The firm performs several functions, of which innovation is one. Development of new products can be considered as an important part of this function. Based on the product policy the firm may distinguish between the following levels of decision: (1) product item, (2) product line and (3) product mix (Kotler 1972, p. 439). Product development may take place as change in existing items, as development of new items within an existing line, but also within product classes that are new either to the firm or both to the firm and the market. It should also be pointed out that the resource requirements and the level of risk are related to the development strategy chosen by the firm. As an example, to be “first on the market” requires large R & D resources and implies high risk, while an imitating strategy will emphasise the need for efficiency in production and cost control (adapted from Douglas, Kreuger, Thoren 1969, pp. 70–72).
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