Business analysis

Business Analysis

The fifth stage of new product development is business analysis.  Palepu & Healy (2008) state how this is the last stage before an organisation decide whether a product should be released into the market. This stage allows developers to identify whether the chosen product is possible, whether it has potential to grow in the current market and whether the product has the capability of returning a degree of financial return (Thomas & Maurice, 2011).  Barrios & Kenntoft (2008) imply the 5 components of business analysis:

-          Estimating cost

-          Sales forecasts

-          Profit projections

-          Risk Assessment

-          Market cannibalisation

Barrios & Kenntoft (2008) state how ineffectively evaluating products marketability and profitability often results in the product being quickly dismissed from the chosen market, which emphasises both the importance of this stage and the accuracy it must be done by.

In relation to the collision sense product I’ve decided to potentially add another platform to the product by having a Collision sense app. This would allow athletes to review performance after training and games from the speed a footballer kicked a shot to the force a boxer gave a punch. This platform allows athletes to share results and form a community.

Cost estimation

With the product being relatively innovative the closest competitor to the collision sense technology is Adidas’s Mi coach technology. The Mi coach is priced at £40 rrp, but production costs haven’t been presented from Adidas therefore determining the price of production will have to be determined on resource by resource basis (see appendix 1) Apple (2013) state how there is a 30% charge on profits made by an app, however the app is going to be free of charge when purchased with a collision sense unit, so there will only be a yearly charge for the app to be on the apple store. The initial yearly sales target is set at 30,000 units (see appendix 2) this is a relatively low target with products such as Nike’s nike+ being used by 4 million users (see appendix 1) however I feel that firstly Nike are a global brand and therefore the promotion becomes simultaneous as so many follow the brands innovations and trust the brand. Additionally the collision sense has a far higher rrp as a consequence of the expense in development and production. Finally the collision sense’s sales figures rely largely on the participation from targeted sponsors such as Sky sports, BT sport, as a large selling point for the brand is its portal it offers for television viewers with potential to add a heightened viewing experience with concepts such as ‘punch of the night’ or ‘tackle of the game’ In order to secure such deals there will be a large sum invested in promoting and pitching the product in order to interest both members of the public and large corporation’s.

Appendicies

Appendix 1.

	Hardware	Technology	Parameters monitored	Users
Nike +	Smart phone	Smart phone app	Distance travelled	4,000,000
	Foot pod	GPS	Speed data
	Wrist band	footswitch	Energy expenditure
			Altitude data
Adidas micoach	Smart phone	Smart phone app	Speed data	Unavailable
	Foot pod		Energy expenditure
	Wrist band	GPS Accelerometer Heart rate monitor	Altitude data
	Chest strap heart monitor		Heart rate data

Appendix 2.

Year 1 estimation

	Year 1	Year 1	Total
	Collision sense unit	Collision sense App
Production cost	£3.5 million (research and development)	£150,000
Selling price per unit	£200	£0.00
Maintenance/development and promotion cost	£500,000	£12,000
Initial sales forecast	30,000	30,000
Promotion team	£300,000
Total gross profit	£6,000,000	£0.00	£6,000,000
Total expenditure	£4,300,000	£162,000	£4,138,000
Total net profit	£1,700,000	-£162,000	£1,538,000

Reference list

Adidas, 2013: http://www.adidas.co.uk/micoach?grid=true  Accessed: 10/12/13

Apple, 2013: https://developer.apple.com/programs/ios/distribute.html Accessed:10/12/13

Barrios, L., & Kenntoft, J. (2008). The Business Analysis Process of New Product Development:-a study of small and medium size enterprises (Doctoral dissertation, Umeå University).

Lowe, S., & ÓLaighin, G. (2012). The age of the virtual trainer. Procedia Engineering, 34, 242-247.

Palepu, K. G., & Healy, P. M. (2008). Business analysis and valuation. CengageBrain. com.

Thomas, C. R., & Maurice, S. C. (2011). Managerial economics: Foundations of business analysis and strategy. McGraw-Hill/Irwin.

Market strategy and development

The next stage of new product development is the market strategy and development phase. Armstrong and Kotler (2012) explains how the focus of this stage is the marketers recognising the developmental products target market, what can be gained from the identified market, the process of developing a marketing mix and the management of the marketing program.  Armstrong and Kotler (2012) believe that in order to achieve market growth an effective market development process must be implemented, with a focus on identifying and developing new market segments for the organisations products, which coincides with previous stages of NPD that enable an organisation to produce effective ideas for a original/lucrative product. Consequently Armstrong and Kotler (2012) believe that an organisation should complete the stage using available tools and models in order to exploit the advantages in ever changing market.

As previously stated the collision sense technology product has a potential large target market size. In relation to Armstrong and Kotler (2012) the products originality is a positive as it can potentially create a new market in both sport entertainment and refereeing. However the success and size of the market will be largely affected by how well the product fits around the structure and behaviour of the consumers. These factors are largely dependent on the planned price for the product and how it will be promoted, with promotion being largely important within gaining inclusion in highly viewed television channels i.e. sky. However planning a set price for the product is hard at this particular point as the product is effectively in its own sports market and therefore comparisons can’t directly take place. However in a review from Phillips (2012) it shows how sky originally priced their product at a premium rate or £300 per year which is relatively expensive for a new product however phillips states how this created a premium feel to the brand and the exclusive content created a demand from consumers, therefore a similar approach can be taken with collision sense as it is exclusive and has no direct competitors. In order to gain a feel of the products positioning, a product positioning map can be used with an indication of the augmented and expected product (see appendix)

To conclude its vital that the product is promoted well to high status television company's as a primary consumer, as this is the most lucrative market. 

Appendix

(Triple A learning, 2012)

Reference list

Armstrong, G., and Kotler, P. (2012). Marketing. Edinburgh Gate: Pearsons Education Limited. 64-73.

Phillips (2012) C Innovation and new product development: Sky+, a mini case study

Triple A learning. (2012). Marketing. Available: http://www.gregglee.biz/ftp/student/Marketing/page_63.htm Last accessed: 4/12/13

Concept development and testing

The third stage of the new product design phase is concept development and testing. Ulrich, 2003 state  that testing a concept is vital in the products development, ensuring the product is suitable for the market, whilst allowing developers to alter the product to consumer’s needs. Kotler and Armstrong, 2012 also state that concept development involves developing a new product into alternate product concepts by finding out how appealing each concept is to the customer.

Concept testing

Lamb, Hair & McDaniel, 2009 explain concept testing as a test to evaluate a newly introduced idea, namely a product or service; examining the sellable and practical determining factors of the prototype before it is introduced. Lamb, Hair & McDaniel, 2009 carry on to state how It is a way of measuring the enthusiasm of the products target consumers, this can be measured through the  reaction to a picture, written statement, or verbal description of the products fundamental capabilities and purposes.

Lycra, 2008 used a group of consumers to test the lycra product range, consumers were given various Lycra compression garments to use in their designated sport and then scored the product:

“Consumer response to a LYCRA® SPORT fabric concept testing:

 • 60% Extreme/Very Interest

 • 56% Extremely/Very Believable

 • 37% Extremely/Very Different

 • 73% Would cost a lot or a little more”

Lycra (2008)

In terms of the product/service of ‘collision sense’ it’s success would be determined largely in the technical development of the product, as if developed effectively it has the potential to be a multi-market product, bringing with it an entertainment element that could vastly improve sports spectatorism, consequently attracting potential contracts from television broadcast company’s. Additionally the product can be used as a development tool for clubs and most importantly used to referee a safe and fair sporting environment. As a consequence of the products potential directions it would appear the product would score highly in terms of product, pricing and promotion.

An effective way of measuring the collision sense’s potential would be through the product positioning map (see appendix). The market map illustrates the range of “positions” that a product can take in a market based on two dimensions that are important to customer. Examples of those dimensions might be:

High price v low price

·         Basic quality v high quality

·         Necessity v luxury

·         Lo-tech v high-tech

Riley (2012)

Another way of researching the target ,markets opinion o the products potential would be through the use of questionnaires this would aid developers in deciding product information such as price, promotion, feasibility, usefulness,  participation, the target market, market need, frequency of purchase and suggestions for improvement (Carlile, 2002)

To conclude concept development and testing allows a developer to realise the level of need for a product, the interest from the target market and potential development possibilities to improve the products demand.

Appendix

Reference list

Carlile, P. R. (2002). A pragmatic view of knowledge and boundaries: Boundary objects in new product development. Organization science, 13(4), 442-455.

Kotler, P. and Armstrong, G. (2012) Principles of Marketing. 14th edn. Essex: Pearson Education Limited.

Pinnacle marketing & Lycra, 2008 http://www.lycra.com/g_en/webpage.aspx?id=963 Acessed:

24/11/2013

Riley, J. (2012). Brand Positioning & Market Mapping.

Ulrich, K. T. (2003). Product design and development. Tata McGraw-Hill Education.

Idea screening

 

Idea screening is defined as an evaluative process in which developers review product ideas, strategies and current market trends (Business dictionary, 2013)

The need to screen ideas using various screening criteria is important as it determines the compatibility of the chosen products with the overall business objectives of the organisation and therefore indicates whether the product(s) have the potential to be successful.

Berens (1972) suggests that using a decision matrix approach is a positive way of screening ideas as it is customer focused, this is because the various criteria are based largely on the customer. In addition using a decision matrix increases efficiency when developing a product as a consequence of the structured and precise format. Chou (2008) states how objective decision making is more effect than subjective as it allows individual attributes to be assessed this reinforces how the decision matrix allows for an easier group decision process, as it allows the group to make an objective decision. Lastly the information from the decision making process is clearly documented.

When brainstorming in the idea generation stage three products were shortlisted as potential products to develop; these were collision sense, The Kit tracker app and the home circuit trainer app, therefore these three products were evaluated using the decision matrix (see appendix) Despite the kit tracker app and the home circuit trainer app’s both appearing relatively cheap to produce it was decided in this stage that the market size was to low and that competition within both areas were already high.

It was decided that the collision sense product would be taken further in the development stage as the results showed it  had the best raw and weighted score and therefore was the obvious choice for further product development, this was mainly due to the lack of competition within this area of sport product/technology and the profit potential of the product due to the increasing numbers and investment within televised sport. This enabled the identification of the products versatility as it can be multi-functional in a holistic range of sports; it offers an entertainment element that can increase spectator satisfaction, make sports such as football fairer whilst enabling another dimension in elite sport analysis.

To conclude the decision matrix allowed for a number of areas of each product to be evaluated and allowed for an efficient decision to be made when choosing the product to develop further.

Appendix

Reference list-

Berens, J. S. (1972). A decision matrix approach to supplier selection. Journal of Retailing, 47(4), 47-53.

Business Dictionary. (2013). Available: at http://www.businessdictionary.com/definition/idea-screening.html. Last accessed 19/11/13

Chou, S. Y., Chang, Y. H., & Shen, C. Y. (2008). A fuzzy simple additive weighting system under group decision-making for facility location selection with objective/subjective attributes. European Journal of Operational Research, 189(1), 132-145.

Idea generation

Idea Generation

What is idea generation?

Graham and Bachman, 2004 state that Idea generation is the process of creating, generating, developing, and communicating a new idea, this idea can be visual, concrete or abstract, but in the case of idea generation within sport the product/idea would often be either concrete or visual. Johnson, 2005 believes in comprising all stages of a thought cycle, from innovation, to development, to actualization.

Examples of idea generation

Pre 1950’s football players would hammer studs into their football boots in order to give them traction on the pitch, this was a large burden as players would be wearing hard metal studs in summer months and the inconsistency of the stud configuration would also affect how they played. In 1954 Adi dassler introduced ‘screw in studs’ which allowed a more consistent figuration, additionally it allowed players to change from metal studs to rubber studs depending on the surface (Soccer boot, 2013)

Another example of idea generation was the adding of ball bearings into a football to allow blind people to play using there hearing (bbc news, 2010)

Collision sense®

                                                                                                                      

My sport product I’ve generated is the Collision senser. This uses a sensor that is connected to a small central hub on the back of a sportsman’s shirt, it measures the power of an impact on the human body.

When developed fully the possibilities and directions collision sense offers are endless.

Collision sense in football

Impact in tackling is a huge talking point in football especially with the constant abuse of gamesmanship through diving. However with collision sense a referee can be made instantly aware of if and when a player was fouled, therefore abolishing cheating out of the game of football. The impact reading will be sent to the referee’s ear pierce, along with whether the impact happened before the tackler made contact with the ball (which will also have a sensor as part of the skin of the football.

Collision sense in full contact sports

In sports such as Rugby, American football, boxing and MMA collisions can be measured for entertainment purposes so that spectators can really see who hits the hardest! From this promotion ideas such as ‘hit of the night’ can be introduced bringing with it huge sponsorship capabilities.

Reference list

http://www.bbc.co.uk/news/magazine-10914782 How do blind people play football so well, Acessed 28/10/13

Graham, D and Bachmann, T., (2004) Ideation: The Birth and Death of Ideas. John Wiley and Sons Inc.

Jonson, B (2005) Design Ideation: the conceptual sketch in the digital age. Design Studies Vol 26 No 6 pp 613–624.

Soccer Boot, Soccer, 2013 10-14 Accessed: 28/10/13

Test

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