Chapter Four

Product/Service Development
4.1-INTRODUCTION
4.2-THE CONCEPT OF PRODUCT/SERVICE
4.3-PRODUCT/SERVICE DEVELOPMENT PROCESS
4.4-LEGAL AND REGULATORY FRAMEWORKS FOR
ENTREPRENEURS
4.5- INTELLECTUAL PROPERTY
PROTECTION/PRODUCT/SERVICE PROTECTION
4.6- INTELLECTUAL PROPERTY SYSTEM IN ETHIOPIA
 Chapter Objectives

After completing this chapter, students will be

able to:

 Describe the Concept of Product and Services;

 List Product/Service Development Process;
and
 Discuss the Intellectual Property Protection.
 1.1 Introduction
• In Entrepreneur’s business, product/service
development is the term used to describe the
complete process of bringing a new product or
service in the market.
• The new product development process involves
the idea generation, product design, and detail
engineering; and also involves market
research and marketing analysis.
 4.2 The Concept of Product/Service
 Many entrepreneurs find it difficult to identify
a new product/service or a new market
opportunity.
 To start and expand a small venture, an
entrepreneur needs to identify opportunities
for domestic and/or international
expansion.
 As the new venture grows and matures a need
for different management skills can occur as
well as for a new infusion of the
entrepreneurial spirit (corporate
 CONT..
 Organization's success is dependent on customer
satisfaction and delight.
 Customer satisfaction is achieved through the
development of product and service, which have all
attributes required by the customer.
 A success product or services do not only have an
attractive package design but should be also able to
provide robust performance.
 Thus, product design must be practical enough for
production and powerful enough to provide a
competitive advantage.
 4.3 Product/Service Development Process

 One of the essential characteristics of a successful

business is exemplified by its ability to continuously
and rapidly develop new or improved versions of
existing products.
 Product development is the process through which
companies react to market signals, respond to changes
in customer demand, adopt new technologies, foray
into new areas, and ensure continuous growth.
 STAGES OF PRODUCT/SERVICE DEV.

These stages can be referred to as:

1. Idea Generation
2. Incubation
3. Implementation
4. Diffusion
 1. Idea Generation

The new product development process starts with

search for ideas. Companies have to encourage any
new idea coming.
The key to successful domestic and international
entrepreneurship is to develop an idea that has a
market for the new product/service idea
conceived.
Some of the more fruitful sources of ideas for
entrepreneurs include consumers, existing
products and services, distribution channels, the
federal government, and research and
development.
 2. Idea Screening
 In the 2nd stage, the purpose is to lessen the
number of ideas to few vital/valuable ideas.
 The ideas should be written down and
reviewed each week by an idea committee
who should sort the ideas into three groups-
 Promising Ideas,
 Marginal Ideas, and
 Rejects:
 Each promising idea should be researched by
committee member.
3. Concept Development and Testing
 Attractive ideas must be refined into fast able product
concepts since people do not purchase ideas but they
buy concepts.
 Any product idea can be turned into several product
concepts. The questions asked probably include:-
 Who will use the product?
 What benefits should the product provide?
 When will people consume the produced?
 Concept Testing: - calls for testing product concepts
with an appropriate group of target
consumers/customers, and then getting the consumers’
reactions.
 4. Marketing Strategy Development
 After testing the new product the concerned body must
develop a preliminary marketing strategy plan for
introducing the new product into the market.
 The marketing strategy will undergo further refinement
in subsequent stages.
 The marketing strategy plan consists of three parts:
(1) Market size, structure, behavior ;
( 2) Planned price, distribution strategy, and marketing
budget of the 1st year; and
(3) Long run sales and profit goals, marketing mix strategy
 5.Business Analysis
 After management develops product concept and
marketing strategy, it can evaluate the proposals’ business
attractiveness.
 Management needs to prepare sales, cost and profit
projections to determine whether they satisfy the
company's objective or not.
 Estimated Total Sales: - Management needs to estimate
whether sales will be high enough to yield satisfactory
profit. 96 Estimating
 Cost and Profits: - After sales forecast the management
should estimate the expected cost and profit at various
levels of sales volume. The company can use other
financial measure to evaluate the merit of a new product
proposal.
 6. Product Development
 If product concept passes the business test, it moves to
R&D or engineering to be developed.
 Its goal is to find a proto type that the
consumers/customers see as embodying the key attribute
described in the product concept statement.
 Scientists must not only design the products’ required
functional characteristics but also know how to
communicate its psychological aspects through physical
cues and how will the consumer/customer react to
different colors, sizes, weight & other physical cues.
 Functional tests are conducted under laboratory & field
conditions to make sure that the product performs safely
and effectively (Durability, Speed, Cost, etc)
 7. Market Testing
 The goals are to test the new product is more authentic
consumer/customer settings and to learn how large the
market is and how consumers/customers and dealers
react to handling, using and repurchasing the actual
product.
 Most companies know that market testing can yield
valuable information about buyers, dealers, marketing
program effectiveness, market potential & other
matters.
 Test Marketing yields several benefits include more
reliable forecast of future sale, and pretesting of
alternative of future sale.
 8.Commercialization
In commercializing, market entry timing is critical. If
the company hears about a competitor nearing the end
of its development work, it will face three choices.
 The 1st choice is First Entry. Under this category, the
firm usually enjoys the "first mover advantage" of
locking up key distributors & gaining reputation.
 The 2nd choice goes with Late Entry Strategy- which
has three advantages include:-
 The competition will have borne the cost of educating
the market;
 The competing product may reveal fault that the late
entrant can avoid; and
 The company can learn the size of the market.
 cont…
 The 3rd strategy- Parallel Entry- can be also chosen by
the company to get in the market.
 The strategy to work, a prospective businessman can
take the advantage of opting for the latest technology
and production process and operate at higher volume of
operation.
 This leads to reduced production cost and production
of quality goods and services.
 Where (Geographical Strategy):-
 To Whom (Target-Market-Prospect):-
 How (Introductory Markets Strategy):-
 4.4 Legal and Regulatory Frameworks for
Entrepreneurs
 Since there are many options that an entrepreneur can
choose in setting up an organization,
 It will be necessary to understand all the advantages and
disadvantages of each regarding such issues as liability,
taxes, continuity, transferability of interest, costs of
setting up, and attractiveness for raising capital.
 Legal advice for these agreements is necessary to ensure
that the most appropriate decisions have been made.
 One of the challenges the novice entrepreneur will face as
he/she goes into business understands the regulatory
environment which is made up of numerous laws and
regulations.
 4.5 Intellectual Property
Protection/Product/Service Protection
4.5.1 What is Intellectual Property?
Intellectual property is a legal definition of ideas,
inventions, artistic works and other commercially viable
products created out of one's own mental processes
4.5.2 Patents
An entrepreneur who invents a new thing or improves an
existing invention needs to get legal protection for her
invention through a patent right
 Cont…
 What Can Be Patented Then?

Processes: Methods of production, research, testing,

analysis, technologies with new applications.
Machines: Products, instruments, physical objects.
Manufactures: Combinations of physical matter not
naturally found.
Composition of matter: Chemical compounds,
medicines, etc
 4.5.3 Trademarks
• A trademark may be a word, symbol, design, or some
combination of such, or it could be a slogan or even a
particular sound that identifies the source or sponsorship of
certain goods or services.
• These are distinctive names, marks, symbols or motto
identified with a company’s product or service and
registered by government offices.
• Unlike the patent, a trademark can last indefinitely, as long
as the mark continues to perform its indicated function.
• Trademarks unlike patents are periodically renewed unless
invalidated by cancellations, abandonment, or other
technical registration/renewal issues.
 Benefits of a Registered Trademark

• It provides notice to everyone that you have exclusive

rights to the use of the mark throughout the territorial
limits of the country.
• It entitles you to sue in federal court for trademark
infringement, which can result in recovery of profits,
damages, and costs.
• It establishes incontestable rights regarding the
commercial use of the mark.
• It establishes the right to deposit registration with
customs to prevent importation of goods with a similar
mark.
• It entitles you to use the notice of registration .
• It provides a basis for filing trademark application in
 4.5.4 Copyrights
• Copyright is a right given to prevent others from
printing, copying, or publishing any original works of
authorship.
• Copyrights provide exclusive rights to creative
individuals for the protection of literary or artistic
productions.
• It protects original works of authorship including
literary, dramatic, musical, and artistic works, such as
poetry, novels, movies, songs, computer software, and
architecture.
• They pertain to intellectual property. Usually
copyrights are valid for the life of the inventor plus a
few decades.
4.6 The Intellectual Property System in Ethiopia
• Ethiopia became a party to the convention
establishing the world Intellectual Property
Organization (WIPO) in February 1998 right after
some time the Country had joined the Nairobi Treaty
on the Protection of the Olympic Symbol in 1981.
• It is a member of the Treaty establishing the
Common Market for Eastern and Southern Africa
(COMESA) which was formed in 1994, the
partnership agreement between members of the
African, Caribbean and Pacific (ACP) Group of
States and the European Union (EU)
 The Intellectual Property System
• To facilitate the provision of adequate legal
protection for and exploitation of intellectual
property in the country;
• To collect, organize and disseminate
technological information contained in patent
documents and encourage its utilization;
• To study, analyze and recommend policies and
legislation on intellectual property to the
government; and
• To promote knowledge and understanding of
intellectual property among the general public;
 CONT…
To be granted a patent, an invention must
fulfill three conditions-
1. it must be new- It should never have been
published or publicly used before;
2. It should be capable of industrial application-
It must be something which can be industrially
manufactured or used; and
3. It must be "non-obvious”- It should not be an
invention which would have occurred to any
specialist working in the relevant field.
 CONT…
Trademark Directive is issued in the country in 1986 with
the following objectives in that it helps:-
 To centrally deposit trademarks which are used by local
and foreign enterprises to distinguish their goods or
services;
 To distinguish the products or services of one enterprise
from those of other enterprises and prevent consumers
from being victims of unfair trade practices;
 To provide information on trademark ownership and right
of use when disputes arise between parties;
 To provide required information on trademarks to
government and individuals; and
 Protection is granted after publication of cautionary notice;
 CONT…
The Proclamation copyright 2004 gives protection to:
 Works of authors who are nationals of or have their
habitual residence in Ethiopia;
 Works first published in Ethiopia; or works first
published in another country and published within
thirty days in Ethiopia;
 Audio-visual works whose producer has his
headquarter or habitual residence in Ethiopia; and
 Works of architecture erected in Ethiopia and other
artistic works incorporated in a building or other
structure located in Ethiopia.