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Commonality decisions when designing for multiple markets
- Source :
- European Journal of Operational Research. 258:902-911
- Publication Year :
- 2017
- Publisher :
- Elsevier BV, 2017.
-
Abstract
- It is well-established that a manufacturer’s commonality decisions between related products are driven by trade-offs between cost savings from standardization and demand effects of customization. Prior research has examined these trade-offs in the context of product line design for a single geography where cannibalization is a primary concern. However, the insights from a single market may not readily apply when serving related products for different geographies where cannibalization ceases to be a concern. The downside of commonality for geographically separated markets arises from a mismatch in customer preferences, which results in disutilities. In this paper we model the trade-off between the consumer-side disutilities and the cost-side scale economies in the presence of demand uncertainty, and derive the optimal extent of commonality between products for both the markets in the context of two product development strategies: (i) primary market centric design (PMD) and (ii) design for multiple markets (DFM). Our insights from analytical and numerical analysis show that when consumers are very picky and market uncertainty is low, the DFM strategy outperforms the PMD strategy. Counter to the practice of introducing primary market centric products into emerging markets our study demonstrates the need for more customization, especially in small, but uncertain markets. Our research has important implications for automakers in integrating the diversity in tastes while making commonality decisions for multiple markets.
- Subjects :
- Information Systems and Management
Primary market
General Computer Science
Standardization
business.industry
05 social sciences
Context (language use)
Single market
Management Science and Operations Research
Industrial and Manufacturing Engineering
Economies of scale
Modeling and Simulation
0502 economics and business
New product development
Economics
050211 marketing
Marketing
business
Emerging markets
050203 business & management
Cannibalization
Industrial organization
Subjects
Details
- ISSN :
- 03772217
- Volume :
- 258
- Database :
- OpenAIRE
- Journal :
- European Journal of Operational Research
- Accession number :
- edsair.doi...........23e8b4656dace98181714cf4095542db