Small Business Management, 18e Longenecker/Petty/Palich/Hoy © 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Product Development and Supply Chain Management Chapter 15 © 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Learning Goals:  Recognize the challenges associated with the growth of a small business.  Explain the role of innovation in a company’s growth.  Identify stages in the product life cycle and the new product development process.  Describe the building of a firm’s total product. © 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Learning Goals (cont.):  Understand product strategy and the alternatives available to small businesses.  Discuss how the legal environment affects product decisions.  Explain the importance of supply chain management and the major considerations in structuring a distribution channel. © 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. To Grow or Not to Grow  Growth sufficient to maintain the status quo is a goal of some entrepreneurs.  Growing a business too quickly can be stressful for the small firm.  A “growth trap” may occur when a firm’s growth soaks up cash faster than it can be generated.  Growth also puts pressure on a small firm’s personnel. 15–5 © 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Innovation: A Path to Growth  Competitive Advantage and Innovation Innovation and entrepreneurship often go hand-in-hand. Coming up with and perfecting new products or services is often not easy. The risk of failure increases when innovation is the goal. Innovation is a means by which a firm can sustain its competitive advantage. 15–6 © 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protec.

1. Small Business
Management, 18e
Longenecker/Petty/Palich/Hoy
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license
distributed with a certain product or service or otherwise on a
password-protected website for classroom use.
Product Development and
Supply Chain Management
Chapter 15
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or
service or otherwise on a password-protected website for
classroom use.
Learning Goals:

2. growth of a small business.
growth.
the new product development process.
product.
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or
service or otherwise on a password-protected website for
classroom use.
Learning Goals (cont.):
alternatives available to small businesses.
product decisions.

3. management and the major considerations in
structuring a distribution channel.
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or
service or otherwise on a password-protected website for
classroom use.
To Grow or Not to Grow
quo is a goal of some entrepreneurs.
stressful for the small firm.
rm’s
growth soaks up cash faster than it can be
generated.
firm’s personnel.
15–5

4. © 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Innovation: A Path to Growth
hand-in-hand.
or services is often not easy.
is the goal.
sustain its competitive advantage.
15–6
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copied, scanned, or duplicated, in whole or in

5. part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Reducing the Risk of Failure
While Innovating
or service you are hoping to create.
s will perceive
as adding value to their lives.
product or service.
product or service.
15–7
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copied, scanned, or duplicated, in whole or in

6. part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Achieving Sustainability
e Advantage
-creating position that endures over
time
15–8
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Achieving Sustainability (cont.)

7. Cycle
15–9
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or service or otherwise on a
password-protected website for classroom use.
The Competitive Advantage Life Cycle15.1
The Product Life Cycle and

8. New Product Development
specific product’s sales and profits over time
be adjusted to the product’s position on the curve.
important to revitalize product lines before
they lose their commercial potential.
—
innovation is necessary for a firm’s survival.
15–11
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or service or otherwise on a

9. password-protected website for classroom use.
The Product Life Cycle15.2
New Product Development
Process
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copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or service or otherwise on a
password-protected website for classroom use.
Idea
Accumulation
Business
Analysis
New Product
Development
Product
Testing

10. New Product Development
Process
consideration
ngineering, or other personnel within the firm
-owned patents
ons from customers
15–14
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
New Product Development

11. Process (cont’d)
profitable.
1. Product’s relationship to the existing product line
2. Cost of development and introduction
3. Available personnel and facilities
4. Competition and market acceptance
15–15
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
New Product Development
Process (cont’d)

12. Product Testing
consumer reaction to the product.
15–16
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Building the Total Product
of identifying a product.
ngible)

13. 15–17
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or service or otherwise on a
password-protected website for classroom use.
Components of a Brand Identity15.3
Building the Total Product
(cont’d)
1. Select a name that is easy to pronounce and

14. remember.
2. Choose a descriptive name.
3. Use a name that is eligible for legal protection.
4. Select a name with promotional properties.
5. Select a name that can be used on several
product lines of a similar nature.
15–19
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Building the Total Product
(cont’d)
1. Be simple.
2. Design for visibility
3. Leave it open to interpretation.

15. 4. Be relentlessly consistent.
5. Recognize the importance of logo design.
6. Get good advice.
7. Don’t expect miracles.
15–20
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Protecting the Product Offering
distinguish a manufacturer’s product
exclusive right to use a
brand to identify a service.

16. 15–21
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Building the Total Product
(cont’d)
about product features, correct use, and care.
15–22
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.

17. Building the Total Product
(cont’d)
• Warranties
certain level or meet certain standards.
competitive practices, customer perceptions, legal
implications
15–23
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Product Strategy

18. marketing mix is used to achieve a firm’s
objectives.
mix—the
individual item
15–24
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Product Strategy (cont.)

19. lines in a product
mix
15–25
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
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copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or service or otherwise on a
password-protected website for classroom use.
Product Lines and Product Mix for 180s LLC
Source: Compiled from “180s,” http://www.180s.com, accessed
January 26, 2011.
15.4
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20. use as permitted in a license distributed with a certain product
or service or otherwise on a
password-protected website for classroom use.
Services Marketing Versus Goods Marketing15.5
Product Strategy (cont’d)
—a service, a
good, or both—offered to consumers in an
exchange transaction.
product or core service) and
complementary components (features).
15–28
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part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.

21. Product Strategy Options
markets
market
markets
market
◦ Multiple products/multiple
markets
Options
the targeted market to
become customers

22. customers to use
more of the product
customers to new
uses for the product
15–29
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
The Legal Environment

23. g
15–30
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
The Legal Environment (cont’d)
use of a registered non-generic name, symbol or
other mark to identify a product or service.
the U.S. Patent and Trademark Office (PTO).

24. the phrase “Registered in the U.S. Patent and Trademark
Office.”
15–31
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
The Legal Environment (cont’d)
make, use, or sell and invention.
or product’s
function

25. 15–32
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
The Legal Environment (cont’d)
of a product and its inseparable parts
inct
and new variety of plant
15–33
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a

26. password-protected website for classroom use.
The Legal Environment (cont’d)
publish, perform, display, or sell his or her works.
k was published
15–34
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.

27. Supply Chain Management
ans by
which a firm creates or develops a product
or service and delivers it to customers.
intermediary relationships to support such
movement.
15–35
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Supply Chain Management
(cont’d)

28. physical relocation of products.
guide the movement of a product.
15–36
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or service or otherwise on a
password-protected website for classroom use.
Channels of Distribution15.7

29. Channels in Supply Chain
Management
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copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or service or otherwise on a
password-protected website for classroom use.
Channels of
Distribution
Direct
Channel
Dual
Distribution
Indirect
Channel
Supply Chain Management
(cont’d)
the marketing function better.

30. 15–39
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Scope of Physical Distribution
(cont’d)

31. warehousing.
15–40
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copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Scope of Physical Distribution
(cont’d)
onsibility for Delivery
Terms
—F.O.B. origin, freight
collect.
15–41
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32. copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Scope of Physical Distribution
(cont’d)
ompanies
-effective
transportation, storage, and distribution services
to small companies.
-Party Logistics Firm (3PL)
ribution
services to companies that prefer to focus their efforts
on other facets of their business.
15–42

33. © 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Key Terms
agents/brokers
brand
brand image
brandmark
brand name
channel of distribution
common carriers
contract carriers
copyright
design patent
direct channel
distribution
dual distribution

34. indirect channel
merchant middlemen
patent
physical distribution (logistics)
plant patent
private carriers
product
product item
product life cycle
product line
product mix
product mix consistency
product strategy
service mark
supply chain management
sustainable competitive advantage third-party
logistics firm (3 PLs)
trade dress

35. trademark
utility patent
warranty
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as
permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for
classroom use.
Small Business
Management, 18e
Longenecker/Petty/Palich/Hoy
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license
distributed with a certain product or service or otherwise on a
password-protected website for classroom use.
Global Opportunities for Small
Business

36. Chapter 18
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copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or
service or otherwise on a password-protected website for
classroom use.
Learning Goals:
global enterprises.
companies to engage in global expansion.
for global businesses.
face.
to support international business efforts.
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product

37. or
service or otherwise on a password-protected website for
classroom use.
Small Businesses as Global
Enterprises
-Global Firms
cross-border business activities in mind
activity—small companies can build upon their
unique resources to become global competitors.
18–4© 2017 Cengage Learning. All Rights Reserved. May not
be copied, scanned, or duplicated, in whole or in part, except
for use as
permitted in a license distributed with a certain product or

38. service or otherwise on a password-protected website for
classroom use.
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or service or otherwise on a
password-protected website for classroom use.
Where in the World Are Entrepreneurial Companies Doing
Business?18.1
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use as permitted in a license distributed with a certain product
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Questions to Consider Before Going Global18.2
Questions Before Going Global

39. global?
ibility for and time
allocated to international operations,
organizational structure
18–7
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part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
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Questions Before Going Global
(cont.)
operations on local production
payback

40. 18–8
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part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
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Before Going Global
political forces in foreign markets.
(NAFTA)
design specifications that may vary
from country to country.
18–9
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41. part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
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Expanding into International Markets
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use as permitted in a license distributed with a certain product
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Factors in
Competing
Internationally
Gaining Access
to Resources
Capitalizing on
Special Features
of Location
Cutting
Costs

42. The Forces Driving Global Businesses
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use as permitted in a license distributed with a certain product
or service or otherwise on a
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Gaining Access
to Resources
Traditional motivation:
Find raw materials.
EMERGING MOTIVATION:
OBTAIN HUMAN RESOURCES.
Expanding Markets
Traditional motivation: Extend the product life cycle.
EMERGING MOTIVATION:
FIND BUYERS FOR HIGHLY SPECIALIZED PRODUCTS.
Cutting
Costs

43. Traditional motivation:
Reduce labor and transportation costs.
EMERGING MOTIVATION:
OBTAIN TARIFF REDUCTIONS
Capitalizing on Special Features of Location
Traditional motivation: Profit from unique local features,
EMERGING MOTIVATION:
FOLLOW LARGE CLIENT FIRMS THAT LOCATE ABROAD
Expanding into International Markets:
Making the Most of Experience
-unit savings gained from the repeated
production of the same good.
to improved work performance.

44. the expansion of production.
18–12
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part, except for use as permitted in a license distributed with a
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use as permitted in a license distributed with a certain product
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BRIC Markets18.3
Cutting Costs
business operations through contracts
with independent providers.

45. operations abroad.
18–14
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part, except for use as permitted in a license distributed with a
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Strategy Options for Global Firms
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use as permitted in a license distributed with a certain product
or service or otherwise on a
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International
strategic alliances
Importing
Global
Strategy

46. Options
Locating facilities
abroad
Exporting
International
franchising
Foreign
licensing
Strategy Options for Global
Firms
country to customers in another country.
-cost way to expand into international markets
activity.
18–16
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47. part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
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Strategy Options for Global
Firms (cont.)
roduct modification
methods
18–17
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part, except for use as permitted in a license distributed with a
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48. Strategy Options for Global
Firms (cont.)
to buyers in the home country.
vendor.
that can provide products or services
a firm needs to operate successfully.
18–18
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part, except for use as permitted in a license distributed with a
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49. Strategy Options for Global Firms
(cont.)
purchase the right to manufacture and sell a
firm’s products in international markets.
—the company buying the licensing rights
—the company selling the licensing rights
unit produced under a licensing contract
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for use as permitted in a license
distributed with a certain product or service or otherwise on a
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Strategy Options for Global Firms
(cont.)

50. age of products,
systems, and management services to a
firm in another country.
firm in different countries for the sake of
pooling resources and sharing the risks
of an enterprise.
18–20
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part, except for use as permitted in a license distributed with a
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Strategy Options for Global
Firms (cont’d)

51. -border acquisition
of a company located in another country
owned subsidiary formed
“from scratch” in another country
18–21
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part, except for use as permitted in a license distributed with a
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Challenges to Global Business
to negatively affect the performance of
businesses operating within.
conomic Risk

52. of the economy changes the business
environment in ways that hinder the
performance of firms operating there.
18–22
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part, except for use as permitted in a license distributed with a
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Challenges to Global Business
rate—the value of one country’s currency
relative to that of another country. Variations in
currency values affects the profitability of
international trade deals.
18–23
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53. part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
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use as permitted in a license distributed with a certain product
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Ease of Doing Business18.4
Assistance for Global
Enterprises
Small Business Guide to Exporting
nternational Trade Administration

54. 18–25
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part, except for use as permitted in a license distributed with a
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Assistance for Global
Enterprises (cont.)
Customers
18–26
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part, except for use as permitted in a license distributed with a

55. certain product or service or otherwise on a
password-protected website for classroom use.
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or service or otherwise on a
password-protected website for classroom use.
18.5 Trade Intermediaries Most Suited for Small Business
Financing Assistance for
Global Enterprises
other demand for payment when specified
conditions are met.
shipped and the title to that product has been

56. transferred.
18–28
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.
Financing Assistance for
Global Enterprises (cont.)
stration
-your-small-
business-exports-foreign-investments-or-projects.
18–29
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in
part, except for use as permitted in a license distributed with a
certain product or service or otherwise on a
password-protected website for classroom use.

57. Key Terms
bill of lading
born-global firms
counterfeit activity
cross-border acquisition
economic risk
economies of scale
exchange rate
experience curve efficiencies
exporting
foreign licensing
globalization
greenfield venture
importing
international franchising
international outsourcing
international strategic alliance

58. learning effects
letter of credit
licensee
licensor
offshoring
political risk
royalties
trade intermediary
trade mission
© 2017 Cengage Learning. All Rights Reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or service or otherwise on a
password-protected website for classroom use.