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product developmenta BUSINESS STRATEGY pursued by a firm aimed at increasing sales by developing new products which can be sold in its existing markets (see PRODUCT-MARKET MATRIX) or new products which take the firm into new markets. (See DIVERSIFICATION). In the former case, product development is especially important given both the life-cycle tendencies of products (see PRODUCT LIFE CYCLE) and in maintaining the firm's competitiveness. Most individual BRANDS follow a typical cycle of introduction, growth, maturity and eventual decline so that it is vital for the firm to develop and launch a constant stream of new brands to replace those in decline. Moreover, the ability of a firm to introduce innovatory new brands is often a key means of establishing a COMPETITIVE ADVANTAGE over rival suppliers. Developing new products involves the firm in undertaking MARKETING RESEARCH and committing resources to product RESEARCH AND DEVELOPMENT. See NEW-PRODUCT DEVELOPMENT, BOSTON MATRIX, PRODUCT-MARKET MATRIX.
product developmentthe process of developing new products that a firm can sell in its existing markets or new markets.
Given the dynamic characteristics of markets, which tend to grow and decline over time (see PRODUCT LIFE CYCLE), it is important for firms to develop new brands to supersede those that are beginning to decline in popularity. Furthermore, the ability of a firm to introduce new products embodying superior product and performance attributes can improve its competitive position over rival suppliers in OLIGOPOLY markets where suppliers compete mainly in terms of PRODUCT DIFFERENTIATION. See PRODUCT MATRIX, RESEARCH AND DEVELOPMENT.