Microeconomic Theory of Spinoff Decisions

2013 ◽  
Vol 2 (4) ◽  
pp. 36-51
Author(s):  
T. V. S. Ramamohan Rao
Keyword(s):  
Bargaining Power ◽  
New Product ◽  
Product Line ◽  
Market Potential ◽  
Organizational Capabilities ◽  
Elasticity Of Substitution ◽  
Microeconomic Theory ◽  
Strategic Bargaining ◽  
High Elasticity ◽  
Coordination Requirements

The present study demonstrates that the product line choice of a firm depends on the elasticity of substitution between products (and the organizational and coordination requirements that it implies), the bargaining power of managers of different product divisions, and marketing prospects of each of the products. A new product idea, put forward by an employee, will be integrated if a combination of these features obtains. A spinoff will result if any one, or more, of these conditions is not satisfied. In general, it is shown that a new product, which has a high elasticity of substitution with the existing products, will experience a spinoff due to lack of organizational capabilities to integrate it while a product with a low elasticity will spinoff only due to the incumbent management’s perception of low market potential and/or the strategic bargaining power of the incumbent management with respect to the existing product line.

Explaining Involuntary Spinoffs from Teams

2012 ◽  
pp. 203-224
Author(s):  
T. V. S. Ramamohan Rao
Keyword(s):  
Resource Allocation ◽  
Bargaining Power ◽  
New Products ◽  
New Product ◽  
Organizational Capabilities ◽  
Team Members ◽  
Strategic Bargaining ◽  
The Stability ◽  
Analytical Device ◽  
Separate Product

A firm consists of different teams with each of them producing a separate product (which may be related to other products of the firm). In turn, each team has individuals of different talents (though some talents may be substitutable across products) who work together to achieve synergies. Some team members may find it advantageous to induct new talents into an existing team and/or introduce new products based on their experience. The firm will efficiently integrate a new product by forming a new team if it (a) has the organizational capabilities to translate potential synergies to reality, (b) can accommodate the strategic bargaining power of the existing team members in resource allocation across talents, and (c) can attract and coordinate the efficient combination of talents. A Spinoff, i.e., the production of the new product in a separate firm, will occur if any one, or more, of these conditions is not satisfied. A variant of the CES function can be shown to provide the most efficient analytical device to examine the stability of teams and spinoffs when teams cannot maintain such cohesion.

Explaining Involuntary Spinoffs from Teams

2011 ◽  
Vol 2 (3) ◽  
pp. 18-37 ◽  
Author(s):  
T. V. S. Ramamohan Rao
Keyword(s):  
Resource Allocation ◽  
Bargaining Power ◽  
New Products ◽  
New Product ◽  
Organizational Capabilities ◽  
Team Members ◽  
Strategic Bargaining ◽  
The Stability ◽  
Analytical Device ◽  
Separate Product

A firm consists of different teams with each of them producing a separate product (which may be related to other products of the firm). In turn, each team has individuals of different talents (though some talents may be substitutable across products) who work together to achieve synergies. Some team members may find it advantageous to induct new talents into an existing team and/or introduce new products based on their experience. The firm will efficiently integrate a new product by forming a new team if it (a) has the organizational capabilities to translate potential synergies to reality, (b) can accommodate the strategic bargaining power of the existing team members in resource allocation across talents, and (c) can attract and coordinate the efficient combination of talents. A Spinoff, i.e., the production of the new product in a separate firm, will occur if any one, or more, of these conditions is not satisfied. A variant of the CES function can be shown to provide the most efficient analytical device to examine the stability of teams and spinoffs when teams cannot maintain such cohesion.

Performance Assessment of the Lead User Idea-Generation Process for New Product Development

2002 ◽  
Vol 48 (8) ◽  
pp. 1042-1059 ◽  
Author(s):  
Gary L. Lilien ◽  
Pamela D. Morrison ◽  
Kathleen Searls ◽  
Mary Sonnack ◽  
Eric von Hippel
Keyword(s):  
New Product Development ◽  
Idea Generation ◽  
New Product ◽  
Major Product ◽  
Product Line ◽  
Direct Result ◽  
Target Market ◽  
Generation Process ◽  
The Past ◽  
Lead User

Traditional idea generation techniques based on customer input usually collect information on new product needs from a random or typical set of customers. The “lead user process” takes a different approach. It collects information about both needs and solutions from users at the leading edges of the target market, as well as from users in other markets that face similar problems in a more extreme form. This paper reports on a natural experiment conducted within the 3M Company on the effect of the lead user (LU) idea-generation process relative to more traditional methods. 3M is known for its innovation capabilities— and we find that the LU process appears to improve upon those capabilities. Annual sales of LU product ideas generated by the average LU project at 3M are conservatively projected to be $146 million after five years—more than eight times higher than forecast sales for the average contemporaneously conducted “traditional” project. Each funded LU project is projected to create a new major product line for a 3M division. As a direct result, divisions funding LU project ideas are projecting their highest rate of major product line generation in the past 50 years.

Introducing the new product line of regulated distribution transformer cooperation of Siemens AG and A. Eberle GmBH & CO. KG

2017 ◽  
Vol 2017 (1) ◽  
pp. 264-267
Author(s):  
Stefan Hoppert ◽  
László Kelemen ◽  
Zoltán Nádudvari ◽  
Gábor Vörös
Keyword(s):  
New Product ◽  
Product Line ◽  
Distribution Transformer

A Metric for Evaluating Design Commonality in Product Families

1998 ◽  
Vol 122 (4) ◽  
pp. 403-410 ◽  
Author(s):  
Sridhar Kota ◽  
Kannan Sethuraman ◽  
Raymond Miller
Keyword(s):  
Product Family ◽  
Objective Measure ◽  
Value Added ◽  
New Product ◽  
Product Line ◽  
Product Complexity ◽  
Product Families ◽  
Market Strategy ◽  
Customer Base ◽  
Market Needs

Many companies develop a market strategy built around a family of products. These companies regularly add new product variations to the family in order to meet changing market needs or to attract a broader customer base. Although the core functionality remains essentially unchanged across the products within a family, new functions, feature combinations and technologies are incorporated into each new product. If allowed to grow unchecked, these component variations, commonly referred to as “complexity”, can result in a loss of productivity or quality. The challenge lies in an effective management of product variations in the design studio and on the manufacturing floor. The key is to minimize non-value added variations across models within a product family without limiting customer choices. In this paper we discuss the factors that contribute to product complexity in general, and present an objective measure, called the Product Line Commonality Index, to capture the level of component commonality in a product family. Through our Walkman case study, we present a simple yet powerful method of benchmarking product families1. This method gauges the family’s ability to share parts effectively (modularity) and to reduce the total number of parts (multi-functionality). [S1050-0472(00)02704-5]

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