Design Entry and Exit Strategies

Astra Zeneca does fundamental research to develop new drugs; Halifax Bank designs new types of accounts; Microsoft designs completely new software. These companies look for the high profits that come from new products, but they have to bear the cost of research and development.

These companies follow a product for its entire life cycle. But most organizations do not start with basic research to develop entirely new products – neither do they continue making a product through its entire life. They find existing products that fit into their range, and modify these to create their own ‘new’ product.

Organizations generally start supplying a product that is already some way through its life cycle. The time when they start, and later stop, making a product defines their entry and exit strategy. The best entry and exit strategy depends on your expertise and objectives. Your organization might be:

• Research driven these are good at research, design and development, but they lack the resources and production skills to manage a growing  demand. They work in the introduction stage, and leave before the growth stage.
• New product exploiters. These look for research that has commercial potential and then exploit it during the growth stage. They use strong marketing and process design to get the high prices available during growth, and then exit when profit margins begin to fall.
• Cost reducers. These design very efficient operations, so they enter the market at the mature stage and produce large quantities efficiently enough to compete with organizations already in the market. They exit when sales fall too low to maintain high production levels.

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