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FACULTY OF SCIENCE & TECHNOLOGY

MAY 2015

EBTD 4103

NEW PRODUCT DEVELOPMENT

MATRICULATION NO. : 850919085881001 IDENTIFICATION NO. : 850919-08-5881 TELEPHONE NO. : 012-278 1322 E-MAIL : mnoridham@oum.edu.my

LEARNING CENTRE : Shah Alam Learning Centre

TABLE OF CONTENTS PAGE NUMBER

1. INTRODUCTION OF THE SELECTED COMPANY ................... 2

2. LITERATURE REVIEW ON THE VARIOUS STAGES

IN A PRODUCT LIFE CYCLE …………………………………………………......... 3

3. ANALYSIS OF THE SELECTED PRODUCT

ACCORDING TO THE STAGES IN THE PRODUCT

LIFE CYCLE .......................................................................................... 5

4. RECOMMENDATIONS TO THE COMPANY

ON HOW THE COMPETITIVENESS OF THE

SELECTED PRODUCT CAN BE IMPROVED ................................. 8

5. CONCLUSION ......................................................................................... 8

6. REFERENCES ......................................................................................... 9

1. INTRODUCTION OF THE SELECTED COMPANY

1. The Nestlé company history

The history begins back in 1866, when the first European condensed milk factory was opened in Cham, Switzerland, by the Anglo-Swiss Condensed Milk Company.

In Vevey, Switzerland, our founder Henri Nestlé, a German pharmacist, launched his Farine lactée, a combination of cow’s milk, wheat flour and sugar, saving the life of a neighbor’s child. Nutrition has been the cornerstone of our company ever since.

“Henri Nestlé, himself an immigrant from Germany, was instrumental in turning his Company towards international expansion from the very start. We owe more than our name, our logo and our first infant-food product to our founder. Henri Nestlé embodied many of the key attitudes and values that form part and parcel of our corporate culture: pragmatism, flexibility, the willingness to learn, an open mind and respect for other people and cultures.” Peter Brabeck-Letmathe, Nestlé Chairman

The Anglo-Swiss Condensed Milk Company, founded by Americans Charles and George Page, merged with Nestlé after a couple of decades as fierce competitors to form the Nestlé and Anglo-Swiss Milk Company.

2. Nestlé in India

After more than a century-old association with the country, today, NESTLÉ India has presence across India with 8 manufacturing facilities and 4 branch offices.

NESTLÉ India set up its first manufacturing facility at Moga (Punjab) in 1961 followed by its manufacturing facilities at Choladi (Tamil Nadu), in 1967; Nanjangud (Karnataka), in 1989; Samalkha (Haryana), in 1993; Ponda and Bicholim (Goa), in 1995 and 1997, respectively; and Pantnagar (Uttarakhand), in 2006. In 2012, Nestle India set up its 8th manufacturing facility at Tahliwal (Himachal Pradesh).

The 4 Branch Offices located at Delhi, Mumbai, Chennai and Kolkata help facilitate the sales and marketing activities. The NESTLÉ India’s Head Office is located in Gurgaon, Haryana

2. LITERATURE REVIEW ON THE VARIOUS STAGES IN A PRODUCT LIFE CYCLE

Just as people go through infancy, childhood, adulthood and old age, so too do products and brands. And just as we thump from being deprived, to being overall contributors to our families or to society, and then back to being needy again over the course of our lives.

The theory of a product life cycle was first acquaint with in the 1950s to explain the expected life cycle of a typical product from design to undesirability, a period divided into the phases of product introduction, product growth, maturity, and decline. The goal of dealing a product's life cycle is to maximize its value and profitability at each stage. Life cycle is primarily associated with marketing theory.

The most simple life cycle in the industry and market area is product life cycle, which consider passageway of a product from the beginning of its birth to the last phase of its dead from sales revenue insight. Apparently such definitions are dependent on the industries and products. The stages of product life cycle are seen as: Introduction, Growth, Maturity, and Decline.

Introduction: The product is innovative in market and the customer is not very familiar with its concept or application, even sometimes the customers do not know their potential need to the product, but by the time the demand for the product is growing (Anderson, Zeithmal, 1984). In the introduction phase, sales may be sluggish as the company builds awareness of its product among potential customers. Advertising is vital at this stage, so the marketing budget is often substantial. The type of advertising depends on the product. If the product is intended to reach a physique audience, than an advertising campaign built around one theme may be in order. If a product is specialized, or if a company's resources are limited, then smaller advertising campaigns can be used that target very specific audiences. As a product matures, the advertising budget associated with it will most likely shrink since audiences are already aware of the product

Growth: The product is introduced to the market so there is growing number of eager customers who want to have the product, the competitors are known with the product and they are trying to enter to the market as well, Therefore the company have to keep develop its supply chain, platforms, technologies and variations (Anderson, Zeithmal, 1984). The growth phase occurs when a product has survived its introduction and is beginning to be noticed in the marketplace. At this stage, a company can decide if it wants to go for increased market share or increased profitability. This is the boom time for any product. Production increases, leading to lower unit costs. Sales momentum builds as advertising campaigns target mass media audiences instead of specialized markets (if the product merits this). Competition grows as awareness of the product builds. Minor changes are made as more feedback is gathered or as new markets are targeted. The goal for any company is to stay in this phase as long as possible.

Maturity: From Cox (1967) study, the peak of sales revenue is the beginning of “maturity stage” and it ends with “commercial death” which means the sales revenue reduction by 10-20% of the peak point in a monthly trend. In the stage the customers are completely familiar with the product and demand is almost constant. Though, product development, cost reduction, promotional strategies and better services or quality could gain better market share for the company, as there is still a big competition in the market area. (Anderson, Zeithmal, 1984). At the maturity stage, sales growth has started to slow and is approaching the point where the inevitable decline will begin. Defending market share becomes the chief concern, as marketing staffs have to spend more and more on promotion to entice customers to buy the product. Additionally, more competitors have stepped forward to challenge the product at this stage, some of which may offer a higher-quality version of the product at a lower price. This can touch off price wars, and lower prices mean lower profits, which will cause some companies to drop out of the market for that product altogether. The maturity stage is usually the longest of the four life cycle stages, and it is not uncommon for a product to be in the mature stage for several decades.

Decline: Saturation or decline stage is between “Commercial death” and “ Catalogue/market Death” Commercial death is the time that the sales revenue decrease with 10-20% monthly and catalogue death is the time that company stop delivering the product (Cox, 1967). This occurs when the product peaks in the maturity stage and then begins a downward slide in sales. Eventually, revenues will drop to the point where it is no longer economically feasible to continue making the product. Investment is minimized. The product can simply be discontinued, or it can be sold to another company. A third option that combines those elements is also sometimes seen as viable, but comes to fruition only rarely. Under this scenario, the product is discontinued and stock is allowed to dwindle to zero, but the company sells the rights to supporting the product to another company, which then becomes responsible for servicing and maintaining the product.

3. ANALYSIS OF THE SELECTED PRODUCT ACCORDING TO THE STAGES IN THE PRODUCT LIFE CYCLE

MAGGI Noodles is one of the largest & most loved food brands that defines the Instant Noodles category in India. It’s an all-time favorite that while it is loved by many, everybody calls it their own: the noodles that are intertwined in the most memorable experiences of many people

1. Introductory Stage

The introduction stage is the most important stage in the Product Life Cycle. In this stage the product is initially promoted. Maggi’s Introduction Stage dates back to the 1982 when it had entered the Indian market. The product was launched keeping in mind the working women and children. Maggi was a pioneer in the instant noodles market. Nestlé India Ltd. (NIL), the Indian subsidiary of the global FMCG major, Nestlé SA, introduced the Maggi brand in India with its launch of Maggi 2 Minute Noodles, an instant noodles product. With the launch of Maggi noodles, NIL created an entirely new food category - instant noodles. Because of its first-mover advantage, NIL successfully managed to retain its leadership in the instant noodles category Full-Scale Launch of New Products

2. Growth Stage

The product starts to grow in the Growth stage. In this stage large amount of money is spent on advertisement. Maggi entered into its Growth Stage in the early half of the 1990’s where a huge amount of money was spent by Nestle to make it a household name. Maggi was accepted as a ready to eat food. There was a drastic increase in sales and profit too began to rise. Maggi Noodles brand was in their growth stage in 1990s till late 2006 with brief period of declining sales due to faulty product innovation and formulae change from conventional Maggi noodles in the form of launch of Dal Atta Maggi Noodles to noodles similar to Top Ramen Noodles, noodles from stable of Indo Nissin Food Ltd. Maggi was quick to revert back the original formulae to minimize damage. There was change in packaging for different variants of the noodles and launch of new variants. Price was kept competitive with other launches in the market like Nissin's Top Ramen. Maggi was launched in different packages of 50 and 100 gms to increase the consumer base and attract the first time consumers. Variants like Cuppa mania was launched to cater to mobile population, office goers. Maggi also offering freebies like collectible foreign stamps, other freebies with Maggi packs.

3. Maturity Stage

The third stage in the Product Life Cycle is the Maturity Stage. After the completion of the Introduction and Growth Stage a product spends a great deal of time in the Maturity Stage. During the latter half of the 1990’s Maggi faced tough competition from Top Ramen. Large promotional offers were made and many new players also entered the market. Maggi currently is in its Maturity Stage. The competition has led to gradual fall in market share vis-a-vis other new entrants. New players are innovating in product packaging like launching noodles in circular shape so as to enable users to enjoy their noodles in full length.

4. Decline Stage

Nestle India is neck-deep in trouble. And that's not just because Maggi Noodles is staring at a nation-wide ban, or the fact that it's being tested across different countries, but because its competitors are capitalizing on probably what one might call their 'worst phase'. The Food Safety and Standards Authority of India (FSSAI) may have pulled up their socks but so have other brands of instant noodles. In May 2015, Food Safety Regulators from Uttar Pradesh, India found that samples of Maggi 2 Minute Noodles had unexpectedly high levels of monosodium glutamate, as well as up to 17 times the permissible limit of lead. On 3 June 2015, the New Delhi Government banned the sale of Maggi in New Delhi stores for 15 days due to these findings. On June 4, 2015, the Gujarat FDA banned the noodles for 30 days after 27 out of 39 samples were detected with objectionable levels of metallic lead, among other things. Assam had banned sale, distribution and storage of Maggi's "extra delicious chicken noodles" variety for 30 days since June 4, 2015 after tests carried out at the state public health laboratory concluded the particular variety to contain added MSG and excessively high lead content. Some of India's biggest retailers like Future Group which includes Big Bazaar, Easyday and Nilgiris have imposed a nationwide ban on Maggi. Thereafter multiple state authorities in India found an unacceptable amount of lead and it has been banned in more than 5 other states in India

4. RECOMMENDATIONS TO THE COMPANY ON HOW THE COMPETITIVENESS OF THE SELECTED PRODUCT CAN BE IMPROVED

To gain maximum leverage in terms of profit the company should pay emphasis on segments with age groups 25-35 and above. Advertising is the key to success. Targeting these segments will not only enhance the company‘s profit margins but also it will leverage the brand image of Maggi. The company should advertise its products by depicting attributes related to Health like Nutrition values, % of Vitamins, Proteins etc. This would help in customers perceiving the product as Healthy.

Venture into other food products like chips, chocolates etc. under its sole brand name would not only help in Brand extension but will also enhance Maggi‘s market share. Additionally, to increase the Innovation in Product, packaging and pricing of Maggi Noodles through investment in Market Research.

In order for Maggi and Nestle to pulled out from decline stage they must understanding that the food safety issue will leading to sharp attack on the brand and its image. To make it more acceptable to its stakeholders and consumers, the results should be made public through banners and advertisements wherever possible, besides of course the social media. In short it should start talking to consumers and demonstrate that it cares. Simultaneously, some such tests should be undertaken in labs of repute globally and some in their own labs. Ratification by external experts provide more credibility when a brand’s own image has been sullied.

5. CONCLUSION

The product life cycle helps a company understand the stages (introduction, growth, maturity, and decline) a product or service may go through once it is launched in the marketplace. The number and length of stages can vary. When a product is launched or commercialized, it enters the introduction stage. Companies must try to generate awareness of the product and encourage consumers to try it. During the growth stage, companies must demonstrate the product’s benefits and value to persuade customers to buy it versus competing products. Some products never experience growth. The majority of products are in the mature stage. In the mature stage, sales level off and the market typically has many competitors. Companies modify the target market, the offering, or the marketing mix in order to extend the mature stage and keep from going into decline. If a product goes into decline, a company must decide whether to keep the product, harvest and reduce the spending on it until all the inventory is sold, or divest and get rid of the product. Add new features to your existing product or service. By adding new features the company can potentially get former customers interested in their product again, or attract a market of new consumers. (2,405 words)

6. REFERENCES

Anderson, C.R. & Zeithaml, C.P. (1984), "Stage of the product life cycle, business strategy, and business performance", Academy of Management journal 27(1), pp. 5-24.

Cox, W.E. (1967), "Product life cycles as marketing models", Journal of Business, , pp. 375-384.

Grantham, Lisa Michelle. "The Validity of the Product Life Cycle in the High-tech Industry." Marketing Intelligence and Planning June 1997.

Hedden, Carole. "From Launch to Relaunch: The Secret to Product Longevity Lies in Using the Right Strategy for Each Stage of the Life Cycle." Marketing Tools. September 1997.

Kumar, Sameer, and William A. Krob. Managing Product Life Cycle In A Supply Chair. Springer Science and Business Media, Inc., 2005.

prezi.com,. 'Product Life Cycle Of Maggi'. N.p., 2015. Web. 5 June. 2015.