Stage 5
Business Analysis
The fifth
stage of the new product development process is the business analysis stage. It
is described by Kotler et al. (2013, pg. 281) as ‘a review of the sales, costs
and profit projections for a new product to find out whether they satisfy the
company’s objectives’, and therefore this shows, that this stage is based
around the financial side of the new concept. They also indicate that three key areas make up
this stage, which are sales, costs and profit projections, and for any new
concept you have to assess how each three will do. Firstly, Kotler et al. (2013,
pg. 281) go on to say that ‘to estimate sales, the company might look at the
sales history of similar products and conduct market surveys’; this will mean
you can assess how successful the concept will be. Secondly, costs will be vital because they
will determine where you are placed in the market, the more expensive; the more
high-end your product will be. Finally, profit projections will mean you can
assess if the concept will be a worthwhile investment in both the short-term
and long-term.
You can see
the business analysis stage in the emergence of the International Premier
Tennis League (IPTL) this year. The founder Mahesh Bhupathi, used cricket’s
Indian Premier League as a model to see how his shorter format could be a
success in the Asian market. He stated that ‘six years ago the IPL was launched
(in India) and it has become a rousing success’. This shows an example of
estimating sales by looking at a similar model. They also saw a chance to ‘tap
the potentially enormous market in Asia’, therefore they identified that a
concept such as this would have a huge demand and therefore sales of tickets
and merchandise would be considerable. They also planned to have sponsors to
pay the players’ salaries which had been planned to be between US$4m and US$10m.
In relation
to the new concept of relay Formula One, it is believed that this has the
potential to be profitable. James Allen of the Financial Times (2014) indicates
that the decline in TV audience in Formula One is ‘estimated at 10 per cent’,
therefore this shows that people are becoming uninterested and a new exciting
concept may attract the viewer’s attention again. It is hoped to thus attract
the already established Formula One teams, therefore they will have the cars
already to race. Firstly, races will only be held within Europe, therefore
travel costs will not be large, however, if the sport begins to grow, races
will begin to take place further afield and more sponsors will need to be
sought after. Ticket prices for the event will be considerably cheaper than
that of Formula One, which again will attract people to the event. It costs approximately
£170 pounds for general admission to the British Grand Prix, however, tickets
for relay Formula One will be available for around £70, which will be
considerably more attractive to the market.
Reference List
- Allen, J. (2014) Inequalities and fall in TV audiences take their toll. Available at: http://im.ft-static.com/content/images/8449b0ec-5f18-11e4-a807-00144feabdc0.pdf (Accessed: 10 December 2014).
- Formula One (2014) Formula One Tickets. Available at: http://tickets.formula1.com/ (Accessed: 10 December 2014).
- Kotler, P. & Armstrong, G. & Harris, L. & Piercy, N. (2013) Principles of Marketing. (6th edn) Harlow: Pearson.
- NDTV Sports (2013) Mahesh Bhupathi unveils plan for IPL-style tennis league. Available at: http://sports.ndtv.com/french-open-2013/news/208302-mahesh-bhupathi-unveils-plan-for-international-premier-tennis-league (Accessed: 10 December 2014).
- Pathak, H. (2014) The Coca-Cola IPTL: How and why did the revolutionary event come into being? Available at: http://essentiallysports.com/theorization-tee-itpl/ (Accessed: 10 December 2014).
