CHAPTER 4: PRODUCT/SERVICE DEVELOPMENT

4.1 INTRODUCTION
❖In Entrepreneur’s business, product/service development
is the complete process of bringing a new product or
service in the market and it's an ongoing practice in which
the entire business is looking for opportunities as new
products provide growth promise to businesses that allow
them to strengthen their market position.
❖Intense global competition, short product and technology
lifecycles, unpredictable consumer buying patterns, and
possible market stagnation makes new product
development a critical activity in most businesses.
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❖ Hence, this chapter explores the new product development
process and at the same time sketch outs the product
development procedure in reality where consideration of real
life situation and consumer insight are the main concern.
Besides, the chapter; considering (often entrepreneur),
because of their lack of understanding of intellectual
property, ignore important steps that they should have taken
to protect these asset; will describe all the important types of
intellectual property which have become unique problems to
the Patent and Trademark Office.
Chapter Objectives
After completing this chapter, students will be able to:
✓ Describe the Concept of Product and Services;
✓ List Product/Service Development Process; and
✓ Discuss the Intellectual Property Protection.
4.2 The Concept of Product/Service Technology
❑Many entrepreneurs find it difficult to identify a new
product/service or a new market opportunity. To start
and expand a small venture, an entrepreneur needs to
identify opportunities for domestic and/or
international expansion. As the new venture grows and
matures a need for different management skills can
occur as well as for a new infusion of the
entrepreneurial spirit (corporate entrepreneurship).
❑Entrepreneurs should effectively manages change by
continually adapting organizational culture, structure,
procedures, strategic direction, and products in both a
domestic and an international orientation to
accelerate organization's success.
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❑ Organization's success is dependent on customer satisfaction
and delight. Customer satisfaction is achieved through the
development of product successful and service, which have
all attributes required by the customer and do not only have
an attractive package design but should be also able to
provide robust performance. Thus, product design must be
practical enough for production and powerful enough to
provide a competitive advantage.
❑ The essence of product design is to satisfy customer and
maximizes the value for the customer at minimum cost. The
merchandise or service should also be able to meet primary
needs and desire of the customer. However, this may not
require development of new merchandise, but an
enhancement to existing merchandise or service.
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❑ Most companies apparently are introducing a wide variety of smaller,
more efficient, and more intelligent products, coupled with a leaner,
more efficient approach to operation. The goal is to create products
and services by identifying an emerging trend and to match that
trend with the right technology and understanding of the purchasing
dynamics.
❑ A successful startup depends on its distinctive and compelling
proposition. This is how merchandise or services stand out from the
competition and are compelling to the young company‘s customers.
❑ The merchandise or service will succeed most if it either eliminates
an existing pain or adds significant tangible benefits. It is easier to
sell/deliver a new merchandise/service that eliminates a well-known
existing pain, as opposed to sell an item or service that doesn’t
clearly solve a potential client’s pain.
4.3 Product/Service Development Process
❖ Once the opportunity is selected, and a business model has been
designed, the next step is to develop a commercial version of the
opportunity which in most cases is either a product or a service. One
of the essential characteristics of a successful business is exemplified
by its ability to continuously and rapidly develop new or improved
versions of existing products that deliver values more than customers
expect (Palgrave, 2019.)
❖ Product development is the process through which companies react
to market signals, respond to changes in customer demand, adopt
new technologies, foray into new areas, and ensure continuous
growth.
✓ It is a core process in achieving strategic objectives, renewal of the
company business model and deterring competition from displacing
the company from its market position.
✓ Product/service development process is part of the overall new-
venture creation process.
 4.3.1 STAGES OF NEW PRODUCT DEVELOPMENT PROCESS
❑ The various stages of new product development
process are explained next:
1. New Idea Generation
❖ The new product development process starts with search for ideas.
Companies have to encourage any new idea coming. The key to
successful domestic and international entrepreneurship is to
develop an idea that has a market for the new product/service idea
conceived. Some of the more fruitful sources of ideas for
entrepreneurs include consumers, existing products and services,
distribution channels, the federal government, and research and
development.
2. Idea Screening
❖ In the 2ndstage, the purpose is to lessen the number of ideas to few
vital/valuable ideas.
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❖ The ideas should be written down and reviewed each week by an
idea committee who should sort the ideas into three groups-
Promising Ideas, Marginal Ideas, and Rejects: Each promising
idea should be researched by committee member.
3. Concept Development and Testing
❖ Attractive ideas must be refined into fast able product concepts
since people do not purchase ideas but they buy concepts. Any
product idea can be turned into several product concepts.
❖ The questions asked probably include:-
Ω Who will use the product?
Ω What benefits should the product provide?
Ω When will people consume the produced?
❑ Concept Testing: - calls for testing product concepts with an
appropriate group of target consumers/customers, and then
getting the consumers’ reactions. At this stage, the concepts can
be in words or picture description.
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4. Marketing Strategy Development
❖After testing the new product concept, the concerned
body must develop a preliminary marketing strategy
plan for introducing the new product into the market.
❖The marketing strategy will undergo further refinement
in subsequent stages.
❖The marketing strategy plan consists of three parts:
1. Market size, structure, behavior;
2. Planned price, distribution strategy, and marketing
budget of the 1st year; and
3. Long run sales and profit goals, marketing mix strategy.
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5. Business Analysis
❖After management develops product concept and
marketing strategy, it can evaluate the proposals’
business attractiveness. Management needs to prepare
sales, cost and profit projections to determine whether
they satisfy the company's objective or not.
✓ Estimated Total Sales: -Management needs to estimate
whether sales will be high enough to yield satisfactory
profit.
✓ Estimating Cost and Profits: - After sales forecast, the
management should estimate the expected cost and
profit at various levels of sales volume. The company
can use other financial measure to evaluate the merit
of a new product proposal. The simplest is breakeven
analysis.
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6. Product Development
❖ If product concept passes the business test, it moves to R&D or
engineering to be developed to one or more physical version of
the product concept. Its goal is to find a proto type that the
consumers/customers see as embodying the key attribute
described in the product concept statement, Scientists must not
only design the products’ required functional characteristics but
also know how to communicate its psychological aspects through
physical cues and how will the consumer/customer react to
different colors, sizes, weight, & other physical cues.
❖ When the prototypes are ready, they must be put through
regroups functions and consumer/customer tests. Functional tests
are conducted under laboratory & field conditions to make sure
that the product performs safely and effectively (Durability, Speed,
Cost, etc). Consumer testing can take variety of forms, from
bringing consumers/customers into laboratory to giving them
samples to use in their homes.
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7. Market Testing
❖After management is satisfied with the products’ functional
and psychological performance, the product is ready to be
dressed up with the brand name.
❖The goals are to test the new product is more authentic
consumer/customer settings and to learn how large the
market is and how consumers/customers and dealers react
to handling, using and repurchasing the actual product.
Most companies know that market testing can yield
valuable information about buyers, dealers, marketing
program effectiveness, market potential & other matters.
Test Marketing yields several benefits include more reliable
forecast of future sale, and pretesting of alternative of
future sale.
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8. Commercialization
I) When (Timing):- In commercializing, market entry timing is critical.
If the company hears about a competitor nearing the end of its
development work, it will face three choices. These are: First Entry,
Late Entry Strategy, and Parallel Entry Strategy
II) Where (Geographical Strategy):- The company must decide
whether to launch the new product in a single locality, a
region/several regions, in the national/international market.
III) To Whom (Target-Market-Prospect):- Within the rollout markets,
the company must target its distribution and promotion to the best
prospect group.
IV) How (Introductory Markets Strategy):- To sequence and coordinate
many actives involved in launching a new product may/can use
network-planning techniques such as Critical Path
Scheduling (CPS).
4.4 Legal and Regulatory Frameworks for Entrepreneurs
❖ Since there are many options that an entrepreneur can choose in
setting up an organization, it will be necessary to understand all the
advantages and disadvantages of each regarding such issues as
liability, taxes, continuity, transferability of interest, costs of setting
up, and attractiveness for raising capital. Thus, Business and Legal
advice for these agreements is necessary to ensure that the most
appropriate decisions have been made.
❖ One of the challenges the novice entrepreneur will face as s/he goes
into business understands the regulatory environment which is made
up of numerous laws and regulations. To operate as a legal business
person and protect the business from unnecessary suits and
liabilities, the entrepreneur needs to understand the various laws
that govern his/her business. Following are the key legal issues for
the entrepreneur.
4.4.1 Intellectual Property Protection/Product/Service
Protection
❖ What is Intellectual Property?
▪ Intellectual Property which includes patents, trademarks,
copyrights, and trade secrets represents important assets to the
entrepreneur and should be understood even before engaging the
services of an attorney. Too often entrepreneurs, because of their
lack of understanding of intellectual property, ignore important steps
that they should have taken to protect these assets.
▪ Intellectual property is a legal definition of ideas, inventions, artistic
works and other commercially viable products created out of one's
own mental processes. In the same sense that real estate titles
establish ownership of tangible items, intellectual property is
protected by such legal means as patents, copyrights, and trademark
registrations. In order to enjoy the benefits arising from the exclusive
ownership of these properties, the entrepreneur needs to protect
these assets by the relevant law.
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▪ This is the reason why’ experts strongly recommend that
those in creative fields seek protection through official
registration of their intellectual properties.
4.4.1.1 Patents
▪ An entrepreneur who invents a new thing or improves an
existing invention needs to get legal protection for his/her
invention through a patent right.
▪ A patent is a contract between an inventor and the
government in which the government, in exchange for
disclosure of the invention, grants the inventor the exclusive
right to enjoy the benefits resulting' from the possession of
the patent.
Utility Patent: A utility patent protects any new invention or
functional improvements on existing inventions.
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Design Patent: This patent protects the appearance
of an object and covers new, original, ornamental,
and unobvious designs for articles of manufacture.
Like utility patents, design patents provide the
inventor with-exclusive right to make, use and/or
sell an item having the ornamental appearance
protected by the patent.
This patent is appropriate when the basic product
already exists in the marketplace and is not being
improved in function but only in style. These
patents are particularly important to companies
such as shoe producers and product package design
firms that need to protect their ornamental designs.
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▪ A patent provides the owner with exclusive rights to hold, transfer,
and license the production and sale of a product/process.
▪ It is an intellectual property right and It is issued by government to
the inventor. This exclusive property right can be granted for a
number of years depending on the countries laws and type of
property. Patents are property rights that can be sold and
transferred, willed as well as licensed and at times used as
collateral.
❑What Can Be Patented Then?
Ω Processes: Methods of production, research, testing, analysis, and
technologies with new applications.
Ω Machines: Products, instruments, physical objects.
Ω Manufactures: Combinations of physical matter not naturally
found.
Ω Composition of matter: Chemical compounds, medicines, etc.
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4.4.1.2 Trademarks
❖ A trademark may be a word, symbol, design, or some
combination of such, or it could be a slogan or even a
particular sound that identifies the source or sponsorship of
certain goods or services.
❖ These are distinctive names, marks, symbols or motto
identified with a company’s product or service and registered
by government offices.
❖ Unlike the patent, a trademark can last indefinitely, as long as
the mark continues to perform its indicated function.
❖ Trademarks unlike patents are periodically renewed unless
invalidated by cancellations, abandonment, or other technical
registration/renewal issues.
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❑Benefits of a Registered Trademark
✓ It provides notice to everyone that you have exclusive rights
to the use of the mark throughout the territorial limits of the
country.
✓ It entitles you to sue in federal court for trademark
infringement, which can result in recovery of profits,
damages, and costs.
✓ It establishes incontestable rights regarding the commercial
use of the mark.
✓ It establishes the right to deposit registration with customs to
prevent importation of goods with a similar mark.
✓ It entitles you to use the notice of registration (®).
✓ It provides a basis for filing trademark application in foreign
countries.
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4.4.1.3 Copyrights
❖Copyright is a right given to prevent others from
printing, copying, or publishing any original works of
authorship.
❖Copyrights provide exclusive rights to creative
individuals for the protection of literary or artistic
productions. It protects original works of authorship
including literary, dramatic, musical, and artistic works,
such as poetry, novels, movies, songs, computer
software, and architecture and they pertain to
intellectual property.
❖Usually copyrights are valid for the life of the inventor
plus a few decades.
 4.5 The Intellectual Property System in Ethiopia
❑Ethiopia became a party to the convention establishing the
world Intellectual Property Organization (WIPO) in
February 1998 right after some time the Country had
joined the Nairobi Treaty on the Protection of the Olympic
Symbol in 1981. It is a member of the Treaty establishing
the Common Market for Eastern and Southern Africa
(COMESA) which was formed in 1994, the Partnership
Agreement between members of the African, Caribbean
and Pacific (ACP) Group of States and the European Union
(EU).
❑The Ethiopian Government established the Ethiopian
Intellectual Property Office in the year 2003 containing the
understated Objectives:-
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➢To facilitate the provision of adequate legal
protection for and exploitation of intellectual
property in the country;
➢To collect, organize and disseminate technological
information contained in patent documents and
encourage its utilization;
➢To study, analyze and recommend policies and
legislation on intellectual property to the
government; and
➢To promote knowledge and understanding of
intellectual property among the general public;
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❑The existing laws and directives in Ethiopia in the field of
Intellectual Property (IP) are the Patent Proclamation and
the Implementing Regulation, the Copyright and Related
Rights Proclamation and the Trademark Registration
Directive. According to the proclamation in order to be
granted a patent, an invention must fulfill three conditions-
(1) it must be new- It should never have been published or
publicly used before;
(2) It should be capable of industrial application- It must be
something which can be industrially manufactured or
used; and
(3) It must be "non-obvious”- It should not be an invention
which would have occurred to any specialist working in
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❑ The proclamation excludes the following from patentability:-
→ Inventions contrary to public order or morality;
→ Plant or animal varieties or essentially biological processes for the
production of plants or animals; and
→ Schemes, rules or methods for playing games or performing
commercial and industrial activities and computer programs;
→ Discoveries, scientific theories and mathematical methods; and
→ Methods for treatment of the human or animal body by surgery or
therapy as well as diagnostic methods practiced on the human or
animal body.
❑ Rights of a patentee include making, using and exploiting the
patented invention in any other way. Any person who wants to use
the patented invention has to get the authorization of the
owner/inventor. The patentee does not have import monopoly right
over the products of the patented invention in Ethiopia.
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❑ There are certain limitations of rights of the patentee included in
the proclamation such acts done for non-commercial purposes;
✓ The use of the patented invention solely for the purposes of scientific
research and experimentation;
✓ The use of patented articles on aircraft, land vehicles or vessels of
other countries which temporarily or accidentally enter in to the air
space, territory or waters of Ethiopia;
✓ Acts in respect of patented articles which have been put on the
market in Ethiopia by the owner of the patent or with his/her
consent;
✓ The use of the patented invention for national security, nutrition,
health or for the development of vital sectors of the economy,
subject to payment of an equitable remuneration to the patentee;
✓ The duration of a patent is 15 years which may be extended for a
further period of five years if proof is furnished that the invention is
properly worked in Ethiopia.
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❖Trademark Directive is issued in the country in 1986
with the following objectives in that it helps:-
➢ To centrally deposit trademarks which are used by local
and foreign enterprises to distinguish their goods or
services;
➢ To distinguish the products or services of one
enterprise from those of other enterprises and prevent
consumers from being victims of unfair trade practices;
➢ To provide information on trademark ownership and
right of use when disputes arise between parties;
➢ To provide required information on trademarks to
government and individuals; and
➢ Protection is granted after publication of cautionary
notice;
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❑ Copyright is protected on the basis of the copyright and related rights
proclamation issued in 2004. The proclamation gives protection to
literary, artistic and scientific works which include books, pamphlets,
articles, computer programs and other writings; speeches, lectures,
addresses, sermons, and other oral works; dramatic, dramatic-
musical works, pantomimes, choreographic works, and other works
created for stage production; musical works, with or without
accompanying words; audiovisual works and sound recordings works
of architecture; works of drawing, painting, sculpture, engraving,
lithography, tapestry, and other works of fine arts; photographic and
cinematographic works; illustrations, maps, plans, sketches, and
three dimensional works related to geography, topography,
architecture or science; derivative works; and collection of works,
collection of mere data (databases) whether readable by machine or
other form.
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❑The Proclamation gives protection to:
▪ Works of authors who are nationals of or have their
habitual residence in Ethiopia;
▪ Works first published in Ethiopia; or works first
published in another country and published within
thirty days in Ethiopia;
▪ Audio-visual works whose producer has his
headquarter or habitual residence in Ethiopia; and
▪ Works of architecture erected in Ethiopia and other
artistic works incorporated in a building or other
structure located in Ethiopia.
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❑The author of a work shall be entitled to protection, for
his work upon creation where it is an original work; and
written down, recorded, fixed or otherwise reduced to
any material form. Quality of the work and the purpose
for which the work may have been created is not taken
in to consideration.
❑The rights of performers, producers of phonograms and
broadcasting organizations are also protected by law.
❑Copyright is protected for the life of the author plus
fifty years.
❑Fifty years for the rights of performers and producers
of sound Recordings and 20 years for the rights of
broadcasting organizations.