Growth of a New Product
Each year more than 400,000 new enterprises are formed, of which only 41% survive beyond their fifth birthday. Of the failures, 52% are due entirely to managerial incompetence and another 40% to lack of experience. Clearly the growth period presents company management a most difficult managerial task. This book studies the interaction between a company's capacity-acquisition policy and the growth rate of its new product: it demonstrates how different policies of acquiring manufacturing capacity can either suppress or facilitate this growth rate. During the growth period, four symptoms of trouble are frequently observed: undercapacity, excess capacity, loss of market share, and price cutting. The author focuses on the first two troubles as the beginning of a complete growth-management analysis. His approach applies the philosophy and methodology of industrial dynamics. A hypothesis of the factors causing the problem is developed as a basis for determining an interaction system that can be simulated by a logical model. The behavior of the model is then explored to give a fuller understanding of the interacting forces and their influence on system behavior. Finally, improvements in policy are suggested and tested on the model. The study demonstrates the efficacy of the industrial dynamics approach to non-linear relationships and pilots a format that other investigators can use to advantage in analyzing other dynamic interactions relating to growth.