NEW PRODUCT INTRODUCTION IN THE FAST MOVING INDUSTRY- CRITICAL SUCCESS FACTORS - A CASE STUDY OF PZ CUSSONS GHANA LIMITED

By FRANCIS HOLLY ADZAH (GHANA) Supervisor: PROF. KWAKU APPIAH-ADU

This paper was submitted in partial fulfilment of the requirements for the Masters of Business Administration (MBA) degree at the Maastricht School of Management (MSM), Maastricht, the Netherlands, June, 2011.

Maastricht School of Management P.O. Box 1203 6201 BE Maastricht The Netherlands

DECLARATION

I Francis Holly Adzah do hereby declare that the work contained in this thesis is the result of original research and has not been submitted for a degree at any other university.

Kwaku Appiah- Adu Supervisor

Francis Holly Adzah Student

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DEDICATION

This thesis is dedicated to my dear lovely family (daughter Rosaline Awo Yayra Adzah, Son Andre Elikem K. Adzah and to my wife Ruth Abla Adzah for their support and encouragement through out my entire course. It is also dedicated to the Most High God who made all things possible and gave me the strength and knowledge to put this work together. The work is equally dedicated to all who contributed in diverse ways to make this project a success. .

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ACKNOWLEDGEMENT
The research journey has been a long and challenging one. It is not a journey that could have been taken alone and I must express my greatest appreciation to certain very important personalities for contributing their knowledge in their field of specialisation. Firstly, I would like to thank my supervisor, Prof. Kwaku Appiah-Adu, who has intelligently guided me along the way. His clear focus and sharp mindedness enabled me navigate the empirical potholes, and kept me on track. Secondly, I would like to thank Mr. Kwame Wiafie, the Commercial Director of PZ Cussons Ghana Limited, who has been the bedrock in finding very important information and sharing in-depth knowledge that helped me to successfully complete this work, not forgetting Mr. Jim Judson the Managing Director, Mr. Samuel Adanny, New Product Development Manager, Miss Shirley AcquahHarrison the Marking Manager of Home Care PZ Cussons Ghana Limited and Mr. Tidiane Asante the Marketing Manager for Personal Care PZ Cussons Ghana Limited. Last but not least, I thank all who helped in any way in the completion of this work.

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ABSTRACT

The increasing changes in consumer preferences in the Fast Moving Consumer Goods (FMCG) industry require continuous development and improvement in both new and existing products. The main thrust of the study is to take a look at the critical issues in introducing new products in the FMCG industry in Ghana with focus on PZ Cussons Ghana Limited. In order to put the issues into

perspective, primary and secondary data were gathered. The secondary data came from books, journals, articles and PZ Cussons Ghana Limited whereas the primary data was collected with the use of 250 questionnaires which were distributed to employees of the organization. The secondary data provided the theoretical background based on which a framework was adopted for the study. The study used qualitative and descriptive methods in analysing the data collected. The outcome of the analysis is illustrated in the form of frequencies, tables and figures. In analysing the questionnaire together with the literature reviewed, it was revealed that PZ Cussons Ghana Ltd has policies and procedures for introducing new products. However, before new products are introduced into the market some key stages such as market testing is not done. Secondly, over the past 5 years, PZ Cussons Ghana Ltd has introduced 10 new products on the market of which four have been successful. In addition, it was revealed that at PZ Cussons Ghana Ltd, various departments were involved in the development of a new product. This means, it was not only limited to those departments directly involved in the development of a new product. Based on the findings, the researcher made some recommendations for managements considerations. The researcher recommended that, before a product is introduced, a test market should be done to ascertain the extent of customer or consumer acceptance of the products before they are introduced into the market. This we believe will to a large extent help prevent product failure. The study concluded that, though PZ Cussons has policies and procedures concerning the introduction of a new product on the market, there are still certain lapses which need a second look if the company wants their products to be successful on the Ghanaian market.

LIST OF TABLES

Table 2.1 FMCG Category and Products15 Table 2.2 Project Review Matrix.33 Table 2.3 Standard Scheduled Timelines for NPD Delivery35 Table 4.1Frequency Distribution for Staffs In Charge of New Product Development46 Table 4.2 Staff Role/Position in their Department................47 Table 4.3 Length of Service in FMCG Industry in Ghana....48 Table 4.4 Departments involved in New Product Development...50 Table 4.5 Number of Product Introduced over the past 5 years53 Table 4.6 Performance of New Products...54 Table 4.7 Some of the successful products introduced..55 Table 4.8 Percentage of Company Sales of NPD over the last 5 years.58

LIST OF FIGURES
Figure 1.0 New Product Development6 Figure 4.1 Involvements in New Product Development...49 Figure 4.2 Involvement with exteranal parties..51 Figure 4.3 Introduction of New Product Developed unto the Market...52 Figure 4.4 Profitability of New Product Developed..57 Figure 4.5 New Product Developed (NPD) that met Target..58 Figure 4.6 Challenges of introducing new products...59

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TABLE OF CONTENTS DECLARATION ...................................................................................................................................... ii DEDICATION ......................................................................................................................................... iii ACKNOWLEDGEMENT ....................................................................................................................... iv ABSTRACT .............................................................................................................................................. v LIST OF TABLES ................................................................................................................................... vi LIST OF FIGURES ................................................................................................................................. vi CHAPTER ONE ....................................................................................................................................... 1 INTRODUCTION .................................................................................................................................... 1 1.1 BACKGROUND OF THE STUDY .............................................................................................. 1 1.2 STATEMENT OF THE PROBLEM ............................................................................................. 3 1.3 RESEARCH OBJECTIVES .......................................................................................................... 4 1.3.1 Specific Objectives ................................................................................................................. 4 1.4 RESEARCH QUESTIONS............................................................................................................ 4 1.4 THEORETICAL FRAMEWORK OF THE STUDY .................................................................... 4 1.5 RESEARCH METHODOLOGY ................................................................................................... 6 1.5.1 Research instrument................................................................................................................ 7 1.5.2 Personal Interviews ................................................................................................................. 7 1.5.3 Sampling Method.................................................................................................................... 7 1.5 SIGNIFICANCE OF THE STUDY ............................................................................................... 7 1.6 SCOPE OF THE STUDY .............................................................................................................. 8 1.7 LIMITATION OF THE STUDY ................................................................................................... 8 1.8 ORGANISATION OF THE STUDY ............................................................................................ 8 CHAPTER TWO .................................................................................................................................... 10 LITERATURE REVIEW ....................................................................................................................... 10 2.0 INTRODUCTION ....................................................................................................................... 10 2.1 NEW PRODUCT DEVELOPMENT IN THE FMCG SECTOR ................................................ 10 2.1.1 Definition of New Product ......................................................................................................... 10 2.1.2 What is Fast Moving Consumer Goods (FMCG) ................................................................. 14 2.2 NEW PRODUCT DEVELOPMENT IN FMCG SECTOR - DEVELOPED COUNTRIES ...... 16 2.3 NEW PRODUCT DEVELOPMENT IN FMCG SECTOR DEVELOPING AND EMERGING COUNTRIES .......................................................................................................................................... 16 2.4 SUCCESS FACTORS IN NEW PRODUCT DEVELOPMENT ................................................ 18 2.5 NEW PRODUCT STRATEGY AND PLANNING .................................................................... 19 2.5.1 Internal Knowledge Sharing and Communication ............................................................... 20 2.5.2 External Linkages and Collaboration ................................................................................... 21 2.6 NEW PRODUCT DEVELOPMENT PRACTICE ...................................................................... 22 2.7 NEW PRODUCT DEVELOPMENT PROJECTS AT PZ CUSSONS LTD .............................. 24 2.7.1 Idea Development at PZ Cussons Ghana Ltd ....................................................................... 24 2.7.2 Initiating the NPD Process.................................................................................................... 25 2.7.3 Going to New Activities Filter (NAF) Meeting ................................................................... 26 2.7.4 Project Kick off Meeting ...................................................................................................... 27 vii

2.7.5 Putting together the Project Team .............................................................................................. 28 2.7.6 Going to the Board for PDD Approval ................................................................................. 29 2.7.7 Presenting to the Board at Gate 1 ......................................................................................... 29 2.7.8 Presenting to the Board at Gate ............................................................................................ 30 2.7.9 Presenting to the Board at Gate 3 ......................................................................................... 31 2.7.9 Reviewing and closing the Project ....................................................................................... 32 2.7.1 Meetings /Presentation of Format ......................................................................................... 33 2.7.2 Reassignment ........................................................................................................................ 34 2.7.3 Out of Office ......................................................................................................................... 34 2.7.4 Board Reviews ...................................................................................................................... 34 2.7.5 Project Team Meetings ......................................................................................................... 34 2.7.6 Monitoring ............................................................................................................................ 34 2.7.7 Project KPI/Prioritisation Checklist ..................................................................................... 35 CHAPTER THREE................................................................................................................................. 38 RESEARCH METHODOLOGY AND THEORITICAL FRAMEWORK............................................ 38 3.0 INTRODUCTION ....................................................................................................................... 38 3.1 PROBLEM DEFINITION ........................................................................................................... 38 3.2 RESEARCH OBJECTIVE ......................................................................................................... 39 3.2.1 Specific Objectives ............................................................................................................... 39 3.3 THEORETICAL FRAMEWORK ............................................................................................... 39 3.4.1 Dependent Variable .............................................................................................................. 42 3.5 RESEARCH ASSUMPTIONS .................................................................................................... 42 3.6 RESEARCH LIMITATIONS ...................................................................................................... 42 3.7 RESEARCH QUESTIONS.......................................................................................................... 43 3.8 RESEARCH METHODOLOGY ................................................................................................ 43 3.8.1 Research Type ...................................................................................................................... 43 3.8.2 Data Collection Instrument and Source. ............................................................................... 43 3.8.3 Sampling Methods. ............................................................................................................... 44 3.8.4 Data Analysis Methods. ........................................................................................................ 44 CHAPTER FOUR ................................................................................................................................... 45 FINDINGS AND ANALYSIS................................................................................................................ 45 4.1 INTRODUCTION ...................................................................................................................... 45 4.2 INFORMATION ABOUT RESPONDENTS .............................................................................. 45 4.2.1 Staff Role/Position in their Department ............................................................................... 46 4.2.3 Length of Service in FMCG Industry ................................................................................... 46 4.2 PROCESSES INVOLVED IN INTRODUCING NEW PRODUCTS AT PZ CUSSONS GHANA LTD ......................................................................................................................................... 47 4.2.1 Involvement in New Product Development ......................................................................... 47 4.2.3 Departments involved in New Product Development .......................................................... 48 4.2.4 Involvement with external parties in the development of new product ................................ 49 4.2.5 Processes in developing new products at PZ Cussons Ghana Ltd ........................................ 50 4.2.6 The introduction of New Product unto the Market ............................................................... 51 4.3 NUMBER OF NEW PRODUCTS INTRODUCED; SUCCESS AND FAILURE OVER THE PAST 5 YEARS ...................................................................................................................................... 52 4.3.1 Performance of New Products introduced unto the Ghanaian Market ................................. 53 4.3.2 The profitability of new products over the past 5 years ....................................................... 56 4.3.3 Percentage of company sales of NPD over the last 5 years .................................................. 56 4.3.4 New products introduced which met targets ........................................................................ 57 viii

4.4CHALLENGES OF INTRODUCING NEW PRODUCTS UNTO THE GHANAIAN MARKET . 58 4.5POLICIES ON RESEARCH AND NEW PRODUCT DEVELOPMENT. ...................................... 59 CHAPTER FIVE..................................................................................................................................... 60 5.0 CONCLUSION, RECOMMENDATIONS AND FUTURE RESEARCH ................................. 60

CONCLUSION ....................................................................................................................................... 60 RECOMMENDATIONS ........................................................................................................................ 62 FUTURE RESEARCH ........................................................................................................................... 63 APPENDIX A QUESTIONAIRE........................................................................................................69 APPENDIX B - INFORMATION OF PRODUCT SUCCESS/FAILURE.73

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CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY

New products are the engines of growth and assets for several companies. Why are certain companies successful at new product development and introduction? And how do some businesses make it seem so easy. Companies that fail to develop and introduce new products in their market domain are putting themselves at great risk. Their existing products are vulnerable to the ever changing consumer needs and tastes, advances in technology, rising domestic and foreign competition and shortened product life cycles. It is in this light that it is important for companies to introduce new product to enable them stay in the industry and survive competition. Introducing new products comes with its associated risks, a point that businesses need to take into consideration. This is critical to the survival of a Product or Brand. PZ Cussons Ghana Ltd, one of the companies competing in the Fast Moving Consumer Goods industry (manufacturing), regularly develops and introduces new products and brands on the market . Some of these products have failed (Power Fist Energy Drink, Elephant Gold Detergent, Dish Scouring Washing Powder, just to mention a few). However there are some that have survived on the market after introduction (Carex Hand Sanitizer and Hand wash, Nunu Milk, Imperial Leather etc). Booz, Allen & Hamilton in Phillip Kotlers millennium edition (2000) define new products in six categories: New to the world products that create an entirely new market. A new product line that makes a company enter an established market for the first time. Additions to existing product lines that supplement a companys established product lines such as new package, size or flavour. Improvements and revision of products providing an improved performance or greater perceived value or replacing existing products. Repositioning existing products that are targeted to new markets segments. 1

New product development and introduction does not only happen in foreign countries but also in the Ghanaian business landscape which has witnessed numerous product introductions across several industries. One industry that has experienced so many new products in the past decade has been the FMCG industry. The reason why this industry continues to be flooded with new products is due to the ever changing needs and tastes of consumers who are becoming more sophisticated. Whether these new products have been successful is another area of interest. What processes do these new products go through before being introduced?

There is no doubt that the Fast Moving Consumer Goods (FMCG) industry in Ghana has seen lots of new products being introduced on the market. Introducing new products on the market has become the hallmark of this industry. Some of these products have names that strike a chord with their target users. Introducing new products involves a critical factor that leads to the success of the products and this is what most companies in Ghana and other parts of the world need to follow to succeed in the market. What actually drives its popularity is the buzz that is often created around it. Some of these products have enjoyed varying degrees of success while a few others have not. New product introduction in this industry is quite frequent but the question that one needs to ask is whether it goes through any formal process.

This study will seek to probe into critical success factors in the introduction of a new product. On the average, the success rate of new products is estimated to be lower than 10% and consumes significant portion of financial, managerial & technical resources of companies. It is estimated that only few new products go past their third year (Trott, 2008). Though the definition of success is a relative term, there is no doubt that the survival of many companies depends upon the success of their new products. More than 90% of overall successes come from few companies and a large number of companies together contribute to less than 10% of new product success (Trott, 2008). The successful companies approach new product introduction differently from others. Strategic and technological

choices based on customers current needs as well as future evolutions of needs, are important factors for new products.

1.2

STATEMENT OF THE PROBLEM

In todays competitive business environment, organizations are constantly looking for ways and means of outperforming their competitors. In the Fast Moving Consumer Goods Industry, the situation is not different. To be able to survive in such a turbulent environment, innovation and new product development is vital. Most corporations in the Fast Moving Consumer Goods Industry often introduce new products to replace existing products that have reached declining stage, improve their product portfolio, increase market share and sales growth targets and, improve profitability, among other objectives.

The challenge for corporate entities does not only rest in their ability to introduce new products into the market, but most importantly to make the product successful. Very often, the investment required for a new product development is so huge that organizations do not want to venture. Most organizations are realising that, investments sometimes made into the development and introduction of a new product are by far higher than the returns. Hence some organisations prefer to make modifications to existing products than developing a new product altogether. It is also time consuming trying to introduce a new product. This creates a situation where sometimes by the time the product is introduced it is no longer a new product. Constant change in consumer preferences also hinders the introduction of new products. Consumers are now becoming unpredictable as far as their preferences and choices are concerned making it difficult for organizations to predict their next line of action.

Research proves that several new products introduced by corporate entities fail to meet expectations; new products are successful if it is evident that the products have met the anticipated consumers needs, expected sales targets and market share (Journal of Marketing, Marketing Research and the New Product Failure Rate, C Merle Crawford, 1977). 3

1.3

RESEARCH OBJECTIVES

The main objective of the study is to look at the critical factors in introducing new product in Fast Moving Consumer Goods with special focus on PZ Cussons Ghana Ltd. However, the study will look at the following specific objectives: 1.3.1 Specific Objectives

1. To find out the process and how new products are introduced at PZ Cussons Ghana Ltd. 2. To assess the performance of new product introduced over the period of five (5) years at PZ Cussons Ghana Ltd. 3. To find out the challenges of introducing new products. 4. To find out PZ Cussons Ghana Ltds policies on research and new product development. This study will also look at whether there are any cross functional teams set up to develop new products.

1.4

RESEARCH QUESTIONS

The study provided answers to the following outlined questions. 1. What are the processes and how are new products introduced at PZ Cussons Ghana Ltd? 2. What is the performance of new product introduced over the period of 5 years at PZ Cussons Ghana Ltd? 3. What are the challenges of introducing new product? 4. What are PZ Cussons Ghana Ltds policies on research and new product development? 5. Are there any cross functional teams set up to develop new products?

1.4

THEORETICAL FRAMEWORK OF THE STUDY

The study finds the model developed by Iyer et.al (2006) as appropriate for the study. This model looks at both internal and external issues as far as introducing new products is concerned. The researcher is of the view that the success of new a product does not only lie with the organization but also with the countrys business environment. The model touched on issues to consider outside the organizations 4

perspective since the organization is informed on the kind of innovation as far as new product development and introduction is concerned. Internally the model looks at the type of innovation, new product development strategies, how to commercialize new products and success and failure. Looking at the objectives of the study, the researcher finds the model a perfect fit into what the study wants to achieve. The model will offer the researcher the opportunity to look at the internal and external issues pertaining to the organizational perspective of PZ Cussons which in this case will be in the Ghanaian context. The model will be discussed into more details in Chapter three explaining all the various factors considered by Iyer et.al in new product developments.

Figure 1.0 New Product Development

Source: Iyer et.al (2006) Factors affecting new product success

Contextual Factors - Infrastructure - Countrys Economy -Development Path - Market Size - Business and -Consumer Culture

Type of Innovation * Incremental * Radical

New Product Development Strategies

New Product Commercialization Strategies - Promotion Efforts -Distribution Efforts -Supply Chain Development -Strategic Control

New Product Success or Failure

1.5

RESEARCH METHODOLOGY

The study made use of both primary and secondary data. Secondary data was used to gather information on the literature on the topic. Sources such as internet, articles, magazines and text books were used. Primary data was used to gather fresh insights from the practioners who actually play key 6

roles in new product introductions. The study focused on PZ Cussons Ghana Limited as it achieved both success and failure with new products introduced over the years. However data collection was not limited to only this company but cut across a number of players with the aim of enriching the study.

1.5.1

Research instrument

A questionnaire was administered. These questionnaires were carefully designed to elicit the appropriate data. The questionnaire will use both closed-ended and open-ended questions. Since this study is an exploratory research, there were more open ended questions than close ended. Questionnaires was given to relevant respondents to fill after which interviews were conducted to probe answers in the questionnaire

1.5.2

Personal Interviews

This allowed for more questions and further probing uncovering the needed data. It also provided additional feedback on respondents. Interviews were conducted with respondents at the work premises.

1.5.3

Sampling Method

Sampling unit: The target group for this study include marketing managers, brand managers, new product development managers, project managers, new product committee members such as representatives from Research and development, Quality assurance, Manufacturing, Supply chain, Finance, Sales. Data was gathered from these individuals through questionnaires and personal interviews.

1.5

SIGNIFICANCE OF THE STUDY

The study is significant in the sense that it will help management of PZ Cussons Ghana Limited to know the critical factors for new product development success and the steps needed when introducing new products into the market and also to other FMCG companies, even though the study is case specific they can also draw inference from the PZ Cussons situation into their new product 7

development. To practitioners in the FMCG industry, the study will also serve as a reference point for them when they want to look at how to introduce new product in the FMCG industry. The study will also help lecturers and students in the field of marketing to know more about how to introduce new product especially in the FMCG industry. In addition, it can serve as a base for further research to be carried out to explore areas the study is not able to cover.

1.6

SCOPE OF THE STUDY

The research would use PZ Cussons Limited as a case study. The study would be focused on new product introduction and its critical success factors in the commercial department. The study would involve the various departments directly or indirectly concerned with the introduction of new product development.

1.7

LIMITATION OF THE STUDY

This research was done in a short time of one month after our term papers. Financing this project was demanding but it was managed. Getting data in Ghana is more often difficult since companies are reluctant to release data for fear that it may fall into competitors hands. They also consider some information as sensitive and for that matter should not be in the public domain.

1.8

ORGANISATION OF THE STUDY

The rest of the thesis is organised into five chapters:

CHAPTER TWO: LITERATURE REVIEW-This chapter reviews both theoretical and empirical view on new product development and introduction. The theoretical view will touch on what other writers in academics and practitioners of new product development have written. The empirical view will touch on how new products are introduced at PZ Cussons Ghana Ltd. 8

CHAPTER THREE: RESEARCH METHODOLOGY-This chapter will mainly be based on all the methods and tools used in carrying out the entire research. Topics to be treated include; the research design, population of the study, sampling and sample procedures, data gathering instruments and data analysis.

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS-This chapter looks at the outcome from the primary source of information received from respondents. The data received was analyzed in accordance with the research objectives and questions.

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS-This chapter is the last but not the least chapter. This brings the entire thesis to an end by summarising the entire work, draws conclusion and makes recommendations for future research project.

CHAPTER TWO LITERATURE REVIEW

2.0

INTRODUCTION

This chapter looks at the various issues on new product development and introduction in the Fast Moving Consumer Goods sector in developed and developing countries, and then narrows it to the case of PZ Cussons Ghana Ltd.

2.1

NEW PRODUCT DEVELOPMENT IN THE FMCG SECTOR

2.1.1 Definition of New Product Korotkov (2010) indicated that it is not easy to provide answer to this question at the first sight. Korotkov broke the phrase new product into two words: new and product He stated that a broad definition of product suggested by Oxford Dictionary is an article or substance that is manufactured or refined for sale (Oxford University, 2010). The origin of the word comes from Latin producere or bring forth. The meaning of the word new is produced, introduced or discovered recently or now; not existed before (Oxford University, 2010). However, nowadays, various agents of sales process (such as consumers, retailers, engineers, technologists, marketers, manufacturers, suppliers, distributors, stakeholders, state regulators) may have different views on what new product is (Trott, 2008). Korotkov considers the term in the marketing context. Also, as pointed out by McDonald (2007), the central idea of marketing is of a matching between a companys capabilities and the wants of customers in order to achieve the objectives of both parties. Consequently, the understanding of product in terms of marketing is largely focused on bridging companys technology and customer needs.

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The Marketing Glossary identifies a product as a manufactured good that possesses objective and subjective characteristics, which are manipulated to maximize the items appeal to consumers who purchase it to satisfy a given need (Clemente, 2002). Similar definitions are given by a majority of honourable academics (Armstrong et al, 2009, Kotler, 1998, Dibb et al, 1997, Trott, 2008). Also, nowadays it is a recognized fact that the nature of product is multi-faceted. Korotkov stated that a product is a complexity of tangible and intangible attributes, including functional, social and psychological utilities and need (Dibb et al, 1997). Despite minor differences in academic concepts about the key forces shaping the product, there is a consensus regarding tangible and intangible facets (Groucutt, 2005).

Korotkov indicated that Dibb et al (1997), Kotler (1998) and Armstrong et al (2009) suggest that there are three fundamental levels of product, each consisting of numerous sub-levels. These levels are: (1) Core product (the level of a product that provides the perceived or real core benefit or service), (2) Actual product, (a composite of the features and capabilities offered in a product: quality and durability, design and product styling, packaging and brand name), (3) Augmented product (support aspects of a product). With that, they point out that products may be organized in various forms in terms of trade marks (family brands, individual brands, brand extensions, product lines etc.), that can be of various depths and widths. Following the logic, one may conclude that if there are any changes in product components, the whole product can be considered new (i.e. it becomes a product innovation).

Korotkov indicated that this is not true in every case. So, what makes the product new, or, in another words, what makes it an innovation? As per The Marketing Glossary, innovation is the introduction of a product that is perceived to be new by the market (Clemente, 2002,). According to Trott (2008), the overwhelming majority of so-called new products are developments and variations of 11

existing formats. Korotkov stated that a research by Booz, Allen & Hamilton had shown that only 10% of new product introductions are new both to the market and the company (Booz, Allen & Hamilton, 1988). In that respect, a true successful innovation requires rather consumer acceptance and effective use of modern technology, than fundamental scientific discovery. Apple iPhone and Sony Walkman are examples of innovation where existing technology is repackaged to better satisfy consumer needs (Korotkov, 2010).

According to Booz, Allen & Hamilton (1988) cited in Trott (2008) product introductions may be classified into 6 groups: (1) New-to-the-world products (they are the first kind and create a new market. They are inventions that usually contain a significant development in technology, such as new discovery or manipulate existing technology in a very different way, leading to revolutionary new). New-to-the-firm products (although not new on the market, these products are new to the particular company. They provide an opportunity to enter an established market for the first time); (2) Additions to existing lines, Line extensions (this category is a subset of new product lines above); (3) Improvements and revisions to existing products (these new products are replacements of existing products in a firms product line); (4) Cost reductions (although this category may not be viewed as new from marketing perspective,it may be very significant from firms perspective, this is often driven by innovations in the process of production); (5) Repositioning, Re-branding (these new products are essentially the discovery of new applications for existing products. This has a lot to do with consumer perception and branding as technological development). A study by Griffin (1997) had revealed that, on the average, a majority of product introductions in western markets are improvements or revisions of existing products (34%), followed by additions to existing products (23%) and new 12

product lines (20%). 4% of launches are repositioning and 9% are cost-reductions. And, finally, only 10% are new-to-the-world, truly new innovations, thus new both to consumers and companies. A survey by Schneider (2004) had confirmed the numbers recorded by Griffin (1997): a portion of new-to-the-world product launches in the US accounts for only 14%.

Groucutt (2005) divides all products into two broad classifications, consumer and industrial. One particular group, convenience consumer products or so-called Fast Moving Consumer Goods (FMCG) falls within the scope of this study. Convenience consumer products (or FMCG) are inexpensive, frequently purchased and rapidly consumed products, that demand only minimum purchasing effort, purchased to satisfy personal or family needs (Dibb et al, 1997).

Many observers claim that pressures of global competition, the fragmentation of markets into smaller segments, and the rapid pace of change in many industries mean that companies product development capabilities are crucial determinants of business success (Brown & Eisenhardt, 1995; Clark & Fujimoto 1991; Schilling & Hill, 1998). As organizational success often depends on the timely and consistent introduction of new products, it is unsurprising that the new product development (NPD) literature contains many prescriptions for high-performance product development (Brown & Eisenhardt, 1995; Clark & Fujimoto, 1991; Crawford, 1992; Griffin, 1997; Lee, Lee, & Sonder, 2000; Loch, Stein, & Terwiesch, 1996; Parnaby, 1995).

However, there are many difficulties in assessing the effectiveness of development activities (Loch et al., 1996; Schumann, Ransley, & Prestwood 1995), aside from the difficulty of defining the concept of success in NPD itself. For example, recognizing that innovation has multiple dimensions, Gopalakrishnan (2000) distinguishes between rapid new product introduction, namely, innovation speed, and the number of new products introduced, that is, innovation magnitude. However, speed and magnitude do not capture the full extent of successful NPD. For example, an engineering function may be very good at rapidly developing numbers of new products, yet, these products may fail to meet 13

customers expectations and/or generate significant revenues and profit. Although studies have examined the relationship between product development processes and product success (Clark & Fujimoto, 1991; Cooper & Klein Schmidt, 1996), difficulties in assessing success meant that the focus is often on process performance, as indicated by measures such as lead times, engineering hours, and late design changes. Indicators of how the product is received in the market are often neglected in such studies.

2.1.2

What is Fast Moving Consumer Goods (FMCG)

Fast Moving Consumer Goods (FMCG) - alternatively known as consumer packaged goods (CPG) are products that are sold quickly and generally consumed at a regular basis, as opposed to durable goods such as kitchen appliances that are replaced over a period of years (www. securities.com). The FMCG industry primarily engages in the production, distribution and marketing operations of CPG. FMCG product categories comprise of food and dairy products, pharmaceuticals, consumer electronics, packaged food products, household products, drinks and others. Meanwhile, some common FMCG include coffee, tea, detergents, tobacco and cigarettes, soaps and others. The big names in this sector include Sara Lee, Nestle, Reckitt Benckiser, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Pepsi, and others Table 2.1 provides the categories and products of FMCG.

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Table 2.1 FMCG Category and Products

Category

Products

Food and Beverages

Health

beverages;

soft

drinks;

staples/cereals/ bakery products (biscuits, bread, cakes); snack food; chocolates; ice cream; tea; coffee; soft drinks; processed fruits; vegetables; dairy

products; bottled water; branded flour; branded rice; branded sugar; juices etc Household Care Fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor

cleaners, toilet cleaners, air fresheners, insecticides and mosquito

repellents, metal polish and furniture polish).

Personal Care

Oral care; hair care; skin care; personal wash (soaps); cosmetics and toiletries; dodorants; perfumes; feminine hygiene; paper products

Source: India Brand Equity Foundation (IBEF)

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2.2

NEW PRODUCT DEVELOPMENT IN FMCG SECTOR - DEVELOPED

COUNTRIES
Fast moving consumer goods (FMCG) are low priced items that are used with a single or limited number of consumptions (Baron et al., 1991). Francis stated that the FMCG [food and grocery] industry in the UK makes a significant contribution to the economy.

2.3 NEW PRODUCT DEVELOPMENT IN FMCG SECTOR DEVELOPING AND EMERGING COUNTRIES

VIETNAM According to the ISI Analytics (2010) FMCG in Vietnam urban area grew 19% in 2008 as a result of the rising number of young and sophisticated consumers. Approximately 50% of consumers in Vietnam are under the age of 30 and this figure is projected to increase to 70mn by 2018. In addition, the number of high income earners (from USD500 per month) has trebled over the past six years while the number of low income earners (under USD250 per month) decreased from 62% in 1999 to 9% in 2008 in major cities such as Hanoi and Ho Chi Minh City.

CHINA In China, statistics compiled by the China Chain Store and Franchise Association showed that 100 major FMCG firms reaped sales income of RMB530bn in 2006 after sound growth of 20% over figures obtained in the previous year. Sixteen out of the 100 examined firms are foreign-funded firms that garnered RMB168.8bn in sales volume. Improved efficiency also contributed significantly to average sales growth of 27% YoY. Meanwhile, the remaining 84 domestic firms reaped RMB360.8bn in sales after a 17% growth

16

NEW ZEALAND Also, ISI Analytics (2010) stated that New Zealands FMCG plays a vital role in its economy, in which it accounted for 5% of GDP, 31% of manufacturing GDP and 26% of manufacturing employment, while offering 63,000 full time jobs to its people. The nations export for food and beverage (F&B) trebled over the past 17 years, growing from NZD6.96bn in 1990 to NZD21.43bn in 2008. Dairy, meat, seafood, fruits and vegetables, wine as well as specialty food industries are among the main categories of the countrys F&B industry. Dairy industry that produces goods ranging from high quality basics (milk powders, butter and etc.) to specialty foods (Ice-cream, artisan cheeses and etc.)

MALAYSIA In Malaysia, total FMCG expanded 8.2% in 2007 with average prices increase by 4.2% as inflation kicked in. Malaysians continued to purchase convenient and indulgent products in spite of inflationary pressures, whereby new launches of ice cream and snacks as well as innovative products such as ice cream minis were signs of successful convenient indulgence. In addition, fabric softener and air freshener experienced notable growth. A survey that involved 1,000 Malaysians indicated that Malaysians continue to be loyal to brands despite the global financial slowdown, particularly in FMCG goods such as dairy products (76%), staple food (78%), soft drinks (61%), canned products (68%), healthcare (78%) and cosmetic products (74%)

INDIA In addition, research shows that Indias FMCG sector was valued at INR60, 000cr in 2004 after a growth of 4% during 2003-04 (www. ibef.org). According to a report by the Federation of Indian Chambers of Commerce and Industry (FICCI), several FMCG registered double-digit growth in value terms, for example, shaving cream (20%), deodorant (40%), branded coconut oil (10%), anti-dandruff shampoos (15%), hair dyes (25%) and cleaners and repellents (20%). On the contrary, negative growth of up to 8% was registered in products such as personal healthcare, laundry soaps, dish wash, toilet soap, toothpaste and toothpowder ( ISI Analytics, 2010). 17

In 2008, Indias FMCG sector had a value of INR86, 000cr and analysts projected a growth of 15% in 2010 (2009: 12%) as the economy shows signs of recovery. According to the FICCI-Technopak report, the FMCG sector will grow at a rate of 10-12% within the next decade to reach INR206, 000cr by 2013 and INR355, 000cr by 2018. The implementation of the proposed Goods and Services Tax (GST) and the less restrictive foreign direct investment (FDI) policies are expected to contribute to the growth of the FMCG sector to INR225, 000cr by 2013 and INR456,000 cr by 2018. With a total market size in excess of USD14.7bn, Indias FMCG industry is the fourth largest sector in its economy and plays a vital role in Indias socio-economic front with nearly eight million stores selling FMCG and employing some 25mn people as wholesalers, distributors and others. Besides that, the FMCG sector purchases nearly INR9,600cr worth of agricultural products and processes them into value-added products while the sector accounted for nearly 40% of the media industrys revenue (ISI Analytics, 2010).

Sales in the FMCG sector grew by a staggering 14.8% during the six-month period ended September 2009 but only expanded 7% during the two-month period ended November 2009. As a result of lower growth in the sector, Indias top 10 FMCG companies experienced deceleration in sales growth from 9.9% during the first half of the financial year (April-September 2009) to a growth of 3.3% during the October- November period. In addition, contributing factors such as price increase of 50-100% for most agri-commodities as well as higher crude oil prices caused operating margin to fall during the October-December quarter (ISI Analytics, 2010).

2.4

SUCCESS FACTORS IN NEW PRODUCT DEVELOPMENT

Suwannaporn and Speece (2010) indicated that there have been several thorough reviews of NPD. They stated that Brown and Eisenhardt (1995) summarized research on NPD success/failure factors into three broad research streams, which can roughly be characterized as: rational planning, communication webs, and disciplined problem solving.

18

Disciplined problem solving is essentially the imposition of a careful, structured, disciplined approach to the elements related to strategy and planning, and internal and external communication. Success factors listed in Poolton and Barclay (1998) roughly correspond, although they divide factors into tactical and strategic categories.

A firms strategy and process characteristics, as noted in Henard and Szymanski (2001), generally relate to these principles. The authors also discuss product characteristics, which are commonly examined success factors. But researchers who focus specifically on the NPD process are more likely to regard favourable product characteristics as a result of good NPD. Similarly, marketplace characteristics as described in Henard and Szymanski (2001) are more likely to be considered environmental situations, which the NPD process must assess and to which strategy must adapt.

2.5

NEW PRODUCT STRATEGY AND PLANNING

A strategic approach to NPD is frequently cited as critical (Suwannaporn and Speece, 2010). They stated that Brown and Eisenhardt (1995) call this rational planning. They noted that planning, frequent milestones, and senior management involvement are some of the critical issues. Poolton and Barclay (1998) see a whole set of elements in strategy and planning, including top management support, integration into strategy, but also flexibility. They asserted that strategic factors are even more important than tactical issues. The NPD process must be well planned (though this is a tactical issue in their schema), well implemented, and receive appropriate support. Successful NPD is seen as a balance between the discipline of a heavyweight leader, strong top management, and an outstanding product, relatively autonomous problem solving by the project team. Moorman and Miner (1998) point out that it is also critical that planning and strategy be flexible, so that companies can improvise during the NPD process to adapt to changing conditions and new information.

19

Focus is an important part of strategy. Henard and Szymanski (2001) categorize marketing and technological synergy as well as focused commitment of personnel R&D resources to NPD as strategy characteristics. Cooper and Klein Schmidt (2007) also cited the need for early strategic thinking about a new product, its role in the company, and its position. In addition, some of what they call a high quality process is about strategic issues, such as initially assessing and working out the proper fit with markets and technologies. Specifically for food NPD, Katz (1998) argues that focusing on core competency is an integral part of best strategy. Francis (2006) distinguishes a product independent phase of NPD, which encompasses all the activities, such as concept development and strategic planning, before actual R&D begins on the physical product.

Most of this work has been done in the West, but the modest amount of research performed elsewhere shows little difference in the basic concepts. Based on in-depth interviews and a study of food processing companies in Nigeria, Ilori et Al. (2000) cited both sufficient resource allocation to R&D and synergy between technical and product capabilities, i.e. core competencies, as two of three key success factors in NPD. Survey data by Jeong et al. (2006) shows that market orientation and technology orientation have a significant impact on NPD outcomes among Chinese companies.

2.5.1

Internal Knowledge Sharing and Communication

Strong internal communication is also a key issue in the success or failure of NPD. Indeed, Madhavan and Grover (1998) view NPD as a knowledge management process, in which information use and flow are critical. Moenaert et al. (2000) discuss the critical importance of managing communication flows in innovation teams. Cross-functional involvement in the teams has usually been considered an important aspect of this information flow for successful outcomes of the NPD process (Brown and Eisenhardt, 1995). Henard and Szymanski (2001) dispute this, based on weak results in the little quantitative research on NPD success factors. However, quantitative studies often simply measure the

20

mere presence of cross-functional teams. It seems likely that what really counts is their quality (Cooper and Klein Schmidt, 2007).

As noted above, Gresham et al. (2006) argue that differences in customer orientation across business functions makes cross-functional communication less effective. Fredericks (2005) pointed out that real involvement by team members depends on their understanding of the NPD process and their own roles in it. At any rate, few observers follow Henard and Szymanski (2001) in downgrading the role of crossfunctional involvement in NPD. Thus, van der Valk and Winstra (2005) place cross-functional orientation as a key element at both the strategy and operational levels, although many observers are more likely to regard interaction, communication, and information flow as mainly tactical and/or operational (Poolton and Barclay, 1998; Cooper and Kleinschmidt, 2007).

Most researchers include at least R&D, marketing, and manufacturing as the critical functions. Gresham et al. (2006) show the need for a shared commitment to market orientation, especially between marketing and R&D, under such conditions. Rochford and Rudelius (1997) shows that interdepartmental cooperation is important. Suwannaporn and Speece (2000) maintain that information flow and knowledge development are key issues in successful NPD, and that this flow should have several levels, within and across teams and across functions.

2.5.2

External Linkages and Collaboration

Much general research on NPD combines the internal and external dimensions of communication and information flow together (Brown and Eisenhardt, 1995; Poolton and Barclay, 1998). However, researchers who specifically address communication and information flow in any detail usually recognize external linkages as a distinct issue. For example, although Moenaert et al. (2000) focus on internal communication, they also cited strong communication with suppliers as being very important. Van der Valk and Winstra (2005) show that 21

supplier involvement works better when it is considered strategically. Sometimes suppliers have expertise in certain technologies, and the ability to implement a particular technology well may require supplier involvement (Mark-Herbert, 2002). More innovative projects, as well as conditions of high technological turbulence, make supplier involvement in NPD more critical (Ragatz et al., 2002; Petersen et al., 2003). Optimal coordination of such involvement depends on market and competitive conditions. For maximum effect, suppliers should be brought in early, and their involvement should be throughout all stages of NPD. However, there are different forms and degrees of supplier integration, depending on strategic and tactical considerations. The deepest involvement of suppliers in NPD projects usually requires stronger relationships (Comer and Zirger, 1997; Handfield et al., 1999; Petersen et al., 2003; Van Echtelt et al., 2006)

2.6

NEW PRODUCT DEVELOPMENT PRACTICE

Supportive Practices of successful product development, whether judged by product or process performance, may be analysed at numerous levels, the two main levels are the company and the individual development project (Clark & Fujimoto, 1991; Wheelwright & Clark, 1995). Good practice has been characterized by team-based organization and product champions (Markham & Griffin, 1998; Wheelwright & Clark, 1995), formalized (but flexible) design and development processes (Iansiti, 1995), cross-functional integration (Cooper, 1995; Dimanescu, 1992; Keller, 2001; McDonough, 2000; Tatikonda & Montoya-Weiss, 2001), high autonomy and authority on the part of project leaders (Clark & Fujimoto, 1991; Jassawella & Sashittal, 2000).

The organization of development teams within the NPD process has received extensive attention (Wheelwright & Clark, 1995). In particular, relatively autonomous multifunctional teams have been advocated as routes to effective product development. However, it is being recognized although project team organization is significant, so are appropriate techniques of planning, controlling, and communication (Clark & Fujimoto, 1991; Munns & Bjeirmi, 1996). Concurrent engineering has been 22

widely advocated as a tool for reducing time-to-market, same as the related practice of overlapping different stages of the development process (Birou & Fawcett, 1994; Haque & Pawar, 2001; Iansiti, 1995; Thomke, 1997), although McDermott and Handfield (2000) have recently suggested that concurrent development activities are not suitable for radically new projects.

Given that many products comprise a high proportion of components from suppliers, the ability to manage interactions with external parties is also clearly important. Good practice is said to involve the early integration of customer requirements into the design process (Gruner & Homburg, 2000; Huang, Soutar, & Brown, 2002; Khurana & Rosenthal, 1997; Neale & Corkindale, 1998; Souder, Buisson, & Garrett, 1997), the extensive involvement of suppliers (Birou & Fawcett, 1994; Handfield, Ragatz, Peterson, & Monczka, 1999; LaBahn, 2000; McGinnis & Vallopra, 1999), and the early inclusion of manufacturing personnel in concept generation (Ettlie, 1995; Srinivasan, Lovejoy, & Beach, 1997; Swink, 1999). Such actions facilitate the inclusion of downstream information at the front-end of the process, thereby decreasing the probability of problems at the latter part of the project, where solutions may be more costly.

Strong supplier relationships, is claimed to be linked to growth and profitability (Karlsson & Ahlstrom, 1996). There are a number of reasons for this. Supplier involvement in the cost-determining, early stages of the design process allows for customer access to suppliers technological and design expertise. Long-term commitment from a buyer to suppliers encourages suppliers to be more creative, to accept risk, and to make investments in technology and R&D relevant to that buyer. Close relationships facilitate communication of greater quality and consistency between buyers and suppliers than distant, antagonistic ones. (Birou & Fawcett, 1994). Cusumano and Nobeoka (1998) emphasized the need to consider product development projects as part of a portfolio. They argued that good practices at project level, such as those described above, should be combined with a multiproject thinking, allowing organizations to make the best out of potential connections between projects that share technologies and components. 23

Some authors have combined the above practices to create integrative models of NPD. The Academy of Management article of Brown and Eisenhardt (1995) is probably the best-known example of this and has inspired a large number of research (e.g., Song & Montoya-Weiss, 2001). Similarly, Cusumano and Nobeoka (1998) distinguished between what they call lean product development, a model which combines many of the practices described above, and the more traditional functional product development, in which there are lightweight project coordinators, high levels of in-house engineering, and less need for cross-strong functional integration.

NPD as part of the PZ working culture should be seen as part of peoples daily jobs. Various functional heads should ensure that their managers/supervisors include successful NPD delivery as part of their annual objectives. Parameters such as quality of input, timings and efficient use of departmental resources could be used as Key performance indicators.

2.7

NEW PRODUCT DEVELOPMENT PROJECTS AT PZ CUSSONS LTD

All New Products Development, Existing Product Development and Margin Improvement Projects should go through the NPD process. 2.7.1 Idea Development at PZ Cussons Ghana Ltd

A team of creative thinkers (SPARKS TEAM) drawn from cross functions will be put together: Team will be made up of all Marketing managers, a rep each from Finance, Engineering, Supply Chain, QA Team will meet quarterly (first Thursday in every quarter) to brainstorm NPDs on the 7 plus 2 key brands Each quarterly meeting will be devoted to a particular category i.e. Home Care, Personal Care, Nutrition Category team members will decide on the brands they would like to brainstorm at the meeting. 24

Brand Manager/ ABM will make a presentation on the brand strategy and trends in the industry. SPARKS team brainstorms and come up with creative, ground breaking NPDs ideas. Ideas are taken by Brand Manager/ ABM to fill their NPD pipelines Where the idea seems to be a good opportunity, Brand Manager/ ABM will initiate the NPD process

Maximum of 4 hours will be spent at all meetings SPARKS team meeting will be chaired by NPD Manager.

2.7.2

Initiating the NPD Process

The NPD process is initiated through the filling of the Product Definition Specification (PDS) The PDS Serves as brief to team, Outline for the Project: Details Timings ( tentative) Markets (including lead) Objectives Insights Concept Key Marketing assumptions Project costs (tentative) Financial Contribution (tentative)

The PDS Allows Projects to be prioritised and ranked, and can be raised by anyone in the organisation but usually from the Technical or Marketing functions.

The Brand Manager/ ABM /initiator completes the PDS with supervision of the Marketing Manager in Team Center

25

PDS is circulated to NAF members through Team centre. (However at the moment because of lack of usage knowledge among most members, PDS is sent to NPD manager who in turn circulates it 2 days ahead to the NAF members for their review ahead on the NAF meeting. This will revert to the norm after June when all had been trained to use the system)

At this stage, timings, volumes, costings and other financial details are based mainly on informed assumptions and must be treated as opportunities in the budget forecast

2.7.3

Going to New Activities Filter (NAF) Meeting

The NAF is made up of Senior Managers from different functions that have wide ranging Business experiences. There should always be at least one member of the Board on the NAF team. The initiator of the PDS appears before the NAF to make their cases for their projects. After the submission NAF has the responsibility to: To challenge the proposal to ensure it is commercially viable e.g Why should we bother with this proposal?) To enhance the quality of the NPD Programme by prioritising NPD Projects. To consider the impact on the wider business (not just the profit or returns). To balance the proposal in the context of everything else that pertains to the Programme and assesses the resource impact. To identify any existing initiative of lower priority that may be killed or delayed in order to accommodate this PDS. To recommend the Project Leader & work stream leaders. To act in an advisory capacity to the submitter, anticipating questions the Project Board might ask. The objective being to make the gate 1 document as robust as possible, assuming the PDS is approved. To approve the process which will be used to manage this initiative (major/minor project) To approve realistic timelines for the completion of the project 26

NAF meetings should be held at least monthly and more often if it becomes necessary however because of the backlog, NAF meetings will be held twice a week until they are cleared after which the meeting schedule reverts to the norm

At each sitting, it is advisable to combine two or three project to ensure that members times are not unduly spent.

PDS documents circulated to NAF team should be studied for at least two days before the NAF meeting.

NAF should decide at the meeting whether a project should go through a full stage/gate process or some stage/gates should be skipped.

All appropriate supporting documents(Risk logs, Issues Logs and Change evaluation forms) should be added to the NAF pack

NAF meetings should not exceed two hours unless it becomes necessary

2.7.4

Project Kick off Meeting

Following approval of the concept by NAF the appointed Project Leader organises a kick-off meeting with his/her project team.

The purpose of the Project Kick off meeting is to form a cross functional Project Team, and brief that team on the NPD Project using the Product Definition Specification approved by the New Activity Filter (NAF).

At the kick-off meeting the team will: Create the Project Plan Agree and put together the Project Definition Document (PDD). See the big picture context how this project fits in with portfolio /category management Brand/Customer marketing Define the scope of the project what we will/wont we be doing

27

Define team members and whether they will be core (available throughout the life of the Project) or non-core partial involvement.

Understand who are the stakeholders and Sponsor Establish & agree the roles & responsibilities for everyone involved Establish & agree the Project objectives Establish & agree clear Lines of communication Establish top line Project plan Identify risks & issues (including initiation concerns) Identify constraints (range reviews etc) Share learnings from previous projects Agree on actual realistic launch date.

2.7.5 Putting together the Project Team

Once the Product Definition Specification (PDS) is approved at the New Activity Filter (NAF), a Project Leader & Team will be assigned. The Project Leader & Team uses the PDS as a brief to complete the PDD. The PDD contains the detail of how the Project will be delivered.

The PDD should state into details: Purpose why are we doing this project? Scope definition of what the project will and wont do Critical Success Factors definition of the criteria for success (outcomes and key dates) Overall Project Objectives definition of deliverables (all specific, measurable and with clear responsibility) Organisation chart, roles, responsibilities and reporting requirements Team Objectives the breakdown of the overall project objectives into smaller and more detailed pieces of work Budget 28

Phase 1 individual functional budgets Phase 2 - Overall project budget which will include a reasonable forecast for the duration of the project, one off expenditure and capital expenses

List of stakeholders key influencers who do not have a role in the project but will require regular communication and information.

Assumptions any assumptions that limit the project or agreements that form the basis of interactions that must take place.

Communications plan reports and meetings their frequency and audience

2.7.6

Going to the Board for PDD Approval

After the kick-off meeting, once the Project Leader and Team are comfortable with the completion of the PDD to their satisfaction, they seek approval from the project Board as the PDD captures the scope of what the project will deliver to the Business.

(This is an iterative process that may see the PDD evolving to its approved state after a number of discussions between the parties involved).

The Project Board formally approves and signs off the PDD. Once approved, any significant change to the PDD must be approved by the Project Board, using the Change Form

For projects that do not need to go the full hog, the Board can at this stage approve Gate 1, Gate 2 and Gate 3 if it is satisfied with all the business and financial parameters of the project.

2.7.7

Presenting to the Board at Gate 1

After the PDD has been approved by the Board, The Business Case Document Summary (BCDS) is written by the Project Team and circulated to the Decision Forum members in advance. The Presentation to the Decision Forum should be concise, and presented by the Project Leader and Work 29

stream Leader (as appropriate). Ideally all the questions that the Decision Forum may have, will have been answered within the BCDS, and on that basis, the presentation should use bullet points as detailed below: Introduction including agenda, decisions required Purpose -WHY Scope - what is and isnt included -WHAT Project Outline HOW & WHEN Answers to questions raised in feedback Issues/risks/assumptions/resources Project Costs/Financials Confirm decision required.

2.7.8

Presenting to the Board at Gate

After the Business Case Document Summary (BCDS) has been approved at Gate 1 it is updated to be presented at Gate 2. The purpose of Gate 2 is for the Project Board to approve the PRODUCT PROTOTYPE (or not), and authorise the project to proceed to the TESTING STAGE. The Gate 2 Business Case Document Summary (BCDS) is evaluated and a decision is reached on the following parameters: To approve the Lead Formulation, fragrance, and Back up (Show sample/target/ benchmark where possible) To approve the proposed Packaging (should be mock-ups if available and possible). To approve Graphic design To approve Packing configuration To approve Financial plan & any Capex requirements To approve Claims To approve latest project costs 30

 To approve proposed trading & promotional plans with category rationale To approve the project, Initial research plan, Initial product design including Product concept Target claim Target formulation To agree action plan to authorise procurement of long lead time components (if necessary) ahead of Gate 3 Launch approval. To approve Project KPIs including Launch date Target cost GSV / NNS / TGM / TGM% Confirm that the project prioritisation remains valid All WSL must ensure that their functional heads have gone through their subsections and satisfied themselves that they make business sense. For imported products, the process ends at this Gate.

2.7.9

Presenting to the Board at Gate 3

After the Business Case Document Summary (BCDS) has been approved at Gate 2 it is updated to be presented at Gate 3. The purpose of Gate 3 is for the Project Board to approve the Product for launch (or not), and authorise the project to proceed to the implementation stage. When presenting to the Board at Gate 3, the PL and WSL must ensure that their presentation covers the following Purpose Recap WHY Changes since last gate Progress since last Gate Answers to questions raised in feedback Overview of prototype testing Delivery to market plan Issues/risks/assumptions/resources Project Costs/Financials/Exit Plan Confirm decision required-PL 31

The Gate 3 Business Case Document Summary (BCDS) is evaluated against the following criteria: Approve the WORKING PROTOTYPE (bronze seal). Approve the Final Product Cost. Approve the final Brand Financial Plan plus any scenarios Approve latest distribution matrix & range review dates, sales support package, confirmed price, promo & margin plans, confirm forecast (this may have been prepared, presented and approved by MD prior to Gate 3). Approve full supply chain launch plan, inventory impact, & exit plans. Approve stability, claims support, INCI, and that mixing trials are complete. All WSL must ensure that their functional heads have gone through their subsection and satisfied themselves that they make business sense.

2.7.9

Reviewing and closing the Project

The purpose of the Project Review is to assess the actual project performance versus plan, and capture any learning aimed at continuous improvement. Nine months after launch A Brand, a Financial Review is to be conducted to allow information such as Market data, Distribution data and financial performance to be collected and compared to plan. The Project Leader works with the relevant team members principally Marketing & Finance to populate the Project Review matrix. The Project Leader sends a task to the team members to update their sections of the Business Case. When all functional sub-section has been completed, the Project Leader summarises the conclusions from the Project Review and incorporates it into the executive summary and submits the Business Case Document Summary (BCDS) to the Board The Board may ask for a formal presentation. 32

Any actions, decisions and conclusions reached in the Decision Forum, are captured and documented. Table 2.2 Project Review Matrix

PROJECT REVIEW MATRIX Date GSV Discount & Trade Promotions Net Net Sales GM value Incremental GM value Average GM% A&P Operating Profit Distribution Brand share Feedback on Run out plan

Gate 1

Gate 3

Months after launch

Comment(s)

Source: PZ Cussons Ghana Ltd, 2011

2.7
2.7.1

HOUSE KEEPING RULES

Meetings /Presentation of Format All presentations should be booked on the outlook calendar There should be a standardised template consistency Maximum of two hours will be spent at all meetings Project team leader/NPD Manager can call for an emergency meeting when the need arises. for NAF and board presentations to ensure

33

2.7.2 2.7.3

Reassignment If anybody will be absent for any reason, he/she should reassign his tasks to another person. Out of Office Out of office assistant should be used when one will not be around for while. This should however be done when that individual has reassigned his task and adequately briefed the assignee.

2.7.4

Board Reviews Board reviews should be held every two weeks and occasionally if it becomes necessary PDD documents should be filled and circulated(soft copies) to the Board two days before a power point presentation

All decisions required should be presented at the board review and record final decisions Board reviews should not exceed two hours unless necessary.

2.7.5

Project Team Meetings Project team meetings should be held at least fortnightly. Emergency meetings could however be called when it becomes necessary

Project kick off meetings should be held one week after approval of PDS. This is to enable project team members to prepare adequately for the project kick off meeting

All minutes of project team meetings should be circulated to members with a copy to the commercial director

Project team meetings should not exceed two hours unless necessary.

2.7.6

Monitoring NAF and the Project board should monitor what work stream leaders in their departments are doing biweekly in the team centre.

34

2.7.7

Project KPI/Prioritisation Checklist NPDs will be considered on the basis of their NNS and GM % contribution to total business as well as their strategic fit to the business

First priority will be given to NPD projects and EPDs that contribute 1million and a minimum of average company GM plus 2%

Where NNS is less than 1 million GHC the considered projects GM expectations must be among the top bracket which stands between 50-60%

All considered projects are expected to grow by not less than 20% year on year or at least aligned to company growth.

Table 2.3 STANDARD SCHEDULED TIMELINES FOR NPD DELIVERY

PDS

NAF

KickOff Meeting

PDD

Gate1/Board Presentation

Gate 2

Gate 3

Launch

1 week

1 week

1 week

1 week

1 week

3 months

1 month

6 months

FEASIBILITY STAGE Project idea mooted Project idea brainstorm Agreement on Project idea PDS development 1st Presentation to NAF NAF Approval/ Suggested Changes/ Rejection

RESPONSIBLE II / NPDM II / NPDM II / NPDM II II

ACCOUNTABLE MM MM MM NPDM NPDM

CONSULTED CD CD CD MM MM

INFORMED

BOARD CD CD

PL

NPDM

MM

CD

35

Project revision based on NAF inputs 2nd Presentation to NAF NAF Approval/ Suggested Changes/ Rejection Concept Testing Kick Off Meeting PDD Development PDD approval & Sign Off

PL PL

NPDM NPDM

MM MM

CD CD

PL PL PL PL PL

NPDM NPDM NPDM NPDM NPDM

MM MM MM MM BOARD

BOARD CD CD CD

DEVELOPMENT STAGE Prototype Development 1st Presentation to Board GATE 2 ) Board Approval/ Suggested Changes/ Rejection Project revision based on Board inputs 2nd Presentation to Board GATE 2 ) Board Approval/ Rejection ( PL PL NPDM NPDM MM BOARD CD PL PL NPDM NPDM MM MM CD CD ( PL NPDM MM CD PL NPDM MM CD

TESTING STAGE Trial quantities production Trial Trade fill Presentation of Trials Feedback to Board ( GATE 3 ) Board Approval/ Suggested Changes/ Rejection PL NPDM MM CD PL NPDM MM CD PL PL NPDM NPDM MM MM CD CD

36

Project revision based on Board inputs 2nd Presentation to Board ( GATE 3 ) Board Approval/ Rejection

PL PL PL

NPDM NPDM NPDM

MM MM BOARD

CD CD

IMPLEMENTATION STAGE Commercial production Consumer Launch Brand Management PL PL PL MM MM MM NPDM NPDM CD BOARD BOARD BOARD

REVIEW STAGE Identify and contract Research Agency Present Findings to Board Write report and Key learning PL PL PL NPDM NPDM NPDM MM MM MM BOARD BOARD BOARD

Source: PZ Cussons Ghana Ltd, 2011

II PL MM NPDM CD BOARD

IDEA INITIATOR PROJECT LEADER MARKETING MANAGER NEW PRODUCT DEVELOPMENT MANAGER COMMERCIAL DIRECTOR EXECUTIVE TEAM

37

CHAPTER THREE

RESEARCH METHODOLOGY AND THEORITICAL FRAMEWORK

3.0

INTRODUCTION

The main focus of the study is to look at the critical issues in the new product introduction in the FMCG industry in Ghana focusing on PZ Cussons Ghana Ltd. To be able to address the critical issues in the introduction of a new product, this chapter presents the various methods and procedures used in helping address the critical issues of new product development the researcher aims to achieve.

3.1

PROBLEM DEFINITION

The competition in the Fast moving Consumer Goods industry calls for continuous innovation and new product development to be able to survive the competition in the market place. However, the development of new products is a big issue for most companies. The issue is that it calls for a huge capital investment to be able to produce entirely new products unto the market. Hence, companies prefer modifying the existing products than make it as a new product. Secondly, most of the new products introduced are not able to generate enough returns to meet the capital invested. This does not encourage companies to entirely go into new product development.

Another issue which is also facing companies in FMCG in Ghana is that the time span for a new product to be introduced into the Ghanaian market makes the product not to be a new product. This is because the FMCGs are competing with other products from developed and developing countries like India, China, etc. By the time the product comes out unto the market, the same or similar one will be coming from competing countries.

38

3.2

RESEARCH OBJECTIVE

The development and introduction of new products in FMCG, is very important to the survival of organizations in that industry. This is because of the increasing competition that exists between the companies. This motivated the researcher to look into the critical issues in the introduction of new products in FMCG with special focus on PZ Cussons in Ghana. However, the study is interested in looking at the following specific objectives outlined below.

3.2.1 Specific Objectives

1. To find out the process of how new products are introduced at PZ 2. To assess the performance of new products introduced over the period of 5 years at PZ 3. To find out the challenges of introducing new products 4. To find out PZs policies on research and new product development 5. This study will also look at whether there are any cross functional teams set up to develop new products.

3.3

THEORETICAL FRAMEWORK

The theoretical model developed by Iyer et al (2006) was adopted as the model for the study. The model looked at two critical broad issues which would bring in-depth understanding to what the research objectives. The model looked at uncontrollable and controllable factors during the introduction of new products. The uncontrollable factors takes a look at the country level factors such as infrastructure, market size, the economic situation, business and consumer culture which are important factors to consider in the introduction of any new product. Since, these factors enumerated are at the country level and the organization cannot control these factors, it is prudent that they are considered in any product introduction. Typically, when the country does not have the necessary infrastructure to support a new product that an organization wants to introduce then the company cannot introduce such products. Iyer et al also looked at the market size, for instance the current 39

population of Ghana is about 24 million and if the market is not big enough to compensate for the cost of developing new products then organizations will not venture into NPD. All these factors are not controlled by the organizations.

The second part of the model which considered factors in the domain of the organizations is grouped under the controllable factors. The factors here examine the strategies to be adopted by organizations during the introduction through to launching or commercialization. They looked at the type of innovation whether radical or incremental, new product development strategies and new product commercialization strategies which will lead to the product success or failure.

The researcher is of the view that this model encompasses all the relevant issues the study hopes to achieve. The model is a perfect one for the study because it provides outside-inside perspective for organizational consideration during new product development. Some of the model provides only the role organizations should play in new product development. However, Iyer et als (2006) model provides both the factors outside the control of the organization which could have impact on the success or the failure of the new product as well as the factors that can be controlled which have impact on the success and failure of the new product. That is the more reason why the study finds this model appropriate for the study. The model is illustrated in Figure 3.0 on the next page.

40

Figure 3.0 New Product Development Source: Iyer et.al (2006) Factors affecting new product success

Uncontrollable Factors Contextual Factors - Infrastructure - Countrys Economic -Development Path - Market Size - Business and -Consumer Culture

Controllable Factors Type of Innovation * Incremental * Radical

New Product Development Strategies

New Product Commercialization Strategies - Promotion Efforts -Distribution Efforts -Supply Chain Development -Strategic Control

New Product Success or Failure

41

3.4.1

Dependent Variable

From the above model it can be observed that the study depends on one variable which is the success or failure of the new product. Therefore the success or failure of new product depends on so many factors such as the uncontrollable i.e. infrastructure, market size, business and culture of consumers and the controllable factors i.e. type of innovation, new product development strategies and commercialization strategies.

3.5

RESEARCH ASSUMPTIONS

Though the researcher did personally administer the questionnaire on the respondents it is that:

assumed

The respondents who completed the questionnaire are well versed in the activities and operations of new product development at PZ Cussons Ghana Ltd

The respondents understood the questionnaire and the responses are their own freely expressed opinions.

3.6

RESEARCH LIMITATIONS

The study is limited to only one organization, and therefore the outcome cannot be generalized to other FMCGs in Ghana. The reason for choosing one organization is because of easy access to information. Looking at the kind of information especially on sales reports and product information it is very difficult to get access to such information because of competition. Though the researcher works at the organization used as the case study, getting product information was difficult. The researcher had to provide several explanations and convince the people in charge for the information to be released.

42

3.7

RESEARCH QUESTIONS

From the above literature reviewed and the research frame work, the study is interested in providing answers to the following research questions. 1. What are the processes and how are new products introduced at PZ Cussons? 2. What is the performance of new products introduced over the period of 5 years at PZ Cussons? 3. What are the challenges of introducing new product? 4. What are PZ Cussonss policies on research and new product developments? 5. Are there are any cross functional teams set up to develop new products?

3.8

RESEARCH METHODOLOGY

3.8.1

Research Type

The study used more of qualitative study than quantitative. The objectives and research questions posed did not demand for the use of numbers but more descriptive analysis. The main reason for using qualitative research is that it aims to provide an in-depth understanding of the world as seen through the eyes of the people being studied. It aims not to impose preordained concepts; hypotheses and theories. They are generated during the course of conducting the research as the meaning emerges from the data.

3.8.2

Data Collection Instrument and Source.

The study made use of both primary and secondary data. Secondary data used includes journal, articles, books and information from PZ Cussons Ghana Ltd. Information gathered from this source provided the guidance and the foundation upon which the entire research work was based. Primary data was also collected with through questionnaires. In all, 300 questionnaires were distributed to respondents to fill. However, 250 were correctly filled and return, so the analysis was based on the 250 questionnaires received.

43

The study focused on PZ Cussons Ghana Limited as it achieved both success and failure in new products introduced over the last 5 years (2006-2010). However data collection was not limited to only this company but cut across a number of players with the aim of enriching the study. 3.8.3 Sampling Methods.

The target group for this study includes marketing managers, brand managers, new product development managers, project managers, new product committee members such as representatives for Research and development, Quality assurance, Manufacturing, Supply chain, Finance, Sales. Data was gathered from these individuals through questionnaires and personal interviews.

The study employed the use of stratified sampling and simple random sampling. This is because of the different departments that existed in the target population. Stratified sampling enables the population to be sub-divided into few sub-groups or strata. In the case of this study, this was considered to be the various departments in the organization i.e. sales and marketing, new product development, supply chain/manufacturing, finance and human resource. By grouping the elements into sub-groups, simple random sampling was applied to each stratum.

3.8.4

Data Analysis Methods.

The data was analyzed to reflect the objectives and research questions posed above. The data collected were coded into Microsoft excel to generate the frequencies, tables and figures which are presented in chapter four.

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CHAPTER FOUR

FINDINGS AND ANALYSIS 4.1 INTRODUCTION

This chapter provides analysis of data based on the data collected from questionnaires administered by the researcher, interviews conducted and observation at PZ Cussons Ghana Limited. The data is presented in relation to staff and management responses at PZ Cussons Ghana Limited on the critical issues in development of new product in the FMCG industry. The results are directly displayed using graphs and tables. In all 300 questionnaires were distributed, 250 were accurately filled and returned. The 250 respondent data are analysed based on the research objectives and questions.

4.2

INFORMATION ABOUT RESPONDENTS

The sample respondents shows that 86 (34.4%) came from Sales and Marketing, this is followed by 60 (24%) from Supply Chain/Manufacturing, 59 (23.6%) New Product Development from 23(9.2%) Finance and IT, and 22 (8.8%) from HRM. These show that the respondents sampled are all experienced when it comes to new product development because most of them were from departments which have something to do with new product development. Table 4.1 Frequency Distribution for Staffs In Charge of New Product Development

Department Sales and Marketing New Product Development Finance/IT Supply Chain/Manufacturing HRM Total Source: Filed Data, 2011

Frequency 86 59 23 60 22 250

Percentage (%) 34.4 23.6 9.2 24.0 8.8 100

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4.2.1

Staff Role/Position in their Department

With respect to the roles or positions they occupy in the organization, it was revealed that 92 (36.8%) were Officers, 76 (30.4%) Sales Assistants, 35 (14.0%) Team/ Marketing group managers, 22 (8.8%) Assistant Managers, 20 (8.0%) Specialist/Expert and 5 (2.0%) Directors/Heads.

Table 4.2 Staff Role/Position in their Department

Department Director/ Head Assistant Manager Team/Marketing group manager Officer Specialist/Expert Sales Assistants Total Source: Filed Data, 2011

Frequency 5 22 35 92 20 76 250

Percentage (%) 2.0 8.8 14.0 36.8 8.0 30.4 100

4.2.3

Length of Service in FMCG Industry

Respondents were asked to indicate the number of years they have been working in the FMCG industry in Ghana. From the responses received it was observed that 86 (34.4%) had worked between 6 and10years, 74 (29.6%) had also worked between 2 and5years, 48 (19.2) had worked more than 10 years and 42 (16.8%) had worked less than 2 years. This shows that majority of the respondents have rich experience in the FMCG industry. Those who had worked less than 2 years are perhaps people who have just been employed and are beginning their career in the industry. This also means that they did understand perfectly the research questions asked and have answered the question based on their experiences over the years.

46

Table 4.3 Length of Service in FMCG Industry in Ghana Length of Service Less than 2 years 2-5 years 6-10 years More than 10 years Total Source: Filed Data, 2011 Frequency 42 74 86 48 250 Percentage (%) 16.8 29.6 34.4 19.2 100

4.2

PROCESSES INVOLVED IN INTRODUCING NEW PRODUCTS AT PZ

CUSSONS GHANA LTD

4.2.1

Involvement in New Product Development

Respondents were asked to indicate whether they had been involved in new product development at PZ, and majority (74%) responded that they had been involved in new product development. On the other hand, (26%) said they had not been involved in the development of new product. For those who had not been involved, there were two possible reasons: (i) they joined the organization recently and had not seen any new products introduced for them to be part of; and (ii) they had never been invited to participate in the introduction of new product, especially the junior officers.

47

Figure 4.1 Involvement in New Product Development Source: Filed Data

4.2.3

Departments involved in New Product Development

Concerning the departments involved in New Product Development, the responses received shows that 121 (48.4%) were from Sales and Marketing, 93 (37.2%) from New Product Development, 14 (5.6%) from Supply Chain/Manufacturing, 12 (4.8%) from HRM and 10 (4%) from Finance/IT. This shows that all the departments in the organization are involved when it comes to new product development. Respondents also revealed that, new product development are handled by Sales and Marketing and New Product Development, with representatives from the other departments and this is evident from the response rate for Sales and Marketing and New Product Development indicated in Table 4.4. This also shows that there is cross functional involvement with other departments who will have experience in business to contribute towards the development of new products. The process is not only limited to the new product development department and sales and marketing but all the other departments are brought on board for every new product development.

48

Table 4.4 Departments involved in New Product Development

Department Sales and Marketing New Product Development Supply Chain/Manufacturing Finance/IT HRM Total Source: Filed Data

Frequency 121 93 14 10 12 250

Percentage (%) 48.4 37.2 5.6 4 4.8 100

4.2.4

Involvement with external parties in the development of new product

Respondents were asked whether they involve other parties apart from depending on their departments within the organization during new product development, and 62% said no while 38% said yes they involve the external parties. Those who said yes indicated that apart from depending on the sales and marketing and new product development for information, they also outsource research work to research organizations to conduct research for the organization during new product development. This they said enables them to focus on their core business since they do not have all the necessary logistics and manpower to conduct the field research. The outcomes of the responses are illustrated in Figure 4.2 below.

49

Figure 4.2 Involvement with exteranal parties Source: Field Data

4.2.5

Processes in developing new products at PZ Cussons Ghana Ltd

On the processes in developing new products at PZ Cussons Ghana Ltd, respondents stated that the process starts with Idea development, where they have creative thinkers called (SPARKS) drawn from different functional areas. This is then followed by initiating the new product development process through filling of the Product Defining Specification which serves as a brief to the team. The next stage of the process is to go to the New Activities Filter (NAF) meeting which comprises Senior Managers from different functions that have wide ranging business experience and with one member of the Board sitting in that meeting. Respondents stated that once the Product Definition Specification (PDS) is approved at the NAF, a project leader is assigned.

The next stage is that the Product Definition Specification is used to fill the Project Definition Document (PDD) which is sent to the board for approval. After the PDD has been approved by the Board which is referred to as gate 1, the Business Case Document Summary (BCDS) is written by the Project Team and circulated to the Decision Forum members in advance. The Presentation to the Decision Forum is concise, and presented by the Project Leader and Work stream Leader (as 50

appropriate). After the Business Case Document Summary (BCDS) has been approved at Gate 1, it is updated to be presented at Gate 2. After the Business Case Document Summary (BCDS) has been approved at Gate 2 it is updated to be presented at Gate 3. The purpose of Gate 3 is for the Project Board to approve the Product for launch (or not), and authorise the project to proceed to the Implementation stage. When the project is implemented there is the project review and the purpose is to assess the actual project performance versus plan, and capture any learning, aimed at continuous improvement.

4.2.6

The introduction of New Product unto the Market

On the issue of how new products are introduced, majority of the respondents indicated that an entirely new product which does not fall under any existing brand is lunch and the product is introduced unto the market. They indicated that when the product is a new product coming out of an existing brand the product is straight away introduced using the existing brand to market it. From the responses it is observed that PZ Cussons Ghana Ltd does not carry out any test marketing before introducing their product on the market. This is presented in Figure 4.3 below.

Figure 4.3 Introduction of New Product Developed unto the Market Source: Field Data 51

4.3

NUMBER OF NEW PRODUCTS INTRODUCED; SUCCESS AND

FAILURE OVER THE PAST 5 YEARS

Respondents indicated that over the past 5 years they have introduced 10 new products. The names of the various products introduced are listed in Table 4.5. Respondents indicated that most of the products were coming from other countries and where not actually produced in Ghana. PZ Cussons Ghana Ltd is a multinational in Ghana, so they bring some of the products from other countries where they are operating to the Ghanaian market and since is not on the market it becomes new in Ghana.

Table 4.5 Number of Product Introduced over the past 5 years

No. 1 2 3 4 5 6 7 8 9 10

Name of Product Desired Cocoa Jet Soap White Jet Soap Blue Power Fist PDR Vns Ftfy Relaxer Powdered Milk Carex HG Sens Camel Anti new Nunu powder Nunu evaporated Source: Field Data,2011

52

4.3.1

Performance of New Products introduced unto the Ghanaian Market

From the information gathered from the sampled respondents, 4 out of the 10 products introduced unto the Ghanaian market are successful and are currently on the market. The remaining 6 products introduced over the last 5 years are not on the market and have been withdrawn. They associated the failure with non market acceptance, in the sense that the products were brought from other countries to be introduced to the Ghanaian market where taste and cultural issues play a key role in consumer purchasing. It was also highlighted that, enough awareness was not created for consumers to accept the product before the introduction. Another issue which accounted for the failure indicated by the respondents was that the prices of the products were too high for customers to purchase. The summary of the performance is illustrated in Table 4.6. The performance of two successful products retrieved from the database of PZ Cussons Ghana is also summarized in Table 4.7. Evidence in terms of sales for those products which were not successful has been attached to the study as an appendix (specify appendix in each case). Table 4.6 Performance of New Products No 1 2 3 4 5 6 7 8 9 10 Total Name of Product Desired Cocoa Jet Soap White Jet Soap Blue Power Fist PDR Vns Ftfy Relaxer Powdered Milk Carex HG Sens Camel Anti new Nunu powder Nunu evaporated 6 53 Failed Failed Failed Failed Failed Failed Failed Successful Successful Successful Successful 4 Successful

Source: Field Data,2011 Table 4.7 Some of the successful products introduced

NUNU POWDER Month product 2008 2009 2010 2011 2012

June

Powder

254,452.09

258,911.61

614958.091

311723.05

232130.85

July

334,020.59

523,796.62

249533.4978

284626.9

54377.7

August

491,428.68

507,053.78

619141

424983.198

September

367,346.60

253,166.89

832808.8

66223.846

October

363,043.11

180,404.27

116968.108

306968.75

November

745,664.70

506,642.58

381357.36

338944.65

December

218,041.86

250,741.75

748872.8

340176.85

January

359,952.89

404,964.90

559346.969

362886.42

February

788,945.34

449,951.07

190207.32

648051.9

March

331,898.38

216,626.97

305194.6

474591.44

April

245,924.82

309,549.41

1125055.472

672637.389

54

May

411,863.17

323,280.89

404730.95

819977.88

grand total

4,912,582.23

4,185,090.73 6,148,174.97 5,051,792.27

286,508.55

NUNU EVAPORATED Month product 2008 2009 2010 2011 2012

June July August September October November December January February March April May

Evaporated

70431.74242 69814.7426 75906.849 24742.5651 58702.91525 18673.3755 59726.6354 91713.9545 70854.47165 58027.97 326180.1926

20279.97 57141.192 109601.78 51786.86 70124.1 32876.96 40398.38 76330.88 67569.164 107302.4528 32605.7352 153604.432

322295.487 280412.414 136402.124 136506.37 256718.822 188947.744 142341.52 428059.136 385227.736 602217.54 47663.936 595344.784

1087.8 188765.2 972358.48 180615.712 147487.24 202226.32 413487.6 487347.17 473036.67 705296.28 375894.79 534501.532

634995.13 -11709.6

Grand total

924,775.41

819,621.91

3,522,137.61 4,682,104.79

623,285.53

Source: PZ Curssons GhanaLtd, Database,2011

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4.3.2

The profitability of new products over the past 5 years

Respondents were asked to indicate whether the new products introduced over the past 5 years have been profitable to PZ Cussons Ghana. Majority of the respondents (55%) indicated that the new products have not contributed positively in terms of profit. The remaining 45% affirm that the new products have contributed profitably. The majority decline can be deduced from the number of new products which have been introduced and failed on the Ghanaian market which perhaps lead to the decline.

Figure 4.4 Profitability of New Product Developed Source: Field Data

4.3.3

Percentage of company sales of NPD over the last 5 years

Respondents were also asked to rate the percentage of company sales of new products introduced over the last 5 years. It was revealed that majority 122 (48.8%) rated 20-30%, followed by 78 (31.2%) rated 10-20%, 35 (14%) rated 5-10% and 15 (6%) rated below 5%. Nobody rated above 50%.

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Table 4.8 - Percentage of Company Sales of NPD over the last 5 years Percentage on Sales Below 5% 5- 10% 10-20% 20-30% 40-50% Above 50% Total Source: Field Data, 2011 4.3.4 New products introduced which met targets Frequency 15 35 78 122 0 0 250 Percentage (%) 6.0 14.0 31.2 48.8 0 0 100

Respondents were asked to rate the new products which have actually met the target for which it was introduced. Majority (150) of the respondents rated less than 10%, followed by (85) who rated 10-25% and the rest rated 25-50%. The ratings clearly show (do you mean support?) the earlier observation made concerning the number of products which have failed when they were introduced.

Figure 4.5 New Product Developed (NPD) that met Target Source: Filed Data

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4.4

CHALLENGES OF INTRODUCING NEW PRODUCTS UNTO THE GHANAIAN MARKET

Concerning the challenges PZ Cussons Ghana face in introducing new products unto the Ghanaian market, majority of the respondents (86%) indicated time consumption and delays as the major problem hindering the introduction of new product at PZ. Lack of raw materials is also seen as a challenge for the introduction of new products at PZ and (65%) of respondents indicated that. Also, (54%) indicated that huge capital requirement is also a challenge when it comes to introducing new products at PZ. Lack of expertise was also another issue which was raised by respondents. Respondents stated that they have to fall on experts for instance in packaging and they find it difficult sometimes obtaining such specialists. Respondents indicated that experts in most of the areas of new products development are very hard to come by in the Ghanaian environment. This is seen as a challenge in the introduction of new products.

Figure 4.6 Challenges of introducing new products Source: Field Data, 2011

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4.5

POLICIES ON RESEARCH AND NEW PRODUCT DEVELOPMENT.

Concerning policies on research and new product development, respondents did indicate that apart from the research from sales and marketing, PZ contracts external parties to carry out marketing research for the organization. Most of the market research is outsourced to research agencies to carry out while the organization concentrates on its core business. Respondents indicated that they place key emphasis on research but there is no department for research since that component has been outsourced to research companies to undertake. At PZ Cussons, new product development has to go through the processes enumerated above (repeat the steps in the process in brackets here).

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CHAPTER FIVE

5.0

CONCLUSION, RECOMMENDATIONS AND FUTURE RESEARCH

In this last chapter, conclusion that reflect the answers to the research questions in this thesis based on findings and analysis would be made. The implications will be compared to other researchers findings in different context. Recommendations for practitioners (managerial implications) and future research for scholars based on the analysis of this studys results will be included as research contribution.

CONCLUSION

5.1 The research looked at the critical issues in the development of new product in the fast moving
consumer goods (FMCG) industry. The research found answers to the critical issues in developing new product at PZ Cussons Ghana Limited. The study assessed the general information of the respondent, and found answers to the research questions, to know the processes and how new products are introduced at PZ, the performance of the new products over the last 5 years on the market, in terms of their profitability meeting of sales target and objectives for the products. The critical challenges confronting the organization in developing new products, and what policies are there to guide employees and management in developing of new products.

The literature review by the researcher reveals that, best practices of new product development encompasses the support of company level, individual and project teams. The support of management in the entire development and introduction of a new product in FMCG industry helps in the success of the product.

Relating this to research question one; what are the processes and how are new products introduced at PZ Cussons Ghana Ltd, it was revealed the processes start with idea development and 60

ends at where it is presented to the Board at gate 3 which is presented in the literature above in pages 24-37. When it comes to the introduction of new products PZ Cussons Ghana does not go through all the proper channel of introducing products. It was indicated that, an entirely new product is not launched without test marketing which is a key in new product development. They do not test to see whether the consumers or customers would like the product and seek their concerns before introducing the products. They just launch the product and the product goes to the market. When it comes to new product under existing brand, the product is not launch it is introduced under the existing brand.

Question two (2) seeks to know the performance of new products introduced over the period of 5 years at PZ Cussons. It was observed from the findings that most of the new products introduced over the last 5 years have not been successful on the Ghanaian market. So far only 4 have been successful so far on the Ghanaian market out of the ten (10) products introduced. The reasons assigned are that these products were doing well in other countries so they were also brought unto the Ghanaian market without creating the awareness. Also, it was revealed that these products were of high prices which made it difficult to sell. Consumer taste, culture and preference were not considered. Theses factors are very important to consider when introducing a new product.

The next question which question three (3) was interested in knowing the challenges of introducing new product. Though PZ Cussons Ghana, involves various departments during new products development. The steps involved in coming out with new products are too lengthy. This can sometimes be time consuming and subsequently cause undue delay for a new product to be introduced to the market. With respect to the theoretical framework above, which looks at the external issues concerning the success or failure of new products developments, with PZ, it was revealed that assess to raw materials during product development is a challenge. Respondents indicated that it is sometimes difficult to get the materials for example packaging materials, molding or cutting machines for the product, which they have to order from outside the country. PZ Cussons Ghana new products are brought from other countries and are been introduced unto the Ghanaian market without test marketing, 61

it is very difficult to incorporate the customers requirements in the design of the new product as well as the introduction of the product unto the Ghanaian market. This by far underscores what the literature talks about in the introduction of new products. Interestingly, new products which are not doing well or have failed on the Ghanaian market perhaps may be doing so well in the country of origin. Mean while these products may be performing poorly here in Ghana as a result of the culture differences, taste, pricing etc.

The study was also concerning about know whether PZ Cussons has policies on research and new product development. Though from the literature review, PZ Cussons has all the internal processes and policies concerning new products laid out clearly, there are issues such as market testing which need to be inculcated into their new product development policies before a new product is introduced on the market. Also, concerning policies on research and new product development, apart from depending on the sales and marketing team, research for new product is outsourced to external research agency to be carried out.

The last but not the least question pose was to know whether cross functional teams set up to develop new products. It was discovered during the research, that PZ Cussons collaborates with both internal and external linkages in the development and introduction of an entirely new product.

RECOMMENDATIONS
From the above findings the researcher would like to propose the following recommendations for management of PZ Cussons, Ghana for consideration.

1. Before the introduction of any new products unto the Ghanaian market, there should be test marketing launch before the product is introduced unto the market. When this is done it will help PZ to know the attitudes and responses of consumers towards the product before introducing to prevent product failure. 62

2. Products from other countries should not just be introduced unto the Ghanaian market. The fact that these products are doing well in other countries does not mean they will be a success in Ghana. Consumer or customer attitudes vary when it comes to product preference. This is the more reason why customer involvement in new product development is vital. 3. Though PZ Cussons has a department for new product development and sales and marketing and rely on these departments for information concerning new products, there is also the need to consider the establishment of a research department which will be responsible for research involving products and consumers. 4. From the findings it was revealed that over the past 5 years PZ Cussons has introduced 10 new products of which 4 have been successful. This suggests that probably new product

introduction needs to be gradual, well researched and well timed. This will help to address the problem of product failure.

FUTURE RESEARCH

The study only focused on PZ Cussons Ghana, and looked at the critical issues involve in new product development. In the first place the study was limited to only one company which is PZ Cussons Ghana because of the researchers ability to access information for the study. The study would have been more interesting if the researcher looked at more than one company and did a comparative study. In the course of the carrying out the study, an area of interest which the researcher discovered was the impact of consumers culture in the success or failure of a new product. However, the study did touch on but did not dwell much emphases is to understand the how the culture of consumers in the process of new product development under pin the success and failure of a new product. The study also, realized that managing the cycle of new of product development requires more expertise and attention and must be researched into by practioners and people in charge of product development. As observed in some literature by the researcher a well managed cycle of new product development enhances the success of

63

new product development. Hence the need the researcher would be interested in carrying out future research in this area.

64

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24. McDonough, E. F. (2000). Investigation of factors contributing to the success of cross-functional teams. Journal of Product Innovation Management, 17(3), 221235.

25. Oliver, N., Dostaler, I., Dewberry, E., (2004). New product development benchmarks. The Japanse, North American and UK consumer electronics industries. Journal of High Technology Market Research 15 249-265

26. Oxford University (2010) Oxford Dictionaries Online [online] Available at: http://oxforddictionaries.com

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27. Petersen, K.J., Handfield, R.B. and Ragatz, G.L. (2003), A model of supplier integration into new product development, Journal of Product Innovation Management, Vol. 20, pp. 284-99.

28. Rochford, L. and Rudelius, W. (1997), New product development process: stages and successes in the medical products industry, Industrial Marketing Management, Vol. 26 No. 1, pp. 67-84.

29. Ragatz, G.L., Handfield, R.B. and Petersen, K.J. (2002), Benefits associated with supplier integration into product development under conditions of technological uncertainty, Journal of Business Research, Vol. 55 No. 5, pp. 389-400.

30. Tatikonda, M. V., & Montoya-Weiss, M. M. (2001). Integrating operations and marketing perspectives of product innovation: The influence of organizational process factors and capabilities on development performance. Management Science, 47(1), 151172.

31. Trott, P. (2001) The role of market research in the development of discontinuous new products, European Journal of Innovation Management, Vol. 4, No 3, pp. 117-125

32. van der Valk, W. and Winstra, F. (2005), Supplier involvement in new product development in the food industry, Industrial Marketing Management, Vol. 34, pp. 681-94.

33. C Merle Crawford, (1977), Research and the New Product Failure Rate Journal of Marketing, Marketing. Vol.41.No.2., pp.51

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APPENDIX A

QUESTIONNARE ON NEW PRODUCT DEVELOPMENT

I am pleased to invite you to participate in a survey on the critical issues in development of new product in FMCG. The research is being conducted as part of the requirement of my MBA Programme with the Maastricht School of Management. I guarantee accuracy and independence of assessment, confidentiality of personal information, publication of results only in a depersonalized summary form. I really do hope that you will find the study useful in your daily job, during the development of new products, the critical issues in developing new products. Thank you so much in advance for your participation in filling out the under listed questions Frances Holly Researcher MBA Student

B. Please colleagues, I am looking for specialists who have certain professional competences and responsibilities for performing new product development task in FMCG. Are you in charge of any of the following? a. Sales and Marketing

b. New Product Development

c. Finance

d. Supply Chain/Manufacturing 69

e. IT

f. HRM

g. None of the above

2. In which department do you currently work? a. Sales and Marketing b. New Product Development c. Finance d. Supply Chain/Manufacturing e. HRM f. Others ( Please specify). 3. What is your role (position) in the department? a. Department director b. Team/Marketing group manager c. Specialist/Expert Please specify if different from above 4. How long have you work in the FMCG industry in Ghana? a. less than 2 years b. 2-5 years c. 6-10years d. More than 10years

5. What categories (or brands) are you responsible for? Please specify. 70

6. Have you been involved in any new product development at PZ before? Yes 7. Which departments were involved? a. Marketing (category of brand management) b. Marketing (NPD/Innovations) c. Strategic planning and forecasting d. Trade marketing e. Finance f. None of the above

No

8. Apart from the various departments in the organization did you involve any external parties? Yes No

If yes to question 8 above please specify 9. Please indicate the process of new product development and introduction at PZ? 10. Are new products introduced into the market straight away after development? Yes If no please indicate how it is done at PZ?..................................................................... 11. How many products have lunched over the past 5years? 1 above 5 12. In your view do you think overall profitability of new product development program has been a success? Yes No No 2 3 4 No

13. Has the new product development program met it objectives? Yes

14. Is the new product development program very important for PZs sales and profit? Yes No

15. What is the percentage of current company sales made up by new products introduced over the last 5 years? 71

a. below 5% b. 5-10% c. 10-20% d. 20-30% e. 40-50% f. above 50% 16. In all new product launches, that you participated, would you be able to estimate how many of them were successful i.e reached targets a. less than 10% b. 10-25% c. 25-50% d. 50-75% e. More than 75% 17. From your experience in NPD, what are the key factors affecting the introduction of new product development at PZ?

18. What are the difficulties you usually face when developing and introducing new products? 19. Are those difficulties mainly internal issues which can be addressed? Yes No

If No, are those issues external? Please specify ------------------------------------------------------------

20. Is there a policy on research and new product development at PZ? Yes

No

21. If yes to question 20 then what are these policies? Please specify----------------------------------

Thank you for participating in this project.

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APPENDIX B-INFORMATION OF PRODUCT SUCCESS/FAILURE

Source:
PZ CUSSONS GHANA DATABASE

73