Introduction to New Product Development
The significance of new product development for any company lies in the long term and successful survival and to maintain its presence in the market. The frequency of new product development depends on the size and nature of industry. The retail industry needs to continuously work on new product research because of the huge number of small and large brands that are competing intensely in the market. There are other factors that also affects the new product strategy and that is entry and exit of new entrants. The energy companies require huge investment in heavy machinery and equipment for oil drilling and filtering. The following report is prepared in the context with Chevron Corporation to analyse new product development strategy and its impact on the business (Shireman, 2014).
Chevron Corporation was established in 1879 which is an American multinational organization. It has operations in 180 nations around the world. The brand is engaged in exploration, production, refining, marketing and transporting of energy products - oil, gas, geothermal. Apart from upstream and downstream operation, it is also engaged in alternative energy operations such as solar, biofuel, wind, hydrogen, fuel cells.
The three terms that are used in relation with each others are innovation, creativity and entrepreneurship. The rate of success in entrepreneurship increases with the tool of innovation. Additionally, entrepreneurship and innovation requires creativity. Thus, creativity is the backbone of innovation and entrepreneurship (Matos and Hall, 2007).
The research and new product development unit at Chevron requires creative thinking to bring into existence something new into the market that aims to address a problem. The energy products that are sold by Chevron comes into the category of non renewable sources which are available in the limited reserves. Also, the use of fossil fuels accounts for nearly 85% of the total energy consumption (Wenzel, Hauschild and Alting, 2000). Thus, keeping in mind the need and availability of energy resources and its growing consumption on global level, it is must that Chevron introduces a product that is able to fulfil the demands and at the same time, it does not affect the reserves. The new product development is equally important for the success of organization because until a business recognises the issues and threat that exists in the modern world and develops creative solutions, it cannot gain a leadership position.
Company Environment - Corporate Strategy And Direction
At present, Chevron offers multiple energy products for business and consumer community. The brand is also committed to produce safe and efficient energy products. It also contributes to green environment practices and address the climate change risk and carbon emissions. The following principles explain the brand's commitment towards environment -
- For every decision making task, it takes into consideration the potential impact on environment (Luong and Weinthal, 2001).
- It used to make efforts for reducing the carbon footprint on a continuous basis throughout the product life.
- The business operations are based on the philosophy that either it should be done in safe manner or need to avoid it completely. It is for the purpose of improving the reliability and safety of each operation and prevent accidents and injuries as well.
- The brand has assigned a life term for each of its site. So, if any of its location has completed its life, it is decomposed to avoid any impact on environment (Ko and Day, 2004).
Corporate Social Responsibility
The corporate social responsibility of Chevron includes multiple areas to drive prosperity and growth. They are like:
For Employees - A code of ethics policy is established to enable safe and ethical operations of business activities. It also includes policies and guidelines of employees to deal in the standard manner with stakeholders (Ali, Tatsumi and Masuda, 2002).
For Community - A continuous effort by all its subsidiaries is aimed towards economic and social well being of local people. It provides employment and learning skills for local people, promotes health care by campaigns and medical facilities as well as nutritional foods. Significant contribution is also done in the areas of education and volunteer efforts for underdeveloped nations.
For Government - Apart from this, each of its subsidiary ensures to pay taxes and comply with the rules and regulations of nation in which it operates.
New Product Development
A unit of research and development of Chevron is working on new product development ideas. The team came up with a product that is derived from the turkey waste which can be converted into renewable diesel and fertilisers. The raw material for the product includes all waste left by Turkey, that is, bones, feathers, heads, feet, greases, bones (Hekkert and et. al., 2005).
The brand used stage gate process to transform a business idea into profitable products. The value creating process enables the culture of innovation and excellence in business on a continuous basis. The model was introduced by Robert G. Cooper as a conceptual and operational map to convert the ideas into reality (Ramadhas, Jayaraj and Muraleedharan, 2004).
Stage 0 - Idea Discovery - The research and development unit at Chevron works to discover the solutions to address oil consumption needs and declining reserves.
Stage 1 - Scoping - At this stage, the team worked to investigate the project and defines its scope.
Stage 2 - Build Business Case - The team then conducts primary research in terms of market and technical areas which defines the product, its features, justification and benefits and development plan (Kolk and Pinkse, 2004).
Stage 3 - Development - The development of the product design at this stage undergoes the essential operation and production activities to produce finished product.
Stage 4 - Testing and Validation - The product developed need to tested among the target consumers to verify and validate the large scale consumption (Kumar and Markeset, 2007).
Stage 5 - Launch - If the product marks successful use, it is then produced on large scale basis for commercial launch.
Following the above process, the research team came up with the idea to produce fertilizers and diesel fuel from turkey waste. Upon investigation they found that large consumption of turkey in multiple nations which will ease the raw material supply. The turkey waste often is dumped in the empty area and is creating an environmental issue. Thus product development will address two problems - turkey waste usage in safe manner and reduction in dependence on fossil fuels. A business case is prepared and submitted to the management. Upon approval, small batch is developed and tested for viability (Rondinelli and Berry, 2000). The product gained successful reviews from its consumers which led the production of energy product on large level.
As the new product development required resources to fulfil the requirement of the various functions. The organisation face no issue in arraign the capital requirement from multiple sources to deploy the machinery and equipment for production. Slaughter houses were contracted for supply of raw material i.e. turkey waste. Other than this, it also hired employees required to preform the various function in different departments (Huppes and et. al., 2007). Finally, a marketing team has been formed who identifies the target market and build plans and strategies for successful launch of product.
Students may also like to read: Strategic management process
Advantages of Launching in International Market
Chevron is planning to launch the new energy product in global market. the brand is already present in more than 180 nations and launching products in all its operating reduce its marketing costs. Moreover the nature of product is uniform all over the globe so there are zero chances of any cultural issues. But the organisation needs to consider important things of foreign markets such as exchange prices, rules and polices of launch (Omer, 2008).
Chevron is planning to launch the new energy product in global market. the brand is already present in more than 180 nations and launching products in all its operating reduce its marketing costs. Moreover the nature of product is uniform all over the globe so there are zero chances of any cultural issues. But the organisation needs to consider important things of foreign markets such as exchange prices, rules and polices of launch (Omer, 2008).
The brand is launching an energy product which is one of the most consumed product.
The product is an innovation and is developed without the use of fossil fuels. This provide competitive advantage to the organisation above industry peers (Matos and Hall, 2007).
More importantly, the brand is able to achieve enhanced image in the market due to several reason. The first is for addressing a global issue and discover a solution that helps reduce dependence of natural reserves. The second is availability of product on global level. The new product contribute to higher sales margins which in turn generate higher return for shareholder. A major area of brand image is from the community as for the new production, it requires additional human capital that can perform the various functions (Wenzel, Hauschild and Alting, 2000).
The increased sales easily covers up the high research and development and product development cost. The brand is able to recover investment in less time.
A notable thing in the new product development is that it enables the brand to establish its operations in any part of the world. It is because unlike traditional energy products, this can be produced at any location. Also, the brand is able to procure raw material from any part of the world (Luong and Weinthal, 2001).
Impact of New Product Development on Management
The new product development have considerable impact the management and organisation of business activities. The new product of Chevron forms a new unit which carries out the various function in separately from other products. It is because the nature of production is altogether different from other products and services (Ali, Tatsumi and Masuda, 2002). The structure and culture will require change when the brand establishes operations in multiple locations. Here it is important to take into consideration the culture aspects of the population and location to develop a healthy workplace. The management is required to research the nature and behaviour of people who are going to be part of firm as employees or suppliers.
Growth Strategy of Business
Chevron needs to prepare product life cycle as it develops its growth plan. The life cycle includes product release, introduction of new and improved design and launch in newer markets. The company needs to address the life cycle at the very initial stage to avoid any gap in the continuous availability of products. An advantage in the global market is that it enable to avail economies of scale (Hekkert and et. al., 2005). The uniform nature of raw material and finished good allow it purchase raw material from nay location in bulk. This will result into huge savings and lower cost of production. For Chevron this can be easily achieved because turkey is available in many parts of world and moreover the turkey waste is being used as a raw material (Ramadhas, Jayaraj and Muraleedharan, 2004).
Also Read: Customer Experience Management On Product Innovation
Risk Management
There is always presence of certain amount of risk factor in every business area. The new product of Chevron may have involved some or the other small or large risk in operational or functional area of the product. Thus, it is important that risk assessment process must be carried out to identify and manage any potential risk in any area of business. The process of risk assessment helps to address if any similar issues has been occurred in the past related to any product development (Kolk and Pinkse, 2004). It also allows the brand to identity the issues related with marketing and selling of goods in at global level. There may different rules and regulation related with use of turkey waste. Other than this, there is a common risk factor that is present in all parts of the world - environment concern and waste disposal. To address this concern, it is essential that production activities should be carried out far from residential locations and there are rules and code of conduct for waste disposal. Many countries have established there own regulation of safe disposal of waste which should be complied as required (Kumar and Markeset, 2007). Non compliance affects the reputation of the brand which affects the overall performance of the business. Chevron must also identify any risk in handling of raw materiel. It is because employees at the production units have to deal with waste which might affect their health and physical well being. Thus it is important that there are protective clothing and accessories for employees and regular health check ups to ensure that business presence is not harmful for any human life.
REFERENCES
- Ali, M. A., Tatsumi, T. and Masuda, T., 2002. Development of heavy oil hydrocracking catalysts using amorphous silica-alumina and zeolites as catalyst supports. Applied Catalysis A: General. 233(1).
- Hekkert, M. P. and et. al., 2005. Natural gas as an alternative to crude oil in automotive fuel chains well-to-wheel analysis and transition strategy development. Energy Policy. 33(5).
- Huppes, G. and et. al., 2007. Eco-efficient environmental policy in oil and gas production in The Netherlands. Ecological Economics. 61(1).
- Ko, J. Y. and Day, J. W., 2004. A review of ecological impacts of oil and gas development on coastal ecosystems in the Mississippi Delta. Ocean & Coastal Management. 47(11).
- Kolk, A. and Pinkse, J., 2004. Market strategies for climate change. European Management Journal. 22(3).
- Kumar, R. and Markeset, T., 2007. Development of performance-based service strategies for the oil and gas industry: a case study. Journal of Business & Industrial Marketing. 22(4).
- Luong, P. J. and Weinthal, E., 2001. Prelude to the resource curse explaining oil and gas development strategies in the Soviet successor states and beyond. Comparative Political Studies. 34(4).
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