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