Question:

As a new product manager you have been asked to identify a suitable new product/service for you organisation. At this stage, your manager has requested an interim report which identifies a suitable opportunity and a recommended new product concept.

In your report include:

A brief description of the organisation and the market it operates in.

Select a potential opportunity which could be exploited by the organisation, and justify its selection.

Generate two new product concepts, provide a clear explanation of the concept and illustrate how they are connected to the opportunity.

Evaluate the two new product concepts and recommend one new product concept for the organisation to take forward into the next stage of full screen testing. Your evaluation needs to consider factors such as fit with the strategy, technical and marketing feasibility. Please note you are not expected to undertake market research for this project. However, the evaluation needs to be substantiated using credible sources such as journal articles and reports.

Provide recommendations.

This assignment focuses on the early stages of the new product process, in particular stages 1–3. You may choose to base this on your own organisation or an organisation you are familiar with, or a fictitious company. Ensure you support your discussion with relevant journal articles and reports.

Answer:

Introduction

The report presents a brief overview of new product management. McDonald’s fast food industry has been observed to comprehend the concept of new product management. This report is planned to launch two new products by McDonald’s to expand its business and increase the revenue of the company thus ensuring profitv maximization. On the other side, it also explains various kinds of strategies which are used by this company. It describes the process and various methods of new product development. It also analyzes the evaluation techniques of McDonald’s such as cumulative expenditure curve, pay off matrix and product innovation charter. The report analyzes and evaluates how the company can create a global market by launching new products in the market. It explains how to achieve organization goals and objectives by producing two new products. It has explained the competitors of McDonalds and analyzed how the company competes in the market.

A brief Description of Organization

McDonald’s is an American fast food and hamburger company which was founded in 1940. It was founded by Richard and Maurice McDonalds. It is one of the biggest companies in the world who is serving 69 million customers per day around the 100 countries. There are approx 375,000 employees are working in McDonald’s (Schlosser, 2012). It sells various products such as hamburger, chicken sandwiches, soft drinks, French fries, breakfast items, desserts, salads and vegetarian items. The restaurants of McDonald’s has founded in 120 countries across the world. The revenue of the company is around US$ 24.622 billion (Trout & Rivkin, 2010). The organization looks forward to the process of changing consumer need at times.  This has to be taken in to certain consideration pertaining to the effective changes. The organization has been strategizing the plans so as to meet the business criteria in the market.

New products

McDonald’s only makes different kinds of burgers, French fries and cold and soft beverages. It should also serve some new products to customers for increasing profits and expanding its business in the global market (Carpenter et al, 2012). It should launch new products under the product line of foodstuff. So the company must serve and produce pizza and chili tacos for customers. It will help the company increase its revenue and profits. In such way, the company can provide more services to customers and it can satisfy their needs. Most of the people, like to eat pizza and chili tacos so if the company launches these products then it can also make a unique identity in the market. It will become a good opportunity for the company if it launches pizza and chili tacos for customers.  But the company should focus on the quality of products while launching these products and it should provide these products at affordable prices to the customers (Song et al, 2008).

Competitors

There are many competitors of McDonald’s such as Burger King, Star Bucks, Panera, S Subway, Chipotle, and Wendy’s. The company should analyze the marketing opportunities for expanding the business of McDonald’s. The company should include pizza and chili tacos and special fast foods for overcoming the competitors such as burger king and star bucks. The burger king has a limited menu but it focuses on the customer needs and requirements in an effective way (Igumbor et al, 2012). Therefore, if the company wants to take advantages of competition so it should launch new products such as pizza and chili tacos and apples for children.  If the company launches pizza and chili tacos, therefore, it can expand its business more, globally. Generally Dominos and Pizza hut famous for delicious and tasty pizza. People like dominos and pizza hut pizza and they usually go outside to eat pizza. So the company should make pizza and chili tacos to satisfy customer demands and requirements. McDonald’s should make effective marketing mix strategy to attract the customers for pizza and chili tacos. It should concentrate on youngsters because they mostly prefer fast food like pizza and chili tacos (Crane & Matten, 2016).

Product portfolio analysis

It is an analysis of an organization product mix to find out the optimum distribution of the resources. Product portfolio analysis plays a significant role in profit margins, market leadership, operational risk and success of the company (Udo-Imeh et al, 2012). The tools of product portfolio analysis for launching a new product in McDonald’s are discussed as below.

BCG matrix of McDonald’s

It is an American fast food company and it operates many restaurants in Australia. McDonald’s has the highest market share in fast food companies. It segregated its operation in four segments such as America, Europe, APMEA, and others. It helps the top management to adopt and use right strategy for each segment according to its requirements. The four dimensions of BCG matrix are discussed as below.

Stars: The BCG matrix is designed for those companies, which have many segments, industrial, geographical and product lines. It helps the top management to adopt and use right strategy for each segment according to its requirements. If the geographical segment is evaluated then Europe comes in the star category.  If the company produces new products in this segment, then it can take more benefits and generate higher profits in this segment. The company can gain more opportunities in Europe if the company produces two new products such as pizza and chili tacos (David, 2011).

Cash cow: This segment provides financial support for launching new products in the food industry. It has high market share and low sales growth. Through high market share, the company can expand its business globally. McDonalds America is included in cash cows group. There is high competition involved in the food industry and there are many substitutes available in America. So the company should produce pizza and chili tacos to attract customers.

Question mark: APMEA (Asia Pacific, Middle East, Africa geographical region) segment becomes a question mark. It maintains high growth industry and it has low market share. In Asia Pacific industries, sales potential of the industry is very high. But due to competitors in the market, McDonald’s is not being able to take advantages of this segment. So the company should introduce new products according to customer needs and desires.

Dogs: None of the segment of McDonald’s fall into the category of dogs and it maintains low sales growth industry and it has low market share. This segment is not good for the financial position of the company. Therefore, the company should develop new products strategies for serving good customer services.

PESTLE analysis of McDonald’s

Political factors:

The political factors such as government rules, regulations, and health and safety policies affect the business and operation of McDonald’s. These factors are faced by McDonalds Company while launching new products such as pizza and chili tacos. So before producing new products, the company should analyze the political factors.

Economic Factors:

For producing new products, the company will have to import raw materials like potatoes, vegetables, and meat because sometimes these materials do not available in the local market. If the company imports fast food material from another company, it will have to pay a large amount. Therefore, it should evaluate the economic factors which affect the business of the company.

Social factors:

The social factors will influence the new product launching in fast food industry. Social factors include values; culture, norms, customs, and living standard all affect the current operation of McDonald’s. If the company launches two new products like pizza and chili tacos so firstly company should analyze the taste, preferences and eating habits of consumers.

Technological factors:

Technological factors like TV, internet and radio will also affect if the company launch new products in the food industry. McDonald’s should do promotion and advertisement by the internet. So the technology plays an important role in launching new products in the food industry (Thompson et al, 2008).

Now it is assumed that company should analyze the political, economic, social, legal and technological factors for producing new products pizza and chili tacos.

Methods for generating new product concept

There are 8 stages of development of new products. They are discussed as below.

• Idea generation: It is the first step of development of new ideas and products. New ideas can be generated marketing research and brainstorming suggestions (Carter &Rogers, 2008).
• Idea screening: After generating of new ideas company should conduct evaluation and screening for new products and ideas.
• Concept definition: In concept definition company should focus on the designing of product, feasibility, and potential of the market.
• Strategic analysis: After ensuring by the company whether the new product and ideas fit for the company or not, then strategic analysis should be conducted by the company.
• Product testing and development: In this step, company finds out: whether the product and idea fulfill the consumer’s needs, wants or not (Grin et al, 2010).
• Market testing: It is an important step for launching new products in the market. In this stage, company modifies the product and services according to customers’ choices and preferences. In this step, the company selects the best time for launching a new product in the market.
• Commercialization: In this step, the company introduces a new product in the market for consumption. In this stage, the company makes a huge investment in the innovative product. It promotes the product through radio, TV, and newspapers (Crawford, 2008).
• Product launch: In this stage company launches the product in the market.

Figure 1: Stages of new product development

(Source: Aramouni & Deschenes, 2015)

There are various methods for generating ideas to the development of new products. Some of the methods are discussed below.

1. a) SCAMPER: It is an important method to generate ideas for the development of new products. It is developed by the Bob Eberie for producing new products in the market.

SCAMPER stands for:

S-Substitute process and material

C-Combine features of products

A-Adapt

M-Modify

P-Put to another use

E-Eliminate

R-Reverse

1. b) Brainstorming: It involves various kinds of solutions for generating new ideas and products. In brainstorming, there is no measurement requires for generating new ideas and product concept. It plays a vital role in generating new ideas and product concept.
2. c) Mind mapping: It is a graphical technique and method for generating new ideas and product concepts. Each idea and product concept are written down by lines and curves to its following and previous ideas and facts. This method was developed by the Tony Buzan for generating new ideas and product concepts (Wheelwright, 2010).
3. d) Synectics: It is a good method for generating a new idea and product concepts. It solves the problems in a rational way and provides support for innovation of products.

The appropriate method for McDonald’s: SCAMPER method can be considered a suitable and appropriate method for McDonald’s for producing pizza and chili tacos because this method will help reduce wastage in the manufacturing process. McDonald’s can produce pizza and chili tacos at a reasonable price through SCAMPER method. This method reduces time, cost and weight of the products (Saghaei &Fazayeli, 2012).

Cumulative expenditure curve

It provides support for determining anticipated cost and the actual cost of new products and it can be shown by the graph. A graph cost curves include the actual cost of products and estimated cost of products. The cost curve of a new product is showing in below diagram.

Figure 2: Cumulative cost curve

(Source: Crawford, 2017)

The aforementioned diagram is representing a cumulative expenditure curve for the new product. If a company launches new products, it accepts early expenditures, average expenditures, and late expenditures. The diagram shows that one cost curve would differ from another curve.

Risk/ payoff matrix

McDonald’s launches a new product like pizza and chili tacos then the new products face two situations. They are such as two decision options (progress or destroy the project) and wider outcomes (achievement of target and failure, disappointment). Putting an end to the process of manufacturing would result in long term loss of the company. Then the situation can become favorable for the company to launch new products in the market (Kotler &Lee, 2008).

There are four generic risk strategies such as avoidance, mitigation, transfer, and acceptance.

A-T-A-R model

ATAR anticipated model stands for awareness, trial, availability and repeat. If the company wants to produce and launch new products in the market it should use ATAR model. It provides help to marketers for anticipate sales volume, profit contribution and sales revenue (Sørensen et al, 2008).

Figure 3: ATAR model

(Source: ATAR forecast for marketing, 2016)

Product innovation charter

The product innovation charter provides support to the company to development of new products and services. It is a written document which is prepared by the top management for making new products strategy and to provide support to the product team. It helps to improve delivery and production method (Mayer et al, 2008).  There are four sections of product innovation charter, they are such as market background, target market, goals and objectives and special considerations. It plays a vital role in launching new products in the food industry. The four sections of product innovation are discussed as below.

• Market background: It validates and evaluates the strategy and objectives of new products. It evaluates and measures the role of team members in developing new products in the market.
• Target market: It focuses on the technologies and environment for launching and introducing of products and services. It also explains the benefits and segment of customers and distribution channels. It evaluates the competition and challenges of the market.
• Goals and objectives: It focuses on the long term as well as short term objectives of the company.
• Special considerations: It evaluates the internal management and external regulatory and legal requirements.

If the company does not have a product innovation charter then it can face many problems and difficulties. It cannot make the strategy for the new products and services. So if the McDonalds want to overcome of their competitors then it should prepare product innovation charter document for the company.

Now it is assumed that product innovation charter is a very important to document for the company to develop a new product in the market (Amstrup et al, 2010). If McDonald’s launches and introduces two new products such as pizza and chili tacos so product innovation charter should be prepared buy the company. Product innovation charter provides support to make new product strategy. It helps to identify goals, objectives, policies, and restriction across the company (Reid &Brentani, 2010).

Two new product concepts: If the McDonald’s produce two new products such as pizza and chili tacos for the growth of the company. Then first it should analyze the market condition and environment. It should identify the competitor’s strategies and analyze them carefully. In the two products, one of the product pizzas can be forwarded in next stage. So if the company wants to produce pizza for long time period thus Firstly it should make a strategy to produce pizza in the next stage. McDonald’s will have to invest the money and it should test the market. In such way, the company can introduces product in the market.

Conclusion

McDonald’s is one of the biggest companies in fast food industry and it is especially famous for various kinds of burgers. The report is mainly focusing on the marketing strategy of this company. This report would help the company to produce new products such as pizza and chili tacos in the global market. It analyzes that if the McDonalds’ launches two new products then it can expand its business and it can generate more revenue. Now it is concluded that new product management plays a significant role in the success of the company. On the other side, the report explains that how the company makes an effective and attractive marketing strategy for the development of new products. So the company should focus on the customer needs, wants and desires. This report will help the company to launch new products in the market and it should promote the new product management process.  So the company should launch two new products such as pizza and chili tacos. McDonald’s’ should also analyze the environment of the country (Budge et al, 2010).

Recommendations

There are some recommendations for McDonald’s are discussed as below.

• It should reduce risk by generating new products it should also provide excellent services and healthy products to customers.
• It must achieve standardizations in each process and service areas.
• It should also include some new products in its product lines such as pizza, chili tacos, and other fast foods.
• It should use excellent advertising and promotional techniques for increasing sales in the market.
• It should establish a good brand image across the world, and it should make an effective marketing strategy for taking benefits of competition.

References

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