Determinants of Competitor’s Response Time to the New Product in the Market of Nepal

This study is concerned with competitor’s response time determinants to a new consumer product in Nepalese market. Products are in high competitive situation. New–to-the-world product is facing more competition complexities. Channels, market research, sales force and public opinions are the main source to get the market information of new products. Consultant’s service is main helping hand to increase competitive strength. Financial and non-financial measures are applied to increase the competitive ability. Both qualitative and quantitative methods are in use to measure competitiveness of new products. The competitor’s response time to most of the new products is less than six months after commercialization. Types of users are also in focus while developing the new products. Cut-throat competition is emerging in the market and firms are not able to defend fairly. IN TODAY’S GLOBALLY COMPETITIVE world, successful new product planning and development is a challenge to the industry. It is a creative function within a business organization. Modern concept of new product planning and development is the involvement of multi-disciplinary team from idea generation to commercialization. In Nepal, competition is increasing day by day. Many products of same use are available in the market. Product failure rate is also increasing. Many products are in sick situation. So the study is focused to know that “what are the determinants of competitor’s response time to a new product in Nepalese market?” 1. Study Methods The study has been based on descriptive (survey cum analytical) research design. Case study approach was followed on different consumer products. It is based on a field survey through questionnaire administration and personal interview. Sample products covered are 10 Soap, 8 Biscuit, 6 Noodles, 5 Cigarettes and 3 Cold Drinks. Thus total sample products are 32 from 18 different manufacturing units of Nepal. Sources of information are mainly 18 line managers and 13 top-level management personnel. The line managers represent 32 new products and the top management represents 23 new products. All the tables are not presented but they are available with the writer. 2. Theoretical Framework In many product markets, particularly where cut-throat competition exists, virtual wars are being fought. New products are being launched with the support of new campaigns and new brands promoted to capture a greater portion of the market share. Improvements are advertising, communications, deliveries, and after-sale-service, among others, are all an outcome of the new competitive market pressure (Majumdar 1993). The marketing strategy literature suggests that the performance of a new entry (new brand, product, service, or firms) depends on: (1) the competitive environment facing the entry, (2) capabilities of the entrant and (3) the market entry strategy. The size of the market The Journal of Nepalese Business Studies V l. II No. 1 Dec. 2005 The Journal of Nepalese Business Studies 34 of the brand is significant in determining the level of sales and it is the indicator of the longterm performance of the brand (Gatignon, Weitz and Bansal 1990). In the current highly competitive market place, firms are under increasing pressure to develop new products and services that are timely and responsive to consumer needs (Olson, Walker and Ruekert 1995). Product development (or innovation) can contribute to a number of important business objectives. Four objectives are particularly well served by product development: first, building strategic competitive advantages in target markets; second increasing market share by offering products which are preferred above those of competitors; third, increasing profitability by introducing more profitable lines; fourth, building a reputation for technical excellence by introducing state-of-the-art products (Johne 1994). So market development including competition is also closely related with new product development. Study of successful product development practice in American and British companies indicated that success results from proactive market interpretation, rather than form lamely following the suggestions of key customers (Johne and Snelson 1990). Product development activities may be four types. They are routine, radical, extended and new style. Routine product development is concerned with old product development mainly for an existing customer base. Guidance on how much updating on product is required comes routinely from feedback, from the external market in the form of representatives report and also internally from technical specialists responsible for applying the latest product technology. Products of the business may be regularly updated on the basis of R& D inputs. Radical product development is concerned with the development of products with completely new attributes, predominantly for existing customer groups. Skillful attention to the internal and external market is necessary for the product success. Extended product development is concerned with adding product lines, which will allow a business to compete in predominantly new target markets. Successful extended product development is focusing on likely market demand or success of product is measured in terms of market success. New style product development is concerned with the development of radically new products for gaining access to new customer groups. Its aim is to reshape an existing market into a new one. Success is possible by skillful combination of process, offering and market development (Johne 1994). Rapid changes in technology and market demand and among the factors that are increasing the pressure on firms to accelerate the product development cycle itself (Liberator & Stylianou 1995). Success in new product introduction can be critical for a firm to maintain its competitive position. However, a variety of difficulties and uncertainties are associated with the new product development process. Firms invest in R & D knowing that only a small percentage of promising product ideas will reach commercialization. About one in seven concepts that enter new product development process becomes a commercial success; about half of the resources that U.S. industry spends on new product development lead to failed or canceled products (Booz Allen & Hamilton 1982). Dominant firms more than non-dominant firms perceive success in new product development as related to time-based competitive advantage-being first being fastest rather Determinants of Competitor’s Response Time 35 than to product based competitive advantage (Stalk and Hout 1990). New-to-the world products generally face a more hospitable market environment than product modifications. New-to-the world products have little competition and potential customers have more reasonable expectations than for product modifications that are generally entering more mature markets and face more rigorous customer expectations (Choffray & Lilien 1984). Listening to the voice of external and internal market can be done passively or actively. Passive listening involves reacting to market stimuli. Active listening involves seeking and checking information proactively from market stimuli. Building on these concepts allows one to speculate that "reactive" listening on the part of a supplier is best suited to routine product development while "proactive" listening is best suited to new style product development. Skillful listening to external and internal market will allow a business to select and affect the type or types of product development which are best suited to meeting business objectives (Johne 1994). Competitor response was found to be faster in markets characterized by higher growth rates. Growth markets are important, and competitors are likely to feel the need to take hasty action in response to a new entrant. These results are consistent with Robinson (1988), who found that market growth had an influence on the magnitude of reactions in the first and second year after entry by a start-up business. When competitor reaction eventually does occur in a growth market, it is likely to be much more aggressive. Robinson (1988) also found that reactions to entry in growth markets tend to be more aggressive. Combined with our results, this suggests that in growing markets competitor reaction to the introduction of a new product is likely to occur sooner, and the reaction will be much more intense. In addition, given that market growth has a greater influence on the magnitude of reactions in the second year after entry than in the first (Robinson 1988); firms that introduce a new product into a growing market are advised to take advantage of this pattern in preparing a counter-response. In addition, a marginally more delayed response was found in markets characterized by the presence of high customer switching cost. We examined the ability and desire of the introducing firm and reacting firm to take action and/or engage in more heated competition if necessary. Results indicate that more delayed response can be expected for the lower market share of the reacting firm and the higher market share of the introducing firm. Competitors who have a high market share tend to react more quickly. However, Robinson (1988) found that relative size had no influence on the intensity of on incumbent’s reaction to a new firm's entry; that is; the intensity of the response was not influenced by relative size. Some large incumbents may respond and try to bully the entrant out of the market, and some fail to react. However, over study demonstrates that the size of the firm determines how fast it will respond if not how much. Finally, we examined factors relating to ability of the reacting firm. Both the typical length of time acquired to develop a new product and the frequency of product changes explain the response time. The variable appear critical because they have the largest coefficient (the co-efficient of new product development time is the largest of the standardized continuous variables, and the co-efficient of the dummy variable for infrequent product changes is the largest of all the dummy variables). The Journal of Nepalese Business Studies 36 Significant Predictors of Response Time Source: Bowman & Gatignon, 1996, p.52. 4. Determinants of Competitor’s Response Time Growing competition has made aware of the alternatives to the consumers who are in position to reject an inferior alternative. Many alternative products of same use are available in the market. If any new product is introduced in the market, the competitor begins to respond quickly. In this competitive pressure, the management should drive the new products by using proper tools and techniques. Thus, this section contains competitive position of new products, adequacy of financial resources to create competitive strategy, use of consultant to strengthen competitive ability, techniques used to increase competitive position, consideration of consumer needs, objectives of product development, consumers group, measurement of product success and competitiveness, response time of competitor, complexity of competition for new products and evaluation of competitors reaction. 4.1 Perception of Top Level Management Most of the consumer product industries (69.57%) have adequate financial resources for creating the competitive strategy of new product. But 52.18% (12 responses out of 23) feel that, competitor's product is the market leader, but 47.82% (11 respondents out of 23) feel that their own new product is the market leader. Sources used to get market information of new product are: (a) Channel of distribution (b) Task force (c) Market evaluation (research) (d) Field data (e) Consultant (f) Agency (g) Sales department (h) Salesman (i) Consumer behavior (j) Public opinion and (k) Media/ wholesaler. Strategic Importance of SBU for Reacting Firms ✦ Industry Characteristics ✧ Market structure Consumer's switching cost Market growth ✧ Competitive structure Industry concentration ✦ Organizational Position ✧ Market share position ✧ Capacity utilization Organizational Abilities of Reacting Firm ✦ Complexity of Product ✧ New Product Development Time ✦ Environmental Instability ✧ Rate of Techonological Change Position of Treatening Firm ✦ Firm Market Share ✦ Capacity Utilization Response