Vehicle Life Cycle Management of passenger cars in Indiaal Report

7/29/2019 Vehicle Life Cycle Management of passenger cars in Indiaal Report

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Table of contents

Chapter 1. Introduction

Chapter 2. Objectives and Scope

Chapter 3. Methodology and Limitations

Chapter 4. Indian Passenger Car Segment

Chapter 5. Application of Product Lifecycle Management in Cars

Chapter 6. Product development of new cars

Chapter 7. Product Cannibalization in cars

Chapter 8. Obsolescence of cars

Chapter 9. Car longevity and Extension strategies

Chapter 10. Conclusion

Chapter 11. Summary of the Project Report

1. INTRODUCTION

Product life cycle is the course of a product's sales and profits over time. The five stages of

each product lifecycle are product development, introduction, growth, maturity and decline.

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Product Life Cycle (PLC) deals with the life of a product in the market with respect to

business or commercial costs and sales measures. Product Lifecycle Management (PLM) deals

with managing descriptions and properties of a product through its development and usefullife, mainly from a business or engineering point of view.

Product Life Cycle Management is the succession of strategies used by management as a

product goes through its product life cycle. The conditions in which a product is sold changes

over time and must be managed as it moves through its succession of stages.

1.1 Product life cycle

The product life cycle goes through many phases, involves many professional disciplines, and

requires many skills, tools and processes. To say that a product has a life cycle is to assert four

things:

1) Products have a limited life

2) Product sales pass through distinct stages, each posing different challenges, opportunities,

And problems to the seller

3) Profits rise and fall at different stages of product life cycle

4) Products require different marketing, financial, manufacturing, purchasing, and human

resource strategies in each life cycle stage.

The products life cycle - period usually consists of five major steps or phases:

Product development, Product introduction, Product growth, Product maturity and finally

Product decline. These phases exist and are applicable to all products or services from a

certain make of automobile to a multimillion-dollar lithography tool to a one-cent capacitor.

These phases can be split up into smaller ones depending on the product and must be

considered when a new product is to be introduced into a market since they dictate the

products sales performance.

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Fig. 1.1: Product Life Cycle Graph

The different stages in a product life cycle are:

PRODUCT DEVELOPMENT PHASE

Product development phase begins when a company finds and develops a new product idea.

This involves translating various pieces of information and incorporating them into a new

product. A product is usually undergoing several changes involving a lot of money and time

during development, before it is exposed to target customers via test markets. Those products

that survive the test market are then introduced into a real marketplace and the introduction

phase of the product begins. During the product development phase, sales are zero and

revenues are negative. It is the time of spending with absolute no return.

INTRODUCTION PHASE

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The introduction phase of a product includes the product launch with its requirements to

getting it launched in such a way so that it will have maximum impact at the moment of sale.

This period can be described as a money sinkhole compared to the maturity phase of aproduct. Large expenditure on promotion and advertising is common, and quick but costly

service requirements are introduced. A company must be prepared to spend a lot of money and

get only a small proportion of that back. In this phase distribution arrangements are

introduced. Having the product in every counter is very important and is regarded as an

impossible challenge. Some companies avoid this stress by hiring external contractors or

outsourcing the entire distribution arrangement. This has the benefit of testing an important

marketing tool such as outsourcing.

Pricing is something else for a company to consider during this phase. Product pricing usually

follows one or two well structured strategies. Early customers will pay a lot for something new

and this will help a bit to minimize that sinkhole that was mentioned earlier. Later the pricing

policy should be more aggressive so that the product can become competitive. Another

strategy is that of a pre-set price believed to be the right one to maximize sales. This however

demands a very good knowledge of the market and of what a customer is willing to pay for a

newly introduced product.

A successful product introduction phase may also result from actions taken by the company

prior to the introduction of the product to the market. These actions are included in the

formulation of the marketing strategy. This is accomplished during product development by

the use of market research. Customer requirements on design, pricing, servicing and

packaging are invaluable to the formation of a product design. A customer can tell a company

what features of the product is appealing and what are the characteristics that should not

appear on the product. He will describe the ways of how the product will become handy and

useful. So in this way a company will know before its product is introduced to a market what

to expect from the customers and competitors. A marketing mix may also help in terms of

defining the targeted audience during promotion and advertising of the product in the

introduction phase.

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GROWTH PHASE

The growth phase offers the satisfaction of seeing the product take-off in the marketplace.This is the appropriate timing to focus on increasing the market share. If the product has been

introduced first into the market, (introduction into a virgin market or into an existing

market) then it is in a position to gain market share relatively easily. A new growing market

alerts the competitions attention.

The company must show all the products offerings and try to differentiate them from the

competitors ones. A frequent modification process of the product is an effective policy to

discourage competitors from gaining market share by copying or offering similar products.

Other barriers are licenses and copyrights, product complexity and low availability of product

components.

Promotion and advertising continues, but not in the extent that was in the introductory phase

and it is oriented to the task of market leadership and not in raising product awareness. A good

practice is the use of external promotional contractors. This period is the time to develop

efficiencies and improve product availability and service. Cost efficiency and time-to-market

and pricing and discount policy are major factors in gaining customer confidence. Good

coverage in all marketplaces is worthwhile goal throughout the growth phase.

Managing the growth stage is essential. Companies sometimes are consuming much more

effort into the production process, overestimating their market position. Accurate estimations

in forecasting customer needs will provide essential input into production planning process. It

is pointless to increase customer expectations and product demand without having arranged

for relative production capacity. A company must not make the mistake of over committing.

This will result into losing customers not finding the product on the self.

MATURITY PHASE

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When the market becomes saturated with variations of the basic product, and all competitors

are represented in terms of an alternative product, the maturity phase arrives. In this phase

market share growth is at the expense of someone elses business, rather than the growth ofthe market itself. This period is the period of the highest returns from the product. A company

that has achieved its market share goal enjoys the most profitable period, while a company that

falls behind its market share goal, must reconsider its marketing positioning into the

marketplace.

During this period new brands are introduced even when they compete with the companys

existing product and model changes are more frequent (product, brand, model). This is the

time to extend the products life.

Pricing and discount policies are often changed in relation to the competition policies i.e.

pricing moves up and down accordingly with the competitors one and sales and coupons are

introduced in the case of consumer products. Promotion and advertising relocates from the

scope of getting new customers, to the scope of product differentiation in terms of quality and

reliability. The battle of distribution continues using multi distribution channels. A successful

product maturity phase is extended beyond anyones timely expectations.

DECLINE PHASE

The decision for withdrawing a product seems to be a complex task and there are lot of issues

to be resolved before the decision to move it out of the market. Dilemmas such as

maintenance, spare part availability, service competitions reaction in filling the market gap are

some issues that increase the complexity of the decision process to withdraw a product from

the market. Often companies retain a high price policy for the declining products that increase

the profit margin and gradually discourage the few loyal remaining customers from buying

it.

Sometimes it is difficult for a company to conceptualize the decline signals of a product.

Usually a product decline is accompanied with a decline of market sales. Its recognition is

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sometimes hard to be realized, since marketing departments are usually too optimistic due to

big product success coming from the maturity phase. This is the time to start withdrawing

variations of the product from the market that are weak in their market position. This must bedone carefully since it is not often apparent which product variation brings in the revenues.

The prices must be kept competitive and promotion should be pulled back at a level that will

make the product presence visible and at the same time retain the loyal customer.

Distribution is narrowed. The basic channel is should be kept efficient but alternative channels

should be abandoned.

1.2 Implications of the Product Life Cycle (PLC)

It is claimed that every product has a life cycle. It is launched, it grows, and at some point,

may die. At least in the short term not all products or services die.

Even though its validity is questionable, it can offer a useful 'model' for managers to keep at

the back of their mind. Indeed, if their products are in the introductory or growth phases, or in

that of decline, it perhaps should be at the front of their mind; for the predominant features of

these phases may be those revolving around such life and death. Between these two extremes,

it is salutary for them to have that vision of mortality in front of them.

However, the most important aspect of product life-cycles is that, even under normal

conditions, to all practical intents and purposes they often do not exist (hence, there needs to

be more emphasis on model/reality mappings). In most markets the majority of the major

brands have held their position for at least two decades. The dominant product life-cycle, that

of the brand leaders which almost monopolize many markets, is therefore one of continuity.

1.3 The Product-Process Matrix

There are series of stages that the production process passes through. The process evolution

begins with a very flexible process that is not very cost efficient. As time passes, the process

becomes more standardized, mechanized, and automated. The end of the cycle is characterized

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by a very systematic process that is very efficient, but extremely capital intensive and

inflexible.

The process life cycle is illustrated by a product-process matrix which represents the

interaction of the product and process lifecycles. The rows represent the stages through which

a production process passes (flexible form in the top row to systematic form in the bottom

row), and the columns represent the different product life cycle phases (great variety start-up

phase on the left hand side to standardized commodity mature phase on the right hand side). A

company can be characterized by its position on the matrix. The positions (regions) are

determined by the companys choice of production process and the stage of the product life

cycle the particular product is in. For example, a company (or business unit) in the upper left

hand corner would probably produce a product where each job is unique and capacity is rarely

used at 100%. A company (or business unit) in the lower right hand corner would most likely

produce a product such as a commodity where the production process is continuous, capital

intensive, and inflexible.

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Fig 1.2: Product - Process Matrix

The natural flow of the matrix is a negatively sloped line from the top left corner to the bottom

right. Although some companies may deviate slightly from the line, no company would

produce a product in either the upper right or lower left corner, where the product would either

be too specialized or the process too uneconomical. As a company moves farther from the

diagonal, it becomes increasingly dissimilar from its competitors. In certain instances, this

may prove to be an advantage. However, if the company cannot find a way to exploit theadvantages of its particular niche, it becomes more vulnerable to attack from competitors.

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Using the Concept

There are three issues that follow from the product-process life cycle. The first issue is

Distinctive Competence, which involves a company recognizing areas where they are strong

relative to their competitors and areas where they are weak and should avoid competition.

The second issue relates to the implications of selecting a particular product-process

combination. As a company undertakes different combinations of products and processes,

management must realize that it is the interaction between these two elements that determines

which tasks will be critical. Different types of process structure provide different competitive

advantages. For example, the advantage of the jumbled flow or job shop is flexibility in termsof both product and volume. A more standardized process emphasizes reliability and cost.

The final issue is how operating units are organized. This involves organizing different

company units so that they can specialize in separate portions of the total manufacturing task

and still maintain overall coordination.

This expansion of the matrix encourages more creative thinking about organizational

competence and competitive advantage. It can also guide the way to more informedpredictions regarding the changes that are likely to occur in a particular industry and to more

in-depth consideration of the strategies that might be followed in responding to such changes.

The product-process matrix provides a natural way to involve manufacturing managers in the

planning process so they are in a position to relate their opportunities and decisions more

effectively with marketing strategy and corporate goals.

The importance of the interrelation of marketing and manufacturing decisions goes untold.

Companies must decide how they are going to compete by choosing a product or marketing

strategy (e.g., broad or narrow product line), followed by a type of manufacturing system (e.g.,

flexible with higher cost or less flexible with lower costs). These decisions must be

continuously reviewed and changed as the companys products and competitors evolve and

mature.

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2. OBJECTIVES AND SCOPE

2.1 Objectives

Study the different phases of product life cycle of passenger cars

Analyze the current scenario of passenger car market in India

Understand the challenges during two of the most crucial periods

Development of a new car

Decline stage

Suggest optimum ways to tackle the above mentioned challenges

Propose an optimum approach to managing a cars life cycle in India.

2.2 Scope

This study applies to the lifecycle of passenger cars in India although some of the concepts can

be implemented at global level. Also, the challenges analyzed & solutions provided are

described assuming normal market conditions in a competitive environment. The optimum

solutions which are provided are applicable to cars of all sizes & in all segments. At the same

time, the market extension strategies which are recommended in this report take into

consideration Indian consumers buying behaviour & their state of mind.

2.3 Need for the Topic

Indian economy is experiencing a boom and the growth rate is one of the highest in the world.

The per capita income in India is accordingly increasing steadily resulting in increased

disposable income at customers end.

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In India there is a radical change in the automobile industry as more & more citizens are

aspiring to own vehicles. Today cars are seen not just a medium of transportation, rather a

status symbol, luxury & lifestyle statement. Hence, many automobile manufacturers, bothIndian & Global, are spreading their presence in India to take advantage of high demand

prevailing in Indian market.

However, businesses must focus on managing the product lifecycle of passenger cars since it

is one of the most important factors to become successful. In the absence of the same, it is

going to be highly difficult to stay competitive and make profit at the same time. There is a

need to customize this management as per Indian conditions and the best possible approach

has to be adopted.

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3. METHODOLOGY AND LIMITATIONS

3.1 Methodology and Procedure of work

The information has been sourced from various authentic and reliable sources like books,

newspapers, trade journals and white papers, industry portals, government agencies, trade

associations, monitoring industry news and developments, and through internet databases.

Also, it involved discussion with members of various car manufacturing companies,

automotive societies, industry analysts etc.

3.2 Limitations of the work

The PLC is a dependent variable which is determined by market actions; it is not an

independent variable to which companies should adapt their marketing programs. Marketing

management itself can alter the shape and duration of a brand's life cycle.

Some of the key limitations of using PLM, as applicable to cars, are:

a. The shift changes in the demand of cars along a period of time makes the distinction of the

product life cycle phase very difficult, the duration of those almost impossible to predict

and the level of sales of passenger cars somewhat in the realm of the imagination.

b. There are few examples of cars that do not follow the usual shape of the product life cycle

graph as shown in Fig. 1.1

c. The product life cycle does not entirely depend on time as shown in Fig. 1.1. It also

depends on other parameters such as management policy, company strategic decisions and

market trends. These parameters are, however difficult to be pinpointed.

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The model of product life cycle also depends on the particular product. There would be

different models and so different marketing approaches. There are basically three different

types of products: a product class (such as cars), a product form (such as a station wagon,coupe, family car etc of a particular industry) and a product brand of that particular industry

(such as Ford Escort). The life cycle of the product class reflects changes in market trend and

lasts longer than the life cycle of the product form or brand. In the other hand the life cycle of

a product form or brand reflects the competitiveness of a company (i.e. sales, profits) and

therefore follows more closely the product life cycle model.

Thus, the life cycle may be useful as a description, but not as a predictor; and usually should

be firmly under the control of the marketer. The important point is that in many markets the

product or brand life cycle is significantly longer than the planning cycle of the organizations

involved. Thus, it offers little practical value for most marketers.

Even if the PLC (and the related PLM support) exists for them, their plans will be based just

upon that piece of the curve where they currently reside (most probably in the 'mature' stage);

and their view of that part of it will almost certainly be 'linear' (and limited), and will not

encompass the whole range from growth to decline.

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4. INDIAN PASSENGER CAR SEGMENT

De-licensing in 1991 has put the Indian automobile industry on a new growth track, attracting

foreign auto giants to set up their production facilities in the country to take advantage of

various benefits it offers. This took the Indian automobile production from 5.3 million Units in

2001-02 to 10.8 million Units in 2007-08. The other reasons attracting global auto

manufacturers to India are the countrys large middle class population, growing earning

power, strong technological capability and availability of trained manpower at competitive

prices.

In 2006-07, the Indian automotive industry provided direct employment to more than 300,000

people, exported auto component worth around US$ 2.87 Billion, and contributed 5% to the

GDP. Due to this large contribution of the industry in the national economy, the Indian

government lifted the restrictions of forging joint ventures for foreign companies, which

attracted global auto giants to the Indian market to establish their plants, resulting in

heightened automobile production.

The Indian automobile market is currently dominated by two-wheeler segment but in future,

the demand for passenger cars and commercial vehicles will increase with industrial

development. Also, as India has low vehicle presence (with passenger car stock of only around

11 per 1,000 population in 2008), it possesses substantial potential for growth.

Key points to be noted are:

Passenger car production in India is projected to cross three million units in 2014-15.

Sales of passenger cars during 2008-09 to 2015-16 are expected to grow at a CAGR of

around 10%.

Export of passenger cars is anticipated to rise more than the domestic sales during

2008-09 to 2015-16.

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Value of auto component exports is likely to attain a double digit figure in 2012-13.

Turnover of the Indian auto component industry is forecasted to surpass US$ 50 Billion in

2014-15. The Indian Automobile Market is expected to grow at a CAGR of 9.5 percent

amounting to Rs. 13,008 million by 2010. The Commercial Vehicle Segment has been

contributing to

the automobile market to a great extent.

Many foreign companies have been investing in the Indian Automobile Market in various

ways such as technology transfers, joint ventures, strategic alliances, exports, and financial

collaborations. The auto market in India can boast of attractive finance schemes, increasing

purchasing power, and launch of the latest products.

Total sales of major car manufacturers in India registered a figure of 0.674 million units at the

end of March, 2007. The number of car exports in India was 39,295 units. General Motors,

Maruti, and Honda accounted for 60 percent of the market sales at the end of April, 2007.

There has been an increase in the purchase of motorcycles and cars both, in the rural as well

as urban areas.

Some vital statistics regarding the automobile market in India has been mentioned below:

Two wheelers - 2nd largest in the world

Commercial Vehicle - 4th largest in the world

Passenger car- 11th largest in the world

As such, the Indian automobile market comprises of a wide variety of vehicles such as light,

medium, and heavy commercial vehicles, cars, scooters, mopeds, motor cycles, 3 wheelers,

and multi-utility vehicles such as jeeps and trax.

The modern automobile market in India has been considering key issues in the process of

growth:

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Customer care, and not just 'service'

Domestic as well as multinational investments

Searing through cut-throat competition Road safety

Anti-pollution norms

Coordination with the government to enable advancement

Used vehicle trade

The future of Indian Passenger Car market is bright as it looks forward to manufacturing and

implementing new innovations such as electric cars as provided by Reva, alternative fuels like

CNG and LPG, and probably customized Internet automobile orders.

Over the last few decades, the car market in India have been in a burgeoning stage with all

types of cars flooding the market in order to meet the demands of Indian customers who are

increasingly exposed to state-of-the-world automobiles and want the best when it comes to

purchasing a car.

It is expected that by 2030, the Indian car market will be the 3rd largest car market across the

globe. Small cars seem to be ruling the roost in the Indian automobile market with over 7.5

lakh small cars being sold in India in 2006-07. The main encouraging factors for the success

story of the car market in India are the increase in the opportunity for new investments, the

rise in the GDP rate, the growing per capita income, massive population, and high ownership

capacity.

The liberalization policies followed by the Indian government have been inviting foreign

investors and manufacturers to participate in the car market in India. The recent trend within

the new generation to get work in the software based sector has led to the rise in the income

level and change in the lifestyle which has further led to the increase in the demand for

different varieties of cars among them. Moreover, there are many financing companies

providing easy car loans at reasonable interest rates and affordable installments.

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The car market in India is crowded with all varieties of car models like the small cars, mid-

size cars, luxury cars, super luxury cars, and sports utility vehicles. Initially the most popular

car model dominating the Car Market in India was the Ambassador, which however todaygave way to numerous new models like Maruti, Fiat, Hyundai, BMW, Toyota and many

others. Moreover, there are many other models of cars in the pipeline, to be launched in the car

market in India.

Some of the leading brands dominating the car market in India at present are Hindustan

Motors, Maruti Suzuki Ltd., Fiat India Private Ltd., Daimler Chrysler India Private Ltd, Ford

India Ltd., Honda Siel Cars India Ltd., General Motors India, Hyundai Motors India Ltd.,

Skoda Auto India Private Ltd., and Toyota Kirloskar Motor Private Ltd. Since the demand for

foreign cars are increasing with time, big brands like Mercedes Benz, Aston Martin, Ferrari,

and Rolls-Royce have long since made a foray into the Indian car market.

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5. APPLICATION OF PRODUCT LIFECYCLE

MANAGEMENT IN CARS

Product lifecycle management (PLM) is the process of managing the entire lifecycle of a

product from its conception, through design and manufacture, to service and disposal. It is one

of the four cornerstones of a corporation's information technology structure. All companies

need to manage communications and information with their customers (CRM-Customer

Relationship Management), their suppliers (SCM-Supply Chain Management), their resources

within the enterprise (ERP-Enterprise Resource Planning) and their planning (SDLC-Systems

Development Life Cycle). In addition, manufacturing engineering companies must also

develop, describe, manage and communicate information about their products.

The benefits of PLM include:

Reduced time to market

Improved product quality

Reducedprototypingcosts

Savings through the re-use of original data

A frameworkfor product optimization

Reduced waste

Savings through the complete integration of engineering workflows

Product Lifecycle Management (PLM) is more to do with managing descriptions and

properties of a product through its development and useful life, mainly from a

business/engineering point of view; whereas Product life cycle management (PLCM) is to do

with the life of a product in the market with respect to business/commercial costs and sales

measures.

Product lifecycle management (PLM) is the title commonly applied to a set of application

software that enables the New Product Development (NPD) business process.

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Within PLM there are four primary areas;

1. Product and Portfolio Management(PPM)

2. Product Design (CAx)

3. Manufacturing Process Management (MPM)

4. Product Data Management (PDM)

Product Data Management is focused on capturing and maintaining information on products

and/or services through its development and useful life. Product and Portfolio Management is

focused on managing resource allocation, tracking progress vs. plan for projects in the new

product development projects that are in process (or in a holding status). Portfoliomanagement is a tool that assists management in tracking progress on new products and

making trade-off decisions when allocating scarce resources.

5.1 Introduction to development process

The core of PLM (product lifecycle management) is in the creation and central management of

all product data and the technology used to access this information and knowledge. PLM as a

discipline emerged from tools such as CAD, CAM and PDM, but can be viewed as theintegration of these tools with methods, people and the processes through all stages of a

products life. It is not just about software technology but is also a business strategy.

For simplicity the stages described are shown in a traditional sequential engineering workflow.

The exact order of event and tasks will vary according to the product and industry in question

but the main processes are:

Conceiveo Specification

o Concept design

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Design

o Detailed design

o

Validation and analysis (simulation)o Tool design

Realize

o Plan manufacturing

o Manufacture

o Build/Assemble

o Test (quality check)

Service

o Sell and Deliver

o Use

o Maintain and Support

o Dispose

Fig 5.1: Domains of PLM

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The major key point events are:

Order

Idea

Kick-off

Design freeze

Launch

The reality is however more complex, people and departments cannot perform their tasks in

isolation and one activity cannot simply finish and the next activity start. Design is an iterative

process, often designs need to be modified due to manufacturing constraints or conflictingrequirements. Where exactly a customer order fits into the time line depends on the industry

type, whether the products are for example Build to Order, Engineer to Order, or Assemble to

Order.

5.2 Phases of product lifecycle and corresponding technologies

Many software solutions have developed to organize and integrate the different phases of a

products lifecycle. PLM should not be seen as a single software product but a collection ofsoftware tools and working methods integrated together to address either single stages of the

lifecycle or connect different tasks or manage the whole process. Some software providers

cover the whole PLM range while others a single niche application. Some applications can

span many fields of PLM with different modules within the same data model.

It should be noted however that the simple classifications do not always fit exactly, many

areas overlap and many software products cover more than one area or do not fit easily into

one category. It should also not be forgotten that one of the main goals of PLM is to collect

knowledge that can be reused for other projects and to coordinate simultaneous concurrent

development of many products. It is about business processes, people and methods as much as

software application solutions. Although PLM is mainly associated with engineering tasks it

also involves marketing activities such as Product Portfolio Management (PPM), particularly

with regards toNew product introduction(NPI).

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Phase 1: Conceive

Imagine, Specify, Plan, Innovate

The first stage in idea is the definition of its requirements based on customer, company,

market and regulatory bodies viewpoints. From this a specification of the products major

technical parameters can be defined. Parallel to the requirements specification the initial

concept design work is carried out defining the visual aesthetics of the product together with

its main functional aspects. For the Industrial Design, Styling work many different media are

used from pencil and paper, clay models to 3D CAID Computer-aided industrial design

software.

Phase 2: Design

Describe, Define, Develop, Test, Analyze and Validate

This is where the detailed design and development of the cars form starts, progressing to

prototype testing, through pilot release to full product launch. It can also involve redesign and

ramp for improvement to existing products as well as planned obsolescence. The main toolused for design and development is CAD Computer-aided design. This can be simple 2D

Drawing / Drafting or 3D Parametric Feature Based Solid/Surface Modelling, Such software

includes technology such as Hybrid Modeling, Reverse Engineering, KBE (Knowledge-Based

Engineering), NDT (Nondestructive testing), Assembly construction.

This step covers many engineering disciplines including: Mechanical, Electrical, Electronic,

Software (embedded), and domain-specific, such as Automotive. Along with the actual

creation of geometry there is the analysis of the components and product assemblies.

Simulation, validation and optimization tasks are carried out using CAE (Computer-aided

engineering) software either integrated in the CAD package or stand-alone. These are used to

perform tasks such as:- Stress analysis, FEA (Finite Element Analysis); Kinematics;

Computational fluid dynamics (CFD); and mechanical event simulation (MES). CAQ

(Computer-aided quality) is used for tasks such as Dimensional Tolerance (engineering)

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Analysis. Another task performed at this stage is the sourcing of bought out components,

possibly with the aid ofProcurementsystems.

Phase 3: Realize

Manufacture, Make, Build, Procure, Produce, Sell and Deliver

Once the design of the cars components is complete the method of manufacturingis defined.

This includes CAD tasks such as tool design; creation of CNC Machining instructions for the

cars parts as well as tools to manufacture those parts, using integrated or separate CAM

Computer-aided manufacturing software. This will also involve analysis tools for process

simulation for operations such as casting, molding, and die press forming.

Once the manufacturing method has been identified CPM comes into play. This involves

CAPE (Computer-aided Production Engineering) or CAP/CAPP (Production Planning) tools

for carrying out Factory, Plant and Facility Layout and Production Simulation. For example:

Press-Line Simulation; and Industrial Ergonomics; as well as tool selection management.

Once components are manufactured their geometrical form and size can be checked against

the original CAD data with the use of Computer Aided Inspection equipment and software.

Parallel to the engineering tasks, sales product configuration and marketing documentation

work will be taking place. This could include transferring engineering data (geometry and part

list data) to a web based sales configurator and otherDesktop Publishing systems.

Phase 4: Service

Use, Operate, Maintain, Support, Sustain, Phase-out, Retire, Recycle and Disposal

The final phase of the lifecycle involves managing of in service information, providing

customers and service engineers with support information forrepair and maintenance, as well

as waste management/recycling information. This involves using such tools as Maintenance,

Repair and Operations Management (MRO) software.

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5.3 All phases: product lifecycle

Communicate, Manage and Collaborate

None of the above phases can be seen in isolation. In reality a project does not run sequentially

or in isolation of other product development projects. Information is flowing between different

people and systems. A major part of PLM is the co-ordination of and management of product

definition data. This includes managing engineering changes and release status of components;

configuration product variations; document management; planning project resources and

timescale and risk assessment.

For these tasks graphical, text and metadata such as product BOMs (Bill of Materials) needs to

be managed. At the engineering departments level this is the domain of PDM (Product Data

Management) software, at the corporate level EDM (Enterprise Data Management) software,

these two definitions tend to blur however but it is typical to see two or more data

management systems within an organization. These systems are also linked to other corporate

systems such as SCM, CRM, and ERP. Associated with these systems are Project

Management Systems for Project/ Program Planning.

This central role is covered by numerous Collaborative Product Development tools which run

throughout the whole lifecycle and across organizations. This requires many technology tools

in the areas of Conferencing, Data Sharing and Data Translation. The field being Product

visualization which includes technologies such as DMU (Digital Mock-Up), Immersive

Virtual Digital prototyping (Virtual reality) and Photo realistic Imaging.

User Skills

The broad array of solutions that make up the tools used within a PLM solution-set (e.g.,

CAD, CAM, CAx) were initially used by dedicated practitioners who invested time and effort

to gain the required skills. Designers and engineers worked wonders with CAD systems,

manufacturing engineers became highly skilled CAM users while analysts, administrators and

managers fully mastered their support technologies. However, achieving the full advantages of

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PLM requires the participation of many people of various skills from throughout an extended

enterprise, each requiring the ability to access and operate on the inputs and output of other

participants.

Despite the increased ease of use of PLM tools, cross-training all personnel on the entire PLM

tool-set has not proven to be practical. Now, however, advances are being made to address

ease of use for all participants within the PLM arena. One such advance is the availability of

role specific user interfaces. Through Tailorable UIs, the commands that are presented to

users are appropriate to their function and expertise.

5.4 Product development processes and methodologies

A number of established methodologies have been adopted by PLM and been further

advanced. Together with PLM digital engineering techniques, they have been advanced to

meet company goals such as reduced time to market and lower production costs. Reducing

lead times is a major factor as getting a product to market quicker than the competition will

help with higher revenue and profit margins and increase market share.

These techniques include:-

Concurrent engineering workflow

Industrial Design

Bottom-up design

Top-down design

Front loading design workflow

Design in context

Modular design.

NPDNew product development

DFSS Design for Six Sigma

DFMA Design for manufacture / assembly

Digital simulation engineering.

Requirement driven design

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Specification managed validation

Concurrent engineering workflow

This is a workflow that instead of working sequentially through stages carries out a number of

tasks in parallel. For example: starting tool design before the detailed designs of a car model

are finished, or the engineer starting on detail design solid models before the concept design

surfaces models are complete. Although this does not necessarily reduce the amount of

manpower required for a project, it does drastically reduce lead times and thus time to market.

Feature based CAD systems have for many years allowed the simultaneous work on 3D solid

model and the 2D drawing by means of 2 separate files, with the drawing looking at the datain the model; when the model changes the drawing will associatively update.

Some CAD packages also allow associative copying of geometry between files. This allows,

for example, the copying of a part design into the files used by the tooling designer. The

manufacturing engineer can then start work on tools before the final design freeze; when a

design changes size or shape the tool geometry will then update. Concurrent engineering also

has the added benefit of providing better and more immediate communication between

departments, reducing the chance of costly, late design changes. It adopts a problem

prevention method as compared to the problem solving and re-designing method of traditional

sequential engineering.

Bottom-up design

Bottom-up design (CAD Centric) is where the definition of 3D models of a car starts with the

construction of individual components. These are then virtually brought together in sub-

assemblies of more than one level until the full car is digitally defined. This is sometimes

known as the review structure showing what the car will look like. The BOM contains all of

the physical (solid) components; it may contain other items required for the final product

BOM such as paint, glue, oil and other materials commonly described as 'bulk items'. Bulk

items typically have mass and quantities but are not usually modelled with geometry.

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Top-down design

Top-down design (Part Centric) follows closer the true design process. This starts with a

layout model, often a simple 2D sketch defining basic sizes and some major defining

parameters. Industrial Design brings creative ideas to product development. Geometry from

this is associatively copied down to the next level, which represents different sub-systems of

the product. The geometry in the sub-systems is then used to define more detail in levels

below.

Depending on the complexity of the car, a number of levels of this assembly are created until

the basic definition of components can be identified, such as position and principaldimensions. This information is then associatively copied to component files. In these files the

components are detailed; this is where the classic bottom-up assembly starts. The top down

assembly is sometime known as a control structure. If a single file is used to define the layout

and parameters for the review structure it is often known as a skeleton file.

Defence engineering traditionally develops the product structure from the top down. The

system engineering process prescribes a functional decomposition of requirements and then

physical allocation of product structure to the functions. This top down approach would

normally have lower levels of the product structure developed from CAD data as a bottom up

structure or design.

Front loading design and workflow

Front loading is taking top-down design to the next stage. The complete control structure and

review structure, as well as downstream data such as drawings, tooling development and CAM

models, are constructed before the product has been defined or a project kick-off has been

authorized. These assemblies of files constitute a template from which a family of products

can be constructed. When the decision has been made to go with a new car, the parameters of

the car are entered into the template model and all the associated data is updated. Obviously

predefined associative models will not be able to predict all possibilities and will require

additional work.

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The main principle is that a lot of the experimental/investigative work has already been

completed. A lot of knowledge is built into these templates to be reused on new products. This

does require additional resources up front but can drastically reduce the time betweenproject kick-off and launch. Such methods do however require organizational changes, as

considerable engineering efforts are moved into offline development departments. It can be

seen as an analogy to creating a concept car to test new technology for future products, but in

this case the work is directly used for the next product generation.

Design in context

Individual components cannot be constructed in isolation. CAD; CAiD models of componentsare designed within the context of part or the entire car being developed. This is achieved

using assembly modelling techniques. Other components geometry can be seen and

referenced within the CAD tool being used. The other components within the sub-assembly

may or may not have been constructed in the same system, their geometry being translated

from other CPD formats. Some assembly checking such as DMU is also carried out using

Product visualization software.

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6. PRODUCT DEVELOPMENT OF NEW CARS

In business and engineering, new product development (NPD) is the term used to describe the

completeprocess of bringing a newproduct or service to market. There are two parallel paths

involved in the NPD process: one involves the idea generation, product design, and detail

engineering; the other involves market research and marketing analysis. Companies typically

see new product development as the first stage in generating and commercializing new

products within the overall strategic process ofproduct life cycle management used to

maintain or grow their market share.

There are several general categories of new products. Some are new to the market (eg.

Automatic transmission vehicles into the Indian Passenger Car market), some are new to the

company (eg. Prius Hybrid car of Toyota), some are completely novel and create totally new

markets (eg. The battery operated Electric cars). When viewed against different criteria, some

new product concepts are merely minor modifications of existing products while some are

completely innovative to the company. The new product can be:

Changes to Augmented Product

Core product revision

Line extensions

New product lines

Repositioning

Completely new

These different characterizations are displayed in the following diagram.

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Fig. 6.1: New product launch strategies

6.1 The following steps explain the process of NPD

1. Idea Generation is often called the fuzzy front end of the NPD process

o Ideas for new cars can be obtained from basic research using a SWOT analysis

(OPPORTUNITY ANALYSIS), Market and consumer trends, companys

R&D department, competitors, focus groups, employees, salespeople, corporate

spies, trade shows, or Ethnographic discovery methods (searching for user

patterns and habits) may also be used to get an insight into new product lines or

product features.

o Idea Generation or Brainstorming of new product, service, or store can begin

when you have done your OPPORTUNITY ANALYSIS to support your ideas

in the Idea Screening Phase.

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2. Idea Screening

o The object is to eliminate unsound concepts prior to devoting resources to

them.o The screening must reveal the following:

Benefit customers in the target market will obtain from the product

The size and growth forecasts of the market segment/ target market

The current or expected competitive pressure for the product idea

The industry sales and market trends the product idea is based on

Technical feasibility to manufacture the car

Profitability of the car when manufactured and delivered to customers at

the target price.

3. Concept Development and Testing

o Develop the marketing and engineering details

The target market and the decision maker in the purchasing process

Features the car must incorporate

Benefits the car will provide

Prediction of consumers reaction to the car

The method with which the product can be produced most cost

effectively

Prove feasibility through virtual computer aided rendering, and rapid

prototyping

The cost to produce it

o T est the concept by asking a sample of prospective customers what they think

of the idea, usually via Choice Modelling.

4. Business Analysis

o Estimate likely selling price based upon competition and customer feedback

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o Estimate sales volume based upon size of market and such tools as the Fourt-

Woodlock equation

o

Estimate profitability and breakeven point

5. Beta Testing and Market Testing

o Produce a physical prototype or mock-up

o Test the product (and itspackaging) in typical usage situations

o Conduct focus group customer interviews or introduce at trade show

o Make adjustments where necessaryo Produce an initial run of the product and sell it in a test market area to

determine customer acceptance

6. Technical Implementation

o New program initiation

o Resource estimation

o Requirement publication

o Engineering operations planning

o Department scheduling

o Supplier collaboration

o Logisticsplan

o Resource plan publication

o

Program review and monitoringo Contingencies what-if planning

7. Commercialization (often considered post-NPD)

o Launch the product

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o Produce and place advertisements and otherpromotions

o Fill thedistribution pipeline with product

o Critical path analysis is most useful at this stage

These steps may be iterated as needed. Some steps may be eliminated. To reduce the time that

the NPD process takes, many companies are completing several steps at the same time

(referred to as concurrent engineering or time to market). Most industry leaders see new

product development as a proactive process where resources are allocated to identify market

changes and seize upon new product opportunities before they occur (in contrast to a reactive

strategy in which nothing is done until problems occur or the competitor introduces an

innovation). Many industry leaders see new product development as an ongoing process

(referred to as continuous development) in which the entire organization is always looking for

opportunities.

For the more innovative products indicated on the diagram above, great amounts of

uncertainty and change may exist, which makes it difficult or impossible to plan the complete

project before starting it. In this case, a more flexible approach may be advisable.

Because the NPD process typically requires both engineering and marketing expertise, cross-

functional teams are a common way of organizing projects. The team is responsible for all

aspects of the project, from initial idea generation to final commercialization, and they usually

report to senior management (often to a vice president or Program Manager). In Passenger car

segment where products are technically complex, development research is typically expensive,

and product life cycles are relatively short, strategic alliances among several organizations

helps to spread the costs, provide access to a wider skill set, and speeds the overall process.

Also, because engineering and marketing expertise are usually both critical to the process,

choosing an appropriate blend of the two is important.

People respond to new products in different ways. The adoption of a new technology can be

analyzed using a variety of diffusion theories such as the Diffusion of innovations theory

which includes economical support of social sector

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6.2 Fuzzy Front End

The Fuzzy Front End is the messy getting started period of new product development

processes. It is in the front end where the organization formulates a concept of the product to

be developed and decides whether or not to invest resources in the further development of an

idea. It is the phase between first consideration of an opportunity and when it is judged ready

to enter the structured development process. It includes all activities from the search for new

opportunities through the formation of a germ of an idea to the development of a precise

concept. The Fuzzy Front End ends when an organization approves and begins formal

development of the concept.

Although the Fuzzy Front End may not be an expensive part of product development, it can

consume 50% of development time and it is where major commitments are typically made

involving time, money, and the products nature, thus setting the course for the entire project

and final end product. Consequently, this phase should be considered as an essential part of

development rather than something that happens before development, and its cycle time

should be included in the total development cycle time.

Broadly five different front-end elements (not necessarily in a particular order) can be

distinguished:

1. Opportunity Identification

2. Opportunity Analysis

3. Idea Genesis

4. Idea Selection

5. Concept and Technology Development

The first element is the opportunity identification. In this element, large or incremental

business and technological chances are identified in a more or less structured way. Using the

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guidelines established here, resources will eventually be allocated to new projects; which then

lead to a structured NPPD (New Product & Process Development) strategy.

The second element is the opportunity analysis. It is done to translate the identified

opportunities into implications for the business and technology specific context of the

company. Here extensive efforts may be made to align ideas to target customer groups and do

market studies and/or technical trials and research.

The third element is the idea genesis, which is described as evolutionary and iterative process

progressing from birth to maturation of the opportunity into a tangible idea. The process of the

idea genesis can be made internally or come from outside inputs, e.g. a supplier offering a newmaterial/technology, or from a customer with an unusual request.

The fourth element is the idea selection. Its purpose is to choose whether to pursue an idea by

analyzing its potential business value.

The fifth element is the concept and technology development. During this part of the front-

end, the business case is developed based on estimates of the total available market, customer

needs, investment requirements, competition analysis and project uncertainty. Someorganizations consider this to be the first stage of the NPPD process.

The Fuzzy Front End is also described in literature as Front End of Innovation, Phase 0,

Stage 0 or Pre-Project-Activities.

Rising cost pressures, shorter development times, and ever stricter quality standards: This

impossible trio is what confronts car manufacturers on a daily basis. To master this situation,

there is a need to have an overview of a vehicles entire lifecycle from the very startfrom

the design to the production to the servicing of the model. And the industry wheels keep

turning faster: The time it takes from the drawing board to series production has been cut by a

third since the mid-1990s. Mounting product complexity and the ever higher proportion of

electronics and software in cars require the planning and production of cars to be realized in

global partnerships between manufacturers and suppliers.

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Before car manufacturers, partners, and suppliers at different locations throughout the world

can work together in sync, a whole range of obstacles need to be overcome. For global

management to work, integrated solutions are needed that provide digital data throughout aproducts entire lifecycle.

6.3 Technology lifecycle

Most new technologies follow a technology lifecycle describing the technological maturity of

a product. This is not similar to a product life cycle, but applies to an entire technology, or a

generation of a technology.

Technology adoption is the most common phenomenon driving the evolution of industries

along the industry lifecycle. After expanding new uses of resources they end with exhausting

the efficiency of those processes, producing gains that are first easier and larger over time then

exhaustingly more difficult.

Technology perception dynamics

There is usually technology hype at the introduction of any new technology, but only aftersome time has passed can it be judged as mere hype or justified true acclaim. Because of the

logistic curve nature of technology adoption, it is difficult to see in the early stages whether

the hype is excessive.

The two errors commonly committed in the early stages of a technology's development are:

fitting an exponential curve to the first part of the growth curve, and assuming eternal

exponential growth fitting a linear curve to the first part of the growth curve, and assuming that take-up of

the new technology is disappointing

Similarly, in the later stages, the opposite mistakes can be made relating to the possibilities of

technology maturityandmarket saturation.

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Technology adoption typically occurs in an S curve, as modelled in diffusion of innovations

theory. This is because customers respond to new products in different ways. Diffusion of

innovations theory, pioneered by Everett Rogers, posits that people have different levels ofreadiness for adopting new innovations and that the characteristics of a product affect overall

adoption.

Stages

The technology life cycle can be broken down into five distinct stages:

1. Bleeding edge - any technology that shows high potential but hasn't demonstrated its

value or settled down into any kind of consensus. Early adopters may win big, or may

be stuck with awhite elephant.

2. Leading edge - a technology that has proven itself in the marketplace but is still new

enough that it may be difficult to find knowledgeable personnel to implement or

support it.

3. State of the art - when everyone agrees that a particular technology is the right

solution.

4. Dated - still useful, still sometimes implemented, but a replacement leading edgetechnology is readily available.

5. Obsolete - has been superseded by state-of-the-art technology, maintained but no

longer implemented.

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7. PRODUCT CANNIBALIZATION IN CARS

Product cannibalization occurs when a company decides to replace an existing product and

introduce a new one in its place, regardless of its position in the market (i.e. the products life

cycle phase does not come into account). This is due to newly introduced technologies and it

is most common in high tech companies. As all things in life there is negative and positive

cannibalization.

In the normal case of cannibalization, an improved version of a product replaces an existing

product as the existing product reaches its sales peak in the market. The new product is sold ata high price to sustain the sales, as the old product approaches the end of its life cycle.

Nevertheless there are times that companies have introduced a new version of a product, when

the existing product is only start to grow. In this way the company sustains peak sales all the

time and does not wait for the existing product to enter its maturity phase. The trick in

cannibalization is to know when and why to implement it, since bad, late or early

cannibalization can lead to bad results for company sales.

1. UNFAVORABLE CANNIBALIZATION

Cannibalization should be approached cautiously when there are hints that it may have an

unfavorable economic effect to the company, such as lower sales and profits, higher technical

skills and great retooling. The causes of such economic problems are given below:

The new product contributes less to profit than the old one:

When the new product is sold at a lower price, with a resulting lower profit than the old one,

then it does not sufficiently increase the companys market share or market size.

The economics of the new product might not be favorable:

Technology changes can force a product to be cannibalized by a completely new one. But in

some cases the loss of profits due to the cannibalization is too great. For example a company

that produced two stroke engines was forced to change into four stroke engines. Although the

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resulting business was a success and yielded great profits, the sales of the two stroke engines

declined so fast that the combined profit from both products, compared to the profits if the

company did not cannibalize the original product showed a great loss in profits.

The new product requires significant retooling:

When a new product requires a different manufacturing process, profit is lower due to the

investment in that process and due to the write-offs linked to retooling the old manufacturing

process.

The new product has greater risks:

The new product may be profitable but it may have greater risks than the old one. A company

cannot cannibalize its market share using a failed or failing product. This can happen in car

manufacturing companies that do not understand enough of a new technology so that to turn it

into a successful and working product. As a result an unreliable product emerges and replaces

a reliable one, that can increase service costs and as a result decrease expected profits.

2. OFFENSIVE CANNIBALIZATION STRATEGIES

Cannibalization favors the attacker and always hurts the market leader. For companies that are

trying to gain market share or establish themselves into a market, cannibalization is the way to

do it. Also cannibalization is a good way to defend market share or size. A usual practice is the

market leader to wait and do not cannibalize a product unless it has to.

It is thought that a company should acquire and develop a new technology that will produce a

newer and better product than an existing one and then wait. Then as competitors surface and

attack market share, cannibalization of a product is ripe. Then and only then quick

introduction of a new product into the market will deter competition, increase profits and keep

market share. But this strategy does not always work since delays will allow the competition

to grab a substantial piece of the market before the market leader can react.

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3. DEFENSIVE CANNIBALIZATION STRATEGIES

Controlled cannibalization can be a good way to repel attackers as deforesting can repel fire. A

market leader has many defensive cannibalization strategies that are discussed below:

Cannibalize before competitors do:

Cannibalization of a companys product(s) before a competitor does, is a defensive strategy to

keep the competitor of being successful. Timing is the key in this strategy. Do it too soon and

profits will drop, do it too late and market share is gone.

Introduction of cannibalization as a means of keeping technology edge over competition:

A good strategy is for a company that is the market leader to cannibalize its products as

competitors start to catch up in terms of technology advancements.

Management of cannibalization rate through pricing:

When cannibalization of a product is decided, the rate at which this will happen depends on

pricing. The price of the new product should be at a level that encourages a particular mix of

sales of the old and new product. If the price of the new product is lower than the price of the

old then cannibalization rate slows down. If the opposite happens then the cannibalization rate

is increased. Higher prices in new products can reflect their superiority over the old ones.

Minimization of cannibalization by introducing of the new product to certain market

segments:

Some market segments are less vulnerable to cannibalization than others. This is because there

is more or less to lose or gain for each of them. By choosing the right segments to perform the

cannibalizations of a product a company can gain benefits without loses and acquire

experience on product behavior.

Many companies find it very difficult to estimate the impact of cannibalization of a new

product. This way companies frequently make the wrong decisions on when and what to

cannibalize. As mentioned before, they introduce a product too early into a market or too late

and subsequently they lose a great share of the market and the process of cannibalization

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backfires at them. The following table shows a theoretical analysis of a product revenues and

the impact of cannibalization of it in favor of another product.

Course 1 2006 2007 2008 2009 2010

Investment -10000 0 0 0 0

Unit sold 50 400 1200 2000 2000

Selling price (Rs.) 50 45 42 40 40

Revenue (Rs.) 2500 18000 50400 80000 80000

Net income (%) 15 15 15 15 15

Net income (Rs.) 375 2700 7560 12000 12000

Net investment (Rs.) - 9625 - 6925 635 12635 24635

Table 7.1: Simple Profit/ Loss calculation

Course 2 2006 2007 2008 2009 2010

New product income

(Rs.)375 2700 7560 12000 12000

Cannibalization

Unit sold 0 300 1000 1500 1500


Revenue

cannibalized (Rs.)

0 12000 40000 60000 60000

Net income (%) 15 15 15 15 15

Income cannibalized

(Rs.)0 1800 6000 9000 9000

Income net of

cannibalization (Rs.)375 900 1560 3000 3000

Net investment (Rs.) - 9625 - 8725 -7165 - 4165 - 1165

Table 7.2: Effect of product cannibalization

Course 3 2006 2007 2008 2009 2010Income net of

cannibalization (Rs.)375 900 1560 3000 3000

Expected lost sales

Units 0 0 500 1000 1000


Lost revenue

expected (Rs.)0 0 20000 40000 40000

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Net income (%) 15 15 15 15 15

Lost income

expected (Rs.)0 0 3000 6000 6000

Income net of

cannibalization with

adjustment for low

sales (Rs.)

375 900 4560 9000 9000

Net investment (Rs.) - 9625 - 8725 - 4165 4835 13835

Table 7.3: Comparison of normal sales vs Cannibalization

In the table above there are three courses to be taken. The first one is a financial analysis of a

product. How units of the product are expected to be sold over the next 3 years, how many of

them were sold over the period 2006 and 2007, their total revenue, their total income, and the

profits compared to the initial investment.

Course 2 considers the impact of cannibalization over the same period of time. In 2007, 300 of

the total 400 units were sold of the original product and only 100 of the newly introduced

product and so on. In the analysis net income from Course 1 is the starting point andadjustments due to cannibalization are made. The analysis shows that losses from

cannibalization are never fully recovered and a loss of Rs. 1165 is left at the end of 2010.

Course 3 shows the situation if the company did nothing compared to cannibalization. Lost

sales are due to competition that already has cannibalized its product and gains market share.

A total of Rs. 15,000 could be lost by the end of 2010. Compared to the cannibalization

alternative, there is a profit and an increase in total income which will cover the initial

investment and which would expect to rise around Rs. 13,000 by the end of 2010. So

cannibalization seems a good idea but better would be to delay it for 2 years (2006 and 2007)

so as to optimize revenues and income from both existing car and new car.

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8. OBSOLESCENCE OF CARS

"Market saturation" is a term used to describe a situation in which a product has become

diffused (distributed) within a market; the actual level of saturation can depend on consumer

purchasing power; as well as competition,prices, and technology.

To give another example, in advanced western households, and depending on the economy,

the number of automobiles per family is greater than 1. To the extent that further market

growth (i.e. growth of the demand for automobiles) is constrained (the main buyers already

own the product), the market is said to be basically saturated. Future sales depend on several

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