
or a two years or a three so you will not like a hair spray to be usable
for the next ten years if you buy it it is kind of a consumer good will be disposed of
after two months three may not be that durable whereas automobile if you buy it has to be
very very durable so that is non durable verses durable this is also one policy that company
has to take a decision whether they want to make a product what would be the durability
of that product for example if a company is manufacturing sox to be worn by customers
like us they will not like to select a fiber for that sox which is usable for the next
fifty years then a person buys a five pair of sox and then for the whole life he will
never buy a sox again so the durability is important criteria when the company is framing
its policy regarding its product they would definitely like to frame a policy so that
sox will have a durable life of maybe one year or two years and after that the sox have
to be replaced so that is ah one ah criteria second feature
can be reusability one of the it is non [reable/reusable] reusable versus reusable detergent is non
reusable because once you use the detergent it is gone and glass bottles are reusable
so that is another criteria recyclability is third criteria non recyclable versus recyclable
pesticides cannot be recycled again but the paper can be recycled again similarly way
of production it can be mass produced or it can be craft produced for customized as per
the requirement so all these criteria also you can say influences
the decision making on part of the company that what type of policy they should follow
and the four broad guidelines we have seen ah these are the additional features that
the companies usually taking to account when they are designing a product or when they
are deciding about the quality the cost and the safety of their products so this is all
related to the policy that the companies usually frame for coming up with new products or for
the designing up of new products or designing a improved version of a old product so all
these factors are usually taken care by the company
now let us see the second part of our presentation today that is how to select a profitable product
there is no standard guideline as i had told for ensuring the success of a product but
quickly we will try to learn gain knowledge or study about one of the most common technique
which any company can adopt for seeing that if they take care of all these points they
can have a the logical or informed decision related to the launch of a product or the
design of a product so selection of a profitable product selection of a profitable product
before selecting a product organizations have to carry out the swot analysis in order to
know their strength weaknesses limitations and opportunities and the perceived threats
so always there are threats there is competition there are technological advancements being
done by the other companies so these are the threats that are there for any company so
strength weaknesses limitations opportunities and perceived threat are the important things
that every company has to take care of the product selection is a team effort so there
are a group of individuals who work on a idea and come up with a new product so it is maybe
sometime a team effort not sometime most of the time you product development team will
be there and the team is responsible for conceptualization and design development of a new product
so this is strength weakness opportunity and threat s w o and t now let us quickly see
now from strength point of view the company can have these strengths it can have abundant
financial resources well known brand name superior management talent better marketing
skills and committed employees now i would ask you as an assignment that you can see
that for any successful company you can take any brand name in india an indian company
which has been successful in various business areas for example maybe in automobiles maybe
in communication sector maybe in household goods take any company which is successful
and you will find that these are the important characteristics of that successful company
that company will have abundant financial resources brand name will be there management
talent also will be there marketing you will see they have better marketing strategies
as compared to the competitive companies and their employees will be commutative once a
person joins that company will always ah like to withstand or always like to retire also
from the same company but on the other hand you can see there will be companies these
are the weaknesses of ah which lead to failure of certain companies that is limited financial
resources weak spending on r and d efforts that is research and development efforts
so companies which do a continuous research and development are often successful companies
then limited distribution higher cost of their product poor marketing skills limited management
skills and under trained employees so these are the characteristic features of the companies
which are usually failing in order to capture the market share so a company can always take
maybe a there is a new company which want to become successful they can always do this
analysis that what are our strength what are our weaknesses what are the opportunities
that exist because the product design and development is only successful when there
is a need in the market when there is a demand in the market
so from opportunities point of view rapid market growth changing customer needs and
taste new uses for products discovered and sales decline for a substitute product these
are the characteristic features or opportunities ah in nutshell what is the opportunity that
there is a demand in a market or there is a need in a market which is unfulfilled so
none of the companies has been able to fulfill that particular need of the customers and
there is a huge database of the customers or huge ah volume of the customers which are
in the need of that particular product so if that opportunity can be tapped by any organization
and a product which satisfies all the functional requirements of that need is launched in the
market the company is definitely going to be successful
but what are the threats success is always you can say used in a good sense everybody
likes to be successful but always there are threats now what can be the threat in current
indian scenario entry of foreign competitors introduction of a new substitute products
product life cycle is in the decline stage and the economic downturn so usually ah the
threats for any organization can be if they do their analysis swot analysis they may feel
that the most of the products the company is manufacturing are towards the declining
stage in the product life cycle if you remember we have covered plc in the last lecture in
product life cycle you have to very very cautious towards the end of your ah a maturity curve
so there are number of threats also opportunities also we have already seen in the previous
slide strengths and weaknesses so any company needs to always do the swot analysis in in
context of their products otherwise they will not be able to match up with the market requirements
or even i can say that they will not even be able to maintain their market share in
the a business so that is important so the challenge in selection is basically you can
see an ever increasing variety of products are now available each having its own characteristics
applications advantages limitation now select the optimal product according to
the requirement of the customers cost cost design and in service requirements even in
general we can see that number of products are there are number of requirements are there
which have different characteristics applications advantages limitation select the optimal product
according to the requirement now this is not the product to select to be selected by the
company this is idea to be selected by the company that this is the area in which we
are going to put our efforts in order to be successful
so the overall target of todays lecture is to find out or to just develop a strategy
to select a profitable product and first part was that what should be the company policy
so we have shown or we have discussed that there can be different product policies by
you know of an company of a company sorry and there can be different methods of selecting
a profitable product out of which we have only seen one that is swot that is a company
should perform a swot analysis of their well being and then come up with their strengths
and try to launch a profitable product which will lead to the success of an organization
so i stop here in the next lecture we will focus on the product development process and
see the various stages of product design and after that we will cover our next lecture
that is a last of this particular week that will be related to the product analysis that
if you have a idea how you will make it a successful idea and what are the tools that
you need to use during the various stages of the product development process in order
to come up with the product which can withstand the pressures of the market
thank you

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