May 1998

Business management, a short summary

The company

The society has demanded the creation of companies by individuals and also by state organisations. The goal of the companies was to fullfill the several demands and needs which exists in a modern society. Individuals sensed a chance / opportunity and governments saw that there was a need to be satisfied in the society.

In the (social)-capitalistic world, which prevailed after the fall of communism, the companies have to be at best profitable or at least cover all the costs. Especially the companies in the private sector have to be profitable. They have to deliver a certain return on investments or capital to guarantee the continuation by the management / owners.

A very general description of the activities of company can be described as follows. A company is selling a product, this can be a physical product or a service offered to a customer. This product has to have a demand in the market. The nature of the demand has to be understood and researched. The product has to be developed and evaluated. The product has to be produced, marketed and sold. After it is sold and delivered most products demand a kind of after-sales support service.

This is in short the cycle of a company. A company has become an advanced organism to be succesfull in this cycle. Several departments have been created to do the job as good and fast as possible. But all of those departments are liable to be to focused on their own little part of the business or to make a mistake. This has to be prevented.

This article will deliver some ideas and thoughts about the product cycle in a given company. The company delivers specialised, high value, products. The approach given in this article is also valid for mass-market, low value, products but the R + D, Research + Development, and marketing departments require with these products a little different approach.

A point to think about

The starting point of a company is its vision. Before one can do something there has to be a guide after which can be acted. This is not necessarily a description of the activities or products but it will deliver a better understanding of the company.

You could think about one of the following proposals. As a company you want to improve a certain condition in the world. You want to make life easier. Or you want to be the technical leader in the community. Or, very basically but why all companies start, you want to make a living. With other words a certain profitability has to be achieved to make it worthwhile.

After the general direction is established you move to implement the vision into a strategic plan. The strategic plan will already consider the activities you are going to do. A synergy has to be created between the available means and the goal you want to reach.

The strategic plan demands the creation of a tactical plan. Where as the vision thing is the responsibility of the board of directors, CEO, CFO and COO level, the strategic plan has to be formulated by the board of directors with support of the management of the several departments. The tactical plan is in need of influences of an even wider group, essentially the people who have to do the job. The R + D, marketing, production, sales and also the bookkeeping/controlling departments will have to participate in the tactical plan. They know what is possible and what will be economically viable.

The early inclusion of the people of the workfloor and the ones who are in immediate contact with the market will secure an opportunity to participate on present developments and limit unsuccessfull adventures into to good to believe projects.

The tactical plan will give an lay out of the actions which are needed to select a need in the society, to develop a product which will fullfill that need, the development and implentation of a focalized marketing campaign which is aimed to customize each product and finally the actual sale and delivery of the product. This has to be added by an after-sales support plan to react on dissatisfactions in the market and research to solve shortcomings and introduce new and attractive additions to the product. All these actions should ofcourse fullfill the demands of efficacy, to keep the cost to an absolute minimum.

The implementation

The R + D and the marketing department should assemble two task forces to respectivily observe and survey the market to look for hidden needs and for shortcomings at existing products.

To introduce new and exiting products it is necessary to observe the market or better the people and find out what they need but what does not exist yet. Socio-Psychological research into the behaviour of people has to be executed to find out what is missing. The involvement of the R + D department is necessary to evaluate if it is already existent in one or another way or if it is technically feasible.

Beside the work for the development of a new product the second task group with support of the sales department should examine the acceptance and use of the existing products. Production faults and possible improvements should uncovered as soon as possible to maintain and even improve the market chances of the product.

The company should try to introduce a three step product cycle. In step one, the existing product is marketed, in step two, an improved product with already some characteristics of the new development should be marketed and step three, the new designed product of a new generation should be marketed. It is important to keep ahead of the market. The three-step system forces you to keep up to date and deliver the best available on the market. And it assures that your competitors are not able to copy and market your product at a better price.

Finally the marketing department should market your product in such a way that it creates a brand name, recognizeable by all parties in the market. The creation of brand name will deliver a product the market wants and nearly automatically picks it if they see / want it. This will also limit copying of your product.

Beside the creation of a brand name every product should be offered to the right customers. Customization of products will tie the customer even closer to the product. A respected name should only cover one group / sector in the market. Every move to widen the group will mostly result in trade offs which will lead to a loss of original customers. The old customers will get dissatified but also a large part of the new customers will view it as unsatisfactory.

Conclusion

It is demanded from the management of a company to keep ahead of the market or better your competitors. The first condition to reach that is to offer a better product at a competitive price.

A lot can be done by a proper management of the company. The management process of vision – strategy – tactics should be taken care of. The financial side of the company should not get all the attention but also the productive and related parts should receive attention. The interaction between all parts of the company secures its existence.

The product and the products in the pipe line should be viewed as the centre of the company. They are responsible for the earnings of a company. The R + D, production, marketing and sales departments play an equal important role in the company.

There should be a lot of interaction in the company to optimise the production cycle. The development of new products demands the knowledge of R + D, marketing and the sales departments. The actual development / design needs the services of R + D and controlling departments. And at the sales and after-sales support of the product the Sales and Marketing departments are the natural partners.

All departments have their own tasks in which they should excel but the internal cooperation is just as important. The result of increased cooperation will not only be an increase in returns and creativity but it also will improve the business climate.

The company who wants to be successfull in the next millenium should be lean. But not that lean. A little bit of fat should be left to have some extra energy left to get the right product to the market. A company to lean will not have the stamina to launch the second and third cycle of the three-step production cycle we described above.

If to much attention is granted to the financial side, the search for new products and improvements on existing products will be viewed as a to expensive exercise. You should maximise the returns of each product but not to the level that competitors get an advantage out of a delayed introduction of new products. Therefore always follow the path of the three-step production cycle. Missing one cycle will increase the difficulty of doing business. It will not only require a change in the marketing and sales plan but it will degrade the company into a follower instead of the business / technology leader.