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We're now going to begin our discussion of chapter 15.
This is one of the three chapters in
unit six or week six.
This chapter has a lot of really good information in it
and we've got quite a few charts to go through here to
get this discussion covered, so let's get started on it.
We're talking about product development and supply chain
management.
I guess the first question that an entrepreneur has to
look at is it going to grow, or is he or she going to grow
or not grow their business?
You don't get the not grow business very often.
Most people want to grow their businesses.
And entrepreneurs, as you might guess, have a broad
spectrum of opinions about growing their business.
But irrespective of what your opinion may be about your
business, there are some things to think about in
growing a business.
First of all, any type of growth in the business
requires investment.
It requires finances to make that growth occur.
And the process of growing a business, first of all, can be
very stressful.
But more importantly, the process of growing a business
can very quickly outstrip your financial resources, a
entrepreneur's financial resources.
And sometimes, it's too late by the time the entrepreneur
really figures out what's going on.
So the growth trap is a major issue in
growing a small business.
It occurs when the firm's ability to either raise cash
or generate cash falls behind its financial
commitments for growing.
And when that occurs, then typically the choices are
pretty limited on what an entrepreneur can do, and the
choices, for the most part, are not great choices.
Most of time, you'll see small businesses shut down.
I have personally experienced small businesses doing a great
job in their market, booking sales as fast as they could
possibly book them, and then they went bankrupt because
they could not provide the finances, they could not
generate the cash internally, to fund their growth.
Remember, growth requires funding, it
requires money to grow.
Now, we talk a lot about innovation, so we're going to
begin a short discussion here on innovation and the
advantages of innovation.
Obviously, innovation and
entrepreneurship go hand in hand.
In fact many, many small companies are products of
innovation from previous backgrounds or previous
experiences with products and services.
So the thing I guess we need to realize about innovation is
it's not easy.
It has to become also almost a culture within a firm.
And I can cite you several examples right now, as you
probably can as well, of companies that we recognize as
innovative companies and the companies who have ingrained
in their culture of the culture of innovation and who
are continually bringing new products to market as a result
of their innovation.
So for an entrepreneurial company to grow, innovation is
almost a requirement for it.
A company that comes to mind very quickly is Apple Computer
and what they've been able to do to innovate over the years
to stay on top of their marketplace.
A fantastic example.
Another company that you don't hear very much about--
I mean, you hear it all the time because many of you use
its services--
but that has done a great job of innovating over the last 10
years is AT&T. There's a great story there on innovation.
Here was a company that controlled a major part of the
land line telecommunications business, and recognized
probably 15 years ago that market was going to slowly
drift away and there were going to be many, many other
markets spinning up in its place.
And so they basically restructured, reformed
themselves, reinvented themselves, to be able to not
only participate in the new markets, but to dominate the
new markets in communications.
So two really good examples right there of
innovation at work.
There's some tips you can take about reducing the risk of
failure while innovating, and I'll just hit
two or three of these.
Typically, innovation needs to be based on experience.
I've developed a product, I've got that
product in the market.
I'm going to try to innovate off of that product or those
product characteristics to be stronger in the market.
Again, Apple is a great example here.
Apple came on to the market, or really made it big in the
market with their MacBook--
I'm sorry, with their Mac series of computers evolving
into MacBook computers and evolving to iPad.
And then once iPad got established,
then hit with iPhones--
I'm sorry, once iPod got established, they hit them
with iPhones and iPads.
Well, if you look at that whole series of products
there, you'll see that a chain or a line of innovation that
actually began with the Mac computers, the desktops.
And probably the one thing that stands out the most is
their graphical user interface.
And once they were able to develop the graphical user
interface into a touch screen technology, they were able to
then apply that technology to every product
that came after that.
So if you go back to the Mac computers and the MacBooks,
you'll see that there is a technology overlap in all
their products from the basic Mac computer all way up to
where they are right now with the iPads and the iPhones.
So one thing you want to do is base your innovations on
things that you are already doing, things that you have in
hand that's better than anybody else's, and see if you
can take those and aggregate those or group those to make a
penetration with new products in the marketplace.
And you could cite other examples of companies who have
been very good at doing this.
In fact, the dominant company in the operating system
business, Microsoft, is a good example of that as well.
You want to pursue innovation that your customers believe
will make their lives better.
In other words, I have a group of customers that are buying
products from me right now.
I do not want to displace those customers from the
products they are buying, but I want to enhance their
experience to the point that they will not buy not only the
old products but the new ones as well.
And Apple, again, is a great example of that.
The other thing that you've got to recognize is
innovation is costly.
It's costly just to begin innovation.
But if I'm going to take innovation and the outputs of
innovation and move it in the marketplace, I've got to have
capital ready to finance that growth.
Let's go back to our original comments from a few moments
ago-- growth requires capital, it requires money.
So if I'm going to innovate, I'm going to develop new
products, I'm going to have to recognize I'm going to have to
finance those products in order to
get them to the market.
A sustainable competitive advantage is a
very important concept.
This is one I want you to remember--
sustainable competitive advantage.
And innovation goes hand in hand with being able to create
a sustainable competitive advantage.
What that means this is I'm going to create a value
creating position in the market and marketplace that's
likely to endure over time.
I'm going to position myself in the marketplace, not only
now, but in years to come, or in a period of time to come,
such that I have a competitive advantage that nobody else can
keep up with, my competitors can't keep up with it.
And you'll see the characteristics of a
sustainable competitive advantage is difficult to
imitate, it creates a really high barrier to market entry.
How many of you right now would like to create a new
iPhone or your version of an iPhone and go head to head
with Apple in the marketplace for phones?
It's very difficult.
A few companies are making some inroads there, but for
the most part it's been impossible to
keep up with them.
It's too much coming out and the gap is too high.
Most of the time, to create a sustainable competitive
advantage, your ideas need to be patentable or
copyrightable.
You've got to be able to get some intellectual property
protection on your ideas.
And you've got to be able to create ever-increasing
performance in your products or in the innovation that
comes along in order to have a
sustainable competitive advantage.
And let's go back to the AT&T example.
Again, Apple and AT&T are very, very large companies,
but their model, the model the practice, the way they do
their business, can be duplicated with smaller
businesses to some extent, at least the culture and the
philosophy.
So let's look at AT&T. AT&T was in a desperate situation,
along with several other big telecommunications companies--
and by the way, some of those big telecommunications
companies did not have the vision of AT&T, and so they
basically are on own life support right now, just trying
to stay alive with much smaller markets and a
contracted business size.
So I come into the market with an iPhone 1, and before too
long-- in fact, in about a year--
I hit the market with an iPhone 2.
Well, what's the difference between an iPhone 1
and an iPhone 2?
Higher performance capabilities.
Each time I come out with a new iPhone product, it's got
some performance features that none of the
previous products had.
And so you see what's going on there with creating that
sustainable competitive advantage.
I'm constantly coming out with similar products or with a
next generation product, but with higher performance, and
that creates a tremendous competitive advantage, a
tremendous barrier to competitors
rising up against you.
This is the competitive advantage life cycle.
And I've got just a few little arguments with this curve, but
let me just show you.
And the argument would come with the sales axis or with
the vertical axis, But the phases are correct--
I develop, I deploy, and then I see a declining market for
my product.
So this becomes very quickly what we call the product life
cycle curve, and we're going to move to that curve here in
just a second.
But basically, the product life cycle is a detailed
picture of what happens to a specific product's sales and
profits over time.
So I can plot those--
I can plot my sales over time with a product and I can plot
the accompanying profits with that product over time.
And it's a very good test to indicate when a company needs
to be entering the marketplace with new products.
So let's look at the product life cycle curve just for a
little bit.
Here you see the sales curve in blue and the profit curve.
And you'll see that the profit curve, on introduction, the
profit percentage--
I'm sorry, the ability to generate cash and generate
profit is maximum once a market is entered into.
And that growth, that profit growth, will continue up to a
certain point occurs before the sales maximizes.
And so you can see what's going on there-- as sales
continue to climb, the profit curve climbs up, it peaks, and
begins to decline.
Well, what's going on?
Well, during that growth curve, the profit curve gets
to a certain point where now I've got competition in the
marketplace, I've got price competition, so my margins
began to decline even though my sales are growing.
And so then after the sales peak and start coming down,
that means I'm selling fewer units yet the margins have
continued to decline, and so my profit begins to fall off
fairly quickly with time.
So there's a point in there during the growth and maturity
phases where I have to decide based upon my life cycle, do I
enter the market with a new product or with a follow on
product that's generated this characteristic, or can I
adjust this product a little bit and extend its life and
consequently extend my growth?
But this is a classic product life cycle curve.
Now, the product development process is one that's fairly
straightforward.
We'll talk a little bit about some of
these in just a moment.
But first, you have to accumulate the ideas, then you
do the business analysis on the ideas--
I'm going to analyze the business case--
and then I do my new product development, once I decide
what those products are going to be.
And then once I go through the development cycle, which
itself can be very costly and time consuming, I do a series
of product testing before I enter the market.
You'll see this product testing phase, which is really
the steps between the product development to product testing
and then into the marketplace, sometimes with software
products, you'll hear that call beta testing.
That's where the software is developed, it goes into a very
limited and controlled market just to do beta testing.
We're going to test the operation, to see if there's
bugs, to see if there's little things we need to improve and
fix before we go into a full market with a introduction
with this product.
So in the business analysis box, we've accumulated ideas
and now we're going to do some business analysis.
This is where we look at various major factors of the
new product ideas.
Does the new product idea have a good relationship with our
existing product line?
Are we deviating too much from what we are already doing and
have success with?
What is the cost of development and the cost of
introducing the product into the marketplace?
What kind of personnel facilities will I need for the
new product?
Is there going to be significant competition the
moment I enter the marketplace, and how will the
market respond to this new product idea?
So those are all very key factors, require a lot of work
to do, but that's part of the business case analysis--
analyzing each product idea to see what that does from a
business standpoint.
Now, let's look at some broader aspects of new
products, or let's say, the total product.
Some definitions here-- branding is a verbal and/or
symbolic means of identifying your product.
You hear a lot of talk about branding in today's business.
Branding typically occurs around the effort to try to
establish a foothold, a sustainable
foothold, in a market.
A brand name is a name that can be spoken.
Coca-Cola or Coke is a brand name.
A brand mark is a brand that cannot be spoken but yet it's
tangible, and that would be an image like the traditional
bottle of Coke.
And then the brand image is symbolic.
It's also intangible.
But when we think of Coca-Cola, or we think of
other well known brands, there's certain images that
come to mind that are more symbolic than anything else.
So let's look at some examples here of that.
This is kind of the broad area of brand identity.
And you see here that for Lou's Lures, the brand mark
would be the hook there with a little fly or whatever it's
called on it-- that's tangible.
A brand name, in this case, would be Lou's Lures, and this
is what you would see showing up on business cards and signs
and advertising--
that's tangible.
And then the brand image-- the brand image is that of a
fisherman fishing.
That's kind of intangible.
So these are all components of the intellectual property
surrounding a brand identity or product identity and this
is something that we have to be very aware of.
Now, we're going to talk more about intellectual property
here in just a moment.
But before we do that, let's look at some rules that the
text has identified, the authors have identified, for
naming a product.
Some of you right now are probably considering starting
a new business or you're thinking about a business
you're going to want to start, and you're thinking about
well, what should we name the businesses or what should we
name our family of products?
And so here are some rules you can look at.
You want a name that's easy to pronounce and remember.
You want to choose a descriptive name.
Use a name is that is eligible for legal protection, and
select a name with promotional properties.
And then, select a name that can be used on several product
lines of a similar nature.
So what we're saying here is you want select names that are
catchy, simple, easy to use, that can be used over a broad
range of products or a big product line,
that is easy to say.
And sometimes that is very difficult to do.
Another thing we have to think about when we're developing
our new products and our new companies
is our product logos.
So you're designing a logo--and by the way, most,
particularly young entrepreneurs, when they're
thinking of their product and thinking of their new company,
the first thing the want to do is run out and design a logo.
And I'm just telling you, logo designs are important, but
that's not the first thing you should do.
When it comes to designing a logo, after you've decided on
your product, after you've done a feasibility analysis,
after you now understand exactly what I want to do with
my small business, I can design a logo.
You want to keep it simple, you want to design it for
visibility--
it's eye catching.
You want to leave it open to interpretation.
If I look over here at this example on the right, that's
Cengage Learning right here.
They're the publishers of our textbook and these charts.
And you can see their mark right here and then their
little logo sign right here.
I'm not sure exactly what that image represents.
I guess if we stare at it a little bit, probably various
thoughts about publishing and book distribution and learning
might come to mind.
But certainly, they've left it open to interpretation.
Are they relentlessly consistent?
Yes, they are.
Cengage, everything they send out has that logo and that
brand mark on it.
And then we've got to recognize the importance of
our logo design.
Once we've designed the logo, that's something we're
committing to use on every promotional thing we do for
that product.
Consistently, over and over again, we hammer that home
until that image gets frozen in our customers'
brain, so to speak.
You want to get good advice on logos, good artistic device.
In today's world, you want to think about logos that would
be checked very nicely on internet websites and on the
computer monitors.
And don't think that the logo's
going to sell you business.
Behind that logo, or in front of that logo, you've got to
have outstanding products.
That's really what's driving what you're doing.
So here's a definition for a trademark and a definition for
a service mark.
You might want to take note of these.
A service mark is a legal term indicating the exclusive right
to use a brand to identify a service.
So it's a legal term that gives you an exclusive right
to use a brand to identify a service.
Some additional things to think about with a total
product, and these also become very important-- packaging.
It's very important in today's world.
In fact, as I look at the amount of commerce that's
occurring just over the internet, electronic commerce,
and I look at the importance of packaging for a lot of
reasons, I can see where there's going to be a lot of
careers in the future opening up just in the packaging area.
Package design--
the development of packaging that minimizes the use of
non-recyclable materials, the color and design of packaging,
packaging designs that do not crush when
they're shipped around.
So packaging has a lot of considerations
for the small companies.
It's a very important aspect of what you're
doing with a product.
Labeling--
a lot of requirements on labeling, and we'll talk about
this some more in just a moment.
There's a lot of legal requirements on labeling right
now, and more regulations being created as we speak.
The government is getting more and more into this labeling
requirement business, particularly on food products
and drug products.
In fact, I have looked at food products and drug product
containers and I've scratched my head sometimes and wonder
how do companies keep up with this?
How can they afford to keep up with all of the details of the
labeling requirements?
And I can tell you what's happening there.
They're doing their best to keep up and any costs are
being passed along to you.
On warranties--
a warranty is simply a promise that a product will do certain
things over a certain period of time, and you have to be
aware of what kind of warranties you're going to
offer with your product, and then you have to budget those
warranty costs into your annual budget.
It's very important.
It's easy to offer a warranty, it's not so easy to budget the
cost of those warranty into your annual operating cost.
So you have to be careful about that.
Well, a product strategy is a kind of an overall idea
package that defines the way your product component of the
marketing mix is going to be used to achieve your
objectives with it.
In other words, I have a product.
Now I want to develop the totality of the strategy that
says this is what the product's going to do, this is
what the performance is going to be, this is what it will do
for my customers, this is how I'm going to package it, this
is how I'm going to market it, this is how I'm going to
distribute it, and so forth and so on.
That's the total product strategy.
So let's look at kind of the makeup of the various levels
and the product strategy.
The lowest denominator, the common denominator, is the
product itself.
Then around that product, you can begin to build up what's
called a product line.
That's the sum of the related individual product items, so
now I've got multiple items of products.
I was looking yesterday at Waterpik Corporation.
I don't know if you're familiar with Waterpiks or
not, but they're very clever devices developed some years
ago that's designed for oral health care and for other
personal health item where you require kind of a pulsating
water pump.
And so Waterpik has done a really good job of
that over the years.
They started out with just a basic water pump, and now
they've got a whole series of products that go along with
that basic water pump.
They've continually improved the technology and the basic
water pump, but they also improved not only the size of
the associated products but the quality of the associated
products that go with it.
So now they have several product lines that's developed
off that single product.
And so those several products, then, would
be the product mix.
That's the firm's total product lines.
And then the product mix consistency is the similarity
of product lines in a product mix.
By similarity, we mean the common parts, the common
technology, the common appearances, the common
functions, that all overlap with a product line.
And I'll point you back to Apple here.
You can see that consistency in all of their products.
There's a lot of those characteristics that just go
forward with every product.
So let's look at this example right here.
This is 180s LLC.
They manufacture kind of sports apparel or sports
clothing, both for training and for actual competition as
well as a work wear and battle gear.
So you can see on the left hand side the depth of the
product lines that 180s LLC offers.
Now if you look across the top, you see the breadth of
their product mix-- the ear warmers, the gloves, the
jackets, the booties, and so forth.
Now when I put this grid together right here, I can now
get a picture of the combination of the product
lines and the product mix for 180s LLC.
And so if I look there very carefully, you can see where
is their kind of bread and butter product line.
It looks like ear warmers there-- that's where they've
done the greatest amount of penetration with that.
And then you look at gloves, and you can see, well, that's
their second highest penetration.
You can see with jackets, they're just kind of beginning
to scratch the surface with booties.
It looks like a kind of beginning there with hats.
They've got some penetration going there, and with eyegear,
they're just beginning, and with scarves,
they're just beginning.
So you can take a quick look at that little example right
there, you can see--
well, this is where 180s LLC is playing in the marketplace.
These are the their products and this is the relationship
of the products and so forth.
It's a good way to look at a company's product lines and
see if there's a cohesiveness or a sensibility to the
product lines.
And occasionally you'll see a company that will just break
out and just do something wacky that
they've never done before.
In fact, I'll give you a good example of that, and many of
you will not even know of this company.
But years ago, there was a company called Collins Radio,
no relationship to me, but they were dominant in the
field of communications, radio communications, microwave
communications, police communications, and so forth,
all of that gear.
In fact, a lot of the telecommunications backbone of
the US was handled by Collins Radio equipment.
This was back in the days when telephones were transmitting
over long microwave links coast to coast and satellites
had not really come on the scene, and so Collins Radio
dominated that market.
Well, Art Collins, the CEO and founder of the company,
decided all of a sudden he wanted to get in
the computer business.
So now he began to branch off and try to develop computers
to go along with his penetration, his domination,
in the radio communications business.
Well, he was competing now with the IBMs of the world,
the deck computers of the world-- some really, really
big, ingrained computer manufacturing companies, and
he just got his hat handed to them in this marketplace.
In fact, it was such a terrible disaster that he lost
his company.
He had to sell the company in order to keep it going, and
had to scale back his participation.
And in the process, the market that he had dominated begun to
change, and he was unable to keep up with those changes
because he wasted all of his effort and capital in a market
that he basically knew nothing about.
Terrible strategy mistake.
Now, here's a little chart that's kind of beneficial from
an information standpoint.
It shows you a good comparison of service marketing versus
goods marketing.
And remember now, in chapter 15, we're kind of spinning off
of chapter seven, which was the
original marketing chapter.
So we went from chapter seven now to chapter 17 and 18 and
now into chapter eight and 15 and 16, and so we're still
talking about marketing.
So here and here on the left hand side of the
characteristics of this type of marketing and on the
counter to the left of the circle there, this column
right here is just pure services marketing, and this
column right here is pure goods marketing.
So here I'm selling pure products, just hard products.
Here I'm selling services.
And so somewhere in between, which is true for most
companies, is where we're going to be when we're selling
most services and goods marketing.
So here's some characteristics on services marketing--
intangible offerings.
I don't have a package, a box that I send out with
something in it.
It occurs at the same time, services marketing.
There's less standardization, there's greater
perishability--
in other words, with services marketing, I'm giving that
service right now.
It's not something I'm going to spread out
over a period of time.
It's something you sign up for right now, I give it to you,
it goes away, and it doesn't come back.
On goods marketing, there's a lot of differences.
There's tangible, it can occur at different times and still
be the same product.
There's a lot more standardization, much less
perishability.
So you can see kind of the characteristics here versus
the characteristics on services marketing.
Somewhere in between in what we're calling the hybrid, the
services and goods marketing together, and many companies
fit into this area right here.
So let's look at how we approach markets and market
penetrations.
And so here's some product strategy options
we can think about.
On the left hand side are a bunch of alternatives.
I can have one product, I can attempt to penetrate one
market with that product, I can have one product that I'm
going to aim at multiple markets.
Remember, we said earlier that markets will tend to segment,
that every market will have different
segments within that market.
And so right on down the list, I can have--
number five-- multiple products with one market or
multiple products in multiple markets.
So there's a bunch of different combinations here I
can think about.
Now, I've got a bunch of options here.
I can convince nonusers in the targeted
market to become customers.
That's where I have one product, one market, and I'm
just working on that one market so I'm going to go
after nonusers primarily.
I could have persuade current customers to
use more of the product.
That's where I've got a modified
product with one market.
Or I can alert my current customers to new
uses for the product.
This is modified products into multiple markets there.
There's several categories here these options will fit
into, but those are the things that I have to think about.
Once I've gotten into a market, I have to think about
how can I get my loyal customers to buy more of my
product or more of the product that's similar to what they
already have?
A lot of that goes back to our reputation, too.
Oftentimes, for instance, right now, I just went and
bought a new iPhone 5.
Well, why didn't I buy a Galaxy or some
other type of phone?
Those are perfectly good phones, but I was used to
using iPhone 5--
I mean, iPhone 4, I'm sorry, an iPhone 3G
is what I had prior.
I was used to the iPhone characteristics, the operating
system, the user interface-- all those
things I was used to.
I also had recognized or experienced a high quality
product prior, and so all that background, that history, went
together to say, I'll just take an iPhone 5.
I won't even look at any of the others because I don't
want to spend my time trying to figure out how to use a
product, I just want to use the product.
So here is a product marketing strategy that you can kind of
see from an image or a graphical standpoint.
Again, here's the six different alternatives that we
have from a strategy standpoint.
So I have one product, a lamp.
I can take that into one market or I can take that into
multiple markets.
Those are basically my two choices with that one product.
If I have a modified product, which I'm going to take a
table lamp and make a desk lamp out of it--
I've still got the same wiring and it has a little bit
different packaging, probably the same light bulb--
I could take that into one market or I could take it in
multiple markets.
If I've got multiple products, I can take them into one
market or I can take them into multiple markets.
So I have a lot of alternatives here with just a
few products.
In fact, I have a friends whose family owns a company
that builds nothing but lamps for hotels.
And they supply lamps all over the world just for hotels.
They've got a lamp company--
they founded the company in Arkansas and finally had to
move the production to China in order to get the
economies of scale.
They really had to have to compete in the marketplace.
Most of the hotel desk lamps that you will now see are
manufactured in China, because it's cheap.
Let's look just a little bit.
That previous discussion was kind of on markets and market
segments and how you decide how you want to penetrate a
market with a product.
We'll will talk about all these subjects more as we move
into the course as well.
On consumer protection, that's on the customer
side of your product.
Primarily, this occurs in the area of food, drugs, and
product safety.
And you can see here the labeling issues that existed
prior to the Labeling Education Act of 1990, but all
of that is changing as we speak.
There's a whole bunch of new labeling rules being generated
right now by the bureaucracy.
The Product Safety Act of 1972.
The Consumer Product Safety Commission was created then
and they kind of monitor now what's going at consumer
product safety, and this is where you see the requirements
for nutrition labeling.
And that act was updated in 1990 with the Nutrition
Labeling and Education Act of 1990, where they began to
cover packaging, how you are to use a product, and the
disposal of that packaging.
So we have all kinds of legal requirements, particularly on
consumer products, that we have to be aware of.
Now, let's look at some specific examples that you're
well aware of.
These are the types of protections that we can get in
the marketplace.
And typically, you'll hear this called sometimes
intellectual property-- trademarks, patents, trade
dress, copyrights.
Those all fit in this category, this broad bucket
that we call intellectual property.
So you see the Coca-Cola symbol up
there, so that's a trademark.
On the right hand side, you see the iPhone, and the iPhone
is primarily protected by patents.
A lot of the technologies used in the iPhone, those are
patents that have been developed over a
long period of time.
On the left hand side, you'll see an outtake on the Pirates
of the Caribbean, and Geoffrey Rush and the other guy, I
forgot his name now, in that scene right there.
That's a copyright type media.
Media is copyrighted, so that film is copyright.
You can't copy it illegally.
Technically speaking, if you ever get caught doing that, it
can be very painful from a legal standpoint.
Trade dress.
Here you see DHL--
DHL is the UPS of the international community.
For a long time, it was the leading hauler or freight
hauler in the international community.
I think UPS has just about caught them or
surpassed them now.
But they had very unique trade dress and everybody knew that.
Well, UPS does too-- the brown suit.
They made a big deal about advertising with that.
So that's what we call trade dress, and that can be
protected legally as well.
Trademark protection.
We have the Lanham Trademark Act, and you can kind of read
there what that grants for you.
It grants you the exclusive right of use a registered,
nongeneric name, symbol, or other mark to identify a
product or service.
Trademarks are filed and granted by the US Patent and
Trademark Office, the PTO.
You lose those rights of trademark protection if your
market enters in to use as a generic term-- in other words,
it's broadly used by lots of different products--
or if the mark is not labeled with the symbols TM or the
little r with a circle around it or the phrase registered in
the US Patent and Trademark Office.
So once you have a trademark, you've got to make sure that
every time you use that trademark that it's denoted or
noted as a trademark.
Patent protection.
There's different types of patents-- utility patents,
design patents, plant patents.
The most common patent is the utility patent, and this is
the legal protection of the right of an inventor to make,
use, or sell an invention.
And typically these run--
I think they run for about 20 years, and then they become
free property.
And there's some arguing about exactly when is the right time
to file for a patent.
Sometimes you may well enter into a marketplace with a new
product, having disclosed when you had the ideas but not
filing for the patent until the product's in the
marketplace, and then file the patent.
The reason why you want to be careful about the timing on
filing for a patent is that once you file, you've revealed
a lot of your information about your technology to your
competitors.
They're watching the patent filings as well as your
are--the patent becomes public information.
A design patent is basically getting a patent on the
appearance of a product, and a plant patent is
exactly what it says.
I'm getting a patent on the next rose bush that I've
generated or created or the next whatever kind of plant.
It's on real, live plants--
I can get patents on those.
Copyright is another form of legal protection of
intellectual property.
It's the exclusive right of a creator to reproduce, publish,
perform, display, or sell his or her works.
And you can see the symbol, the little c with a
circle around it.
And typically what you have to do is have some sort of a
notation that says this is copyrighted information and
when it was published in the copyright owner's name. .
And of course, trade dress are all elements of a firm's
distinctive image or its look and it can be protected under
trademark law.
Now, let's talk just a little bit about supply chain
management.
This is a very important topic, and I almost wish that
the authors would create a new chapter just to focus on
supply chain.
But let's talk just a little bit about that.
So supply chain management is defined right here-- it
integrates and coordinates the means by which a firm creates
or develops a product or service and
delivers it to the customer.
So a supply chain is where it's kind of the beginning to
end chain from when a product is created to when that
product is sitting in the customer's hand.
Distribution is the physical moving on the products and
establishing of intermediary relationships to
support that movement.
So oftentimes, if I'm shipping from my plant, I may ship
initially in a truck that goes to an airport, loads onto a
plane, flies to another city, loads into a truck, which goes
to a warehouse, which gets the product into smaller trucks,
and then finally ends up setting that product on my
customer's front porch.
And so that's the entire distribution chain.
That's all of the intermediary relationships that's required
for me to get a product from my factory to
my customer's facility.
Distribution is a big deal right now, as is logistics.
Logistics is a physical distribution.
That's the activities of distribution involved in the
physical relocation of products.
A big activity in our country, and it's going to get much
bigger with the advent of internet commerce.
A channel of distribution is a system of relationships
established to guide the movement of a product.
So I can have multiple channels of distribution or I
can have single channels of distribution.
It's pretty well my choice of how I want to
distribute my products.
So a direct channel is-- and we'll see a good little
diagram here in a minute to show what these mean--
when I am shipping directly to my customer.
And the shipping, the media there,
is another big question.
What is the shipping?
Is it trucks, boats, ships--
I'm sorry, trucks, boats, airplanes, what is it?
An indirect channel is another type of a supply chain--
I'm sorry, distribution channel.
And then a dual distribution is where I have more than one
channels of distribution in play at one
time with my product.
So here's a good little chart to show us
what we mean by that.
On a direct channel, it's where I'm shipping directly to
my customer, from producer to customer.
A retailer channel is where I'm shipping to a retailer or
industrial distributor, primarily to a warehouse, and
then that retailer or industrial distributor will
ship to the customer or get that product into the
customer's hand.
A wholesaler channel is where I have a wholesaler into the
distribution channel.
And then the agent broker channel is where I have an
agent or a broker in front of the wholesaler.
If you look at this right hand line right here, you see
basically a channel that describes the current
supermarket industry.
A producer is the person that's growing the carrots, an
agent or broker is a broker who is purchasing from the
growers and arranging sales with the wholesalers, and the
shipping goes from the grower to the wholesaler.
Then the wholesaler is selling those carrots to whoever the
local retailer is, and then the retailer is selling those
carrots to you when you come in and need some carrots for
your carrot salad.
So, from the farm, to the broker, to the wholesaler, to
the retail user, to the consumer is the channel.
And most of your food that you buy in the grocery store goes
to that right hand channel right there in that chart,
this channel right here.
And then I can look at different industries and
different types of products and I'll see different ways
that products get distributed around their channels of
distribution.
Very intriguing, and this can get very complicated or it can
be very simple.
Now, my challenge when I'm developing my company or my
new product is establishing my distribution channels.
What are they going to be?
What's the best way for me to get my product into my
customer's or my user's hands?
So I have to look at the cost, I have to look at can I cover
my entire market with this channel or these channels?
What kind of control do I have over distribution?
So these are all factors that I have to take into account
when I'm building my distribution channel.
On physical distribution, I have a lot of choices.
I can use common carriers, I can use contract carriers, I
can use private carriers--
a lot of different choices.
I can use a combination of the two.
And if I've got a large distribution or a large market
that I'm playing into, this can be a fairly large function
within your company of just optimizing how we actually
ship goods around from our manufacturing facility to our
customers or to warehouses or wherever we're taking that
product in our channel.
So in the scope of physical distribution, I have to also
think about other things-- storage of products, handling
of materials, handling of the products, specifying
responsibility for delivery terms.
In fact, you'll see this is a very complicated process.
If you've ever shipped anything very much, you know
that it takes you a long time to set up all these
relationships so that when you're ready to ship, that
shipping occurs seamlessly without interruption.
And big companies have lots of people that do nothing but
just work the distribution channels and the shipping and
delivery aspects of their business.
Think about what it's like to be a Lowe's or a Home Depot or
a Walmart that's got distribution occurring like
crazy all over the world, and so their buyers are out buying
products that they want to see on the store shelves, and
those products come in ultimately to a big
distribution regional warehouse where they then get
shipped out to the big box retailers.
It's very complicated, and there's a large group of
people within those companies that do nothing but just
manage physical distribution of products.
So in the terms, I have to decide what kind of delivery
terms will I have?
Will I pay for freight costs or will they be free on board
origin, FOB origin, freight collect?
That means I'll get your product when you buy your
product from me.
I'll get it on board, and whatever transportation we're
going to use, you're responsible for it
from their own end.
The freight company will collect at delivery.
I can select the carriers that I'm going to use-- another big
deal there, trying to select carriers--
and all the carriers have a lot of middle men too in this
planning and scheduling carriers, and that's not as
straightforward as it sounds.
You've got to really know what's
going on in that business.
Who's going to bear the risk of damage?
How am I going to select the modes of transportation?
What's the best modes of transportation that's going to
reduce my costs or keep my costs
manageable for my operation?
Well, as a result of all these challenges and distribution
and packaging and everything else, we see new types of
companies springing up called logistics companies.
They basically give you cradle to grave distribution
capabilities.
They do trucking, they do packaging, they do
warehousing, they do everything that's needed to
get a product from your factory into
your customer's hands.
In fact, we have one or two in our area that are doing very
well at this--
first of all, establishing warehouses and then
contracting with manufacturers to do packaging for them and
to do shipping for them, and that's a very nice business
for this company once they've been established.
They're operating, I think, mostly in
Texas and in the southeast.
This is a company headquartered in Paris.
A third party logistics firm is a firm that provides
transportation and distribution services to
companies that prefer to focus their efforts on other facets
of their business.
In other words, the third party logistics firm handles
everything for a company on the distribution and
transportation side.
A fourth party logistics firm coordinates every aspect of a
manufacturer's or distributor's supply chain and
acts as the sole point of contact between that company
and all of its logistics and information service providers.
So if I have a large company and I'm shipping lots of
products, this fourth party logistics firm, I'm basically
going to outsource my logistics, planning, and
execution to this firm under contract.
They then will work every aspect of logistics
from that point on.
And those are growing markets for companies here in the US.
Well, here's some key terms you'll see in the chapter.
One thing I challenge my students to do is learn the
business terms, learn that when you get out of school and
somebody says dual distribution, you'll know what
that means, and they say common carriers and you'll
know what that means.
All this information is covered in
chapter 15 in our text.
Long discussion, lots of charts to look at-- this
concludes chapter 15.
I hope it has passed along some information for you.
We'll next look at chapter 16, so let's get ready for that.