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STRATEGIC MANAGEMENT SERIES

P RO D U C T L I F E C Y C L E M A N A G E M E N T
INTRODUCTION Product life cycles are becoming shorter and shorter. Entirely new industries, such as computers and cellular telephones, have sprung from technologies that are evolving so rapidly that the products arising from them become obsolete within a few months of their introduction. Many products in mature industries are revitalized by product differentiation and market segmentation. Organizations increasingly, reassess product life cycle costs and revenues as the time available to sell a product and recover the investment in it shrinks. Even as product life cycles shrink, the operating life of many products is

Management Accounting Guideline

lengthening. For example, the operating life of some durable goods, such as automobiles and appliances, has increased substantially. This leads the companies that produce these products to take their market life and service life into account when planning. Increasingly organizations are attempting to optimize life cycle revenue and profits through the consideration of product warranties, spare parts, and the ability to upgrade existing products. At the same time, consumers and governments pressure companies to design products that consume less energy, operate longer, and cost less to dispose of or recycle. This pressure encourages senior managers to look at

STRATEGIC PERFORMANCE MEASUREMENT

CONTENTS PAGE

E X E C U T I V E S U M M A RY

INTRODUCTION LIFE CYCLE CONCEPTS DEFINED THE OBJECTIVES OF PRODUCT LIFE CYCLE MANAGEMENT THE ROLE OF THE MANAGEMENT ACCOUNTANT THE LIFE CYCLE APPROACH MEASURING PRODUCT LIFE CYCLE PROFITABILITY IMPLEMENTING PRODUCT LIFE CYCLE MANAGEMENT MANAGEMENT ACCOUNTING CHALLENGES CONCLUSION APPENDIX BIBLIOGRAPHY

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As product life cycles become shorter and operating lives become longer, companies of all kinds face new difficulties in optimizing profits. Strategic marketing decisions must take both market and service life into account while addressing current environmental concerns. This guideline defines the various life cycle concepts and the factors that affect each, as well as the strengths and weaknesses of related accounting practices. Understanding the relationships between life cycles and the marketing, engineering and service considerations at each stage of the life cycle, are shown to be critical in maximizing profits over a products entire life cycle. The guideline explains how the management accountant helps maximize profits by measuring

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profitability and taking an active role in all stages of implementation, from gathering support of top management to budgeting and dealing with employee resistance.

C A N A D A

Shaping the Future


Responsibility for the content of this material rests solely with The Society of Management Accountants of Canada. Product Life Cycle Management is designed to provide accurate information in regard to the subject matter covered. This publication does not represent an official position of The Society of Management Accountants of Canada and is distributed with the understanding that the authors, editor and publisher are not rendering tax, legal, accounting or other professional services in the publication.

products from a life cycle perspective and to see the benefits that accrue from more environmentally sensitive designs.

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This guideline will help management accountants and other interested individuals understand the following: different life cycle concepts and the relationships among them; objectives of product life cycle management; management accounting challenges posed by product life cycle management; the role of the management accountant in supporting product life cycle management; strategies for approaching marketing, engineering, and service functions from a life cycle viewpoint; and actions needed to implement product life cycle management successfully. This guideline offers a framework to help optimize profits over the product life cycle. It outlines the strategic marketing decisions that managers can make to enhance life cycle revenue, and explores ways to reduce the broad array of costs associated with a product throughout its life. Where appropriate, the guideline distinguishes between life cycle profits and product-related cash flow within specific time periods. The distinction arises because of treatment of expenses by Generally Accepted Accounting Principles (GAAP) (e.g., depreciation and working capital). The concepts and techniques discussed in this guideline apply to manufacturers both large and small, and to those who manufacture for consumer as well as industrial markets. The discussion also applies to the management of companies that provide services. The guideline assumes that senior managers and management accountants are aware of the competitive dynamics that are leading to increased use of product life cycle concepts, and have made a commitment to implement product life cycle management in their companies. LIFE CYCLE CONCEPTS DEFINED The Product Life Cycle From a marketing perspective, product life cycle management consists of managing a product or service through its start-up, growth, maturity, and decline stages the so-called product life cycle. This cycle can be represented by a bell-shaped curve that

measures sales revenue for a product over time (see Exhibit 1). The product life cycle stages correspond to inflection points in the sales curve. Common labels for these stages are start-up (rising concave curve), growth (rising convex curve), maturity (relatively flat curve), and decline (falling curve). Exhibit 1 The Product Life Cycle
Sales Revenue
Revitalization

Decline

0
Start-up Growth Maturity Decline or Revitalization

Time

It is difficult to identify the stages of a products life cycle while it is in progress by the inflection points on its sales curve; these points are easier to discern after the fact than beforehand. Sales curves also differ in shape; some peak and decline very quickly without ever manifesting a mature stage (e.g., clothes fads), while others linger in maturity for decades (e.g., Mattels Barbie Doll or Levi Strausss blue jeans). The shape of the curve is influenced by many factors, including the nature and timing of product enhancements, introduction of new technology, pricing, degree of segmentation, and choice of distribution channels. Two external factors shape the nature of the sales curve for a new product. One is the rate at which consumers adopt it. The other is the degree to which existing and future products can better meet consumer needs. Ideally, the company rather than its competitors will introduce such substitute products. It is not clear whether strategic marketing decisions (regarding, for example, pricing or segmentation) create life cycle stages, or whether life cycle stages influence strategic marketing decisions. Whatever creates the product life cycle curve, managers must constantly be aware that every product is moving through the cycle. Management implications are inherent at every stage in the process. The life cycle discussed above can be a product class (e.g., automobiles), a product form (e.g., convertibles), or a brand (e.g.,

Product Life Cycle Management

Pontiac Sunbird). Life cycles for a product class and product form last much longer and are better characterized by a bellshaped curve than are brand life cycles. Brand life cycles are subject to a variety of immediate impacts that make them more volatile. Unless otherwise indicated, product life cycles refer to product class and product form, because the properties of these cycles are more predictable and be more easily generalized than are those of brands. The Development Life Cycle The development life cycle consists of various activities that bring a product and its related manufacturing systems into existence. The cycle may also include creating systems for distributing the product and for recycling or disposing of it after it has been used. These activities are commonly grouped under the labels conception, design, development, pilot production, and launch. Each of these sets of activities has traditionally been assigned to and performed exclusively by different persons. However, some of the market dynamics discussed in the introduction of this guideline have changed this situation. People who previously performed their activities only late in the development cycle now contribute their ideas much earlier, during the conception and design stages. The same dynamics also broaden the range of systems in the product development process to include distribution and disposal. The Technology Life Cycle New technology passes through six stages: i) incipient; ii) state of the art; iii) advanced; iv) mainstream; v) mature; and vi) decline.
Modified and adopted from Popper and Buskirk (1992).

must also account for the provision of special product support service to pioneering customers with whom the company jointly solves early problems. Companies shift emphasis from engineering skills to marketing skills during the advanced life cycle stage. Increased sales volume leads to a decline in costs due to economies of scale and to a shift in investments from product technology to process technology (Abernathy and Utterback 1978). Increased product reliability and lower prices lead a larger second wave of customers to purchase the product as it enters the mainstream stage. This sales growth leads to further reductions in price due to additional economies of scale and to the entry of competitors into the market. A technology eventually reaches commodity status during the mature and decline stages of the technology life cycle, at which time competition is based exclusively on price or differentiated service. The Service Life Cycle A service life cycle may arise for products that are not immediately consumed. The service life cycle usually lags behind the product life cycle by one or two stages. Its profitability is the difference between the revenues the producer earns from servicing the products and the costs incurred in servicing those products (Potts 1988). Service life cycles generally fall into four stages: (See Exhibit 2) i) Rapid growth. From the first shipment to the peak in the product life cycle; ii) Transition. From the peak in the product life cycle to the peak in the service cycle; iii) Maturity. From the peak in the service cycle to the last shipment; and iv) End of life. From the last shipment through the last unit in the installed base. Revenues may be generated by service contracts that supplement the service the producer provides under warranty, or from service charges that follow the expiration of the warranty. The amount of revenue generated by service is related to the size of the installed base of products sold, which can exist for several years after the products have left the market. This service annuity should be considered when calculating the total life cycle revenue. Its size depends on design choices that influence a products reliability and serviceability, as
3

Companies generally refine new technology during the incipient and state of the art life cycle stages, and then must decide whether to license the technology to other companies or to continue to develop it for application to marketable products. Estimates of life cycle revenue must take into account royalties from licensed technologies as well as revenue from products that the company develops using the new technology. Estimates of total life cycle costs

well as on policies related to the terms of product warranties.

Each method has both advantages and disadvantages. These are tabulated below: Accrual Method
Weaknesses If the product fails and the expected sales volume is not attained, accumulated deferred costs must be written off. If the amount is large, serious adverse effects are likely to result. Again, if the amount of the potential write-off is large, management may be induced to cover up. Expensing of deferred costs is a subjective decision. Strengths By matching revenue to costs, the accrual method gives a more accurate picture of profits and losses. This method is probably more correct theoretically.

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Exhibit 2 The Relationship Between Product and Service Life Cycles


Sales Revenue

Maturity Transition III Rapid II Growth 1 Service Life Cycle Product Life Cycle
Start-up Growth Maturity Decline

Cumulative Revenue

End of Life IV

Source: Adaped from Potts 1998.

Time

Profit and Cash-Flow Life Cycles Profits and losses arising from products throughout their life are measured either by accrual accounting or by cash-flow accounting. Each method poses both strengths and weaknesses. The accrual method appeals to the accountants basic instinct to match revenues with associated costs. Thus costs, whenever incurred, are expensed only when the relevant revenue is earned. It requires that costs incurred during development and start-up be deferred and carried as assets until expensed against revenue. Expensing under this approach is a subjective decision, based on estimates of revenue. (Expensing may be by estimated unit sales or over specific future time periods.) In contrast to the accrual method, a cash-flow perspective fully expenses all costs when incurred from inception to the withdrawal of the product from the market and the disposal of its related assets. As Exhibit 3 shows, under cash-flow accounting the results of operations (the net cash-flow) are negative during development and early growth. As sales volume and efficiency increases, cash-flow turns positive. Exhibit 3 Cash-Flow Model
Cash Flow
Cumulative Cash Flow

Cash-flow Method
Weaknesses Fails to give rational matching of revenues and costs. Adverse effect on profits (negative cashflow) during start-up may inhibit desirable risk taking by managers. Overstatement of profits during maturity may hide a firms potential vulnerability when the product reaches obsolescence. Strengths Overcomes serious weaknesses of accrual method related to carrying deferred costs as assets.

As an example of the problems noted above, an airplane manufacturer, when asking for tenders for components, will provide an estimated number of airplanes to be built. Contractors are expected to amortize their costs over that number of units. If the number of airplanes actually built falls short of the estimate, the unamortized deferred costs must be absorbed as a loss by the contractor. Product life cycle profits should be the objective that drives product prices and costs. This is a better approach than the more passive one of accepting life cycle profits as a derivative result of revenue and cost decisions taken independently of specific aims for life cycle profits. Ideally, product pricing decisions should be based

Development Start Date

Product Introduction

Time

Product Life Cycle Management

on strategic marketing considerations, such as desired market share and positioning relative to competitors. The target cost for the product is calculated by subtracting the desired profit margin for the product from its price. Planning for life cycle profits will motivate the product development team to shorten product development time, thereby reducing development costs and accelerating revenue by early market entry. This will also motivate the team to use cost reduction techniques to meet the targeted cost. As discussed earlier, major differences exist between results recorded by the accrual method of accounting and by the cash-flow method. For reporting to shareholders a further complication arises. The audited statements of the firm will require adherence to GAAP. This necessity will, of course, preclude cash-flow accounting as a measure of profits and alter some aspects of an internal reporting method based on a pure accrual system. Internal reports to management may differ profoundly from the audited statements. Yet the philosophy of the company may make it essential that a non-GAAP approach be mandatory. Thus, since management makes and ought to make its decisions based largely on its internal reports, but bankers and shareholders make theirs based on the audited statements, it is necessary that a reconciliation between the two by way of further reports be readily available and clear. Relationships Between Life Cycles The life cycle curve for profits tends to parallel that for the product life cycle. As Exhibit 4 shows, profits generally become positive by the end of the start-up stage of the product life cycle, peak in the growth stage, and remain flat or decline in the maturity stage. The latter could result from higher expenses for advertising and product modifications and lower product prices as companies compete for market share in a limited-growth market. A new round of investment is usually needed to sustain or revitalize the product life cycle. A successful effort will halt the decline in profits or may even lead to their rise.

Exhibit 4 The Relationship Between Product and Profit Life Cycles


Dollars
Revitalization Sales

Profits

Decline Revitalization Decline

0
Start-up Growth Maturity Decline or Revitalization

Time

The relationships among product, technology, and development life cycles can be complex. The technology life cycle and the product life cycle tend to coincide, but sometimes less reliable technologies are associated with emerging markets, while mature products and technologies are associated with mature markets. It is possible, however, for the stages of related life cycles not to be synchronized in this manner. For example, new technology can be introduced into a mature industry to help revitalize its products. Development life cycles are usually shorter than product life cycles and often occur more than once during the life cycle of a product. A new development life cycle might be initiated whenever management judges that the product should be modified to meet changing competitive dynamics. Following a products launch, a new development life cycle may be initiated during the start-up stage to fine-tune a product based on early customer feedback, then again during the maturity stage to lower the production cost or to differentiate the product for different market segments. The design priorities of the development life cycle tend to coincide with product life cycle stages (e.g., superior performance in an emerging market and low price in a mature market). THE OBJECTIVES OF PRODUCT LIFE CYCLE MANAGEMENT Life cycle management is a decisionmaking framework that encompasses the identification of all revenues and costs associated with a product or service. The objective of product life cycle management is to maximize profits over a products entire life cycle, rather than to maximize revenues and minimize costs for each stage of the life cycle.

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This requires careful planning before actual production begins, because typically 80-90% of a products life cycle cost is determined during the pre-production stages. Also, trade-offs must be made between maximizing revenue and minimizing costs within each product life cycle stage in the interest of overall life cycle profitability. In order to make such tradeoffs, managers must understand key life cycle concepts, how they relate to each other, and how to put such concepts into practice. THE ROLE OF THE MANAGEMENT ACCOUNTANT The role of the management accountant is to provide managers and any other involved employees with leadership, guidance, and support to encourage them to make decisions in the interest of life cycle profitability. If the people performing various functions are aware that their roles may change as the product goes through the different life cycle stages, they can plan for change rather than react belatedly to it. Management accountants help managers make appropriate decisions in the interest of life cycle profitability by budgeting properly for life cycle expenses, and collecting cost and revenue data that are undistorted by external reporting requirements. They provide education on the life cycle concepts and uses, and provide historical, planned, and forecasted product-related costs and profitability. Management accountants collaborate with engineers to make design trade-off decisions and to support the use of value enhancement techniques early in the product development cycle. They collaborate with marketing personnel to assess the costs incurred, as well as the revenue that is likely to be generated, through each distribution channel. Management accountants also collaborate with sales support personnel to determine when total revenue from support services will peak and to assess the costs associated with delivering service that is appropriate to each product life cycle stage. And they ensure as far as possible that new product proposals submitted by managers include realistic estimates of the revenues and costs associated with different life cycle stages, including development, launch, disposal, and recycling costs, and

residual values for plant and equipment once they are no longer needed to produce the product. THE LIFE CYCLE APPROACH Marketing Considerations Key marketing parameters include product line breadth and depth, price, promotion, and distribution channels used. The appropriate mix of parameters when any particular product is introduced depends on whether the product is the first, or one of the first, to be developed in an emerging industry, or a modification or extension of an existing product developed for a mature industry. Sensitivity analysis can help determine which mix of parameters is best when introducing a new product into a particular market. For example, the impact of variations in price, choice of market segment, or promotional media on sales and market share can be assessed in this manner. Start-up and Growth Stages The customers who buy a product in its start-up and growth stages tend to value performance over price. The company may be tempted to charge a high price for the product because the demand is inelastic and few substitutes for the product exist. In this case, the companys profit margin is high in spite of the relatively high R&D costs of fine-tuning the product and the promotion costs of increasing customer awareness. The high profit margin will attract other companies to the market, unless the original product is well protected by patents. The entry of other companies tends to speed up the rate of technological innovation and/or to lead to price competition and a drop in price. An alternative is to charge a lower price for the new product, thereby keeping profit margins low enough to discourage competitors from entering the market. The long-term objective should be to compensate for the smaller profit margin with higher volume. The companys learning experience with producing the product will eventually lower its costs. Other companies will not be able to produce the product at such a low cost because they will have neither the sales volume nor the learning experience of the pioneer company. This market penetration strategy can lead to the establishment of a dominant

Product Life Cycle Management

design or industry standard for the product. If a company has the dominant industry design, its investment in plant, equipment, and tooling will be protected from premature obsolescence. Other companies will have to incur these expenses if they plan to remain in the industry. Continuous innovation in product and process technology can keep product life cycles short when customer demand for enhanced performance remains strong and unvarying and competitive pressure is unabated. This has been the case in the computer industry for processing speed and disk drive capacity. In both cases, existing computers are made obsolete by the frequent product innovations of their major suppliers (e.g., Intel and Quantum). Also, early customers and new companies may work together closely in a nascent industry to produce several iterations of a product before it is available to a broader market. Maturity Stage Sales growth ends in the maturity stage of the product life cycle. Sales may be sustained for some time by replacement demand, by product or service enhancements, or by growth of the overall market. Sales will remain stable as long as no new product is developed to satisfy the same consumer needs as the current product. The customers who buy the product at this stage are much more price sensitive than were the early customers; they assume that the technology is sufficiently developed to take performance for granted. The product has become a commodity, and competition tends to take place primarily on the basis of price. Although investment in product technology usually tapers off during the maturity stage as demand for increased product performance reaches a plateau, investment in process technology tends to increase as demand for lower prices intensifies. Competitors from developing countries enter the market, or domestic competitors shift production facilities to developing countries, so that they can manufacture mature products more cheaply than domestic producers (because manufacturing costs in such countries are often lower). Domestic competitors who remain at home may choose to differentiate themselves on the basis of product or service features and maintain or increase their prices, or incor-

porate manufacturing efficiencies and lower their prices. Product life cycles vary in how early and extensively segmentation occurs. A company can introduce a product to one or more market segments during the startup and growth stages and introduce extensions of the product to other segments as the product life cycle matures. Although segmentation can sustain or revitalize sales during the maturity stage of the life cycle, a company that competes in several market segments needs to lower the overhead costs associated with serving these segments. Otherwise, it can be vulnerable to competition from a highly focused, singlesegment competitor (Abegglen and Stalk 1985). These costs can be reduced by using common parts for related products, reducing set-up times between product runs, and introducing just-in-time inventory practices. Decline Stage A product will enter the decline stage, where demand for the product is saturated and replacement occurs infrequently or not at all. The decline will accelerate if a substitute product, with superior capability and/or a lower price, becomes available. Decline often can be delayed or avoided by revitalizing the original product. This can be done by defining new market segments to serve customers that the original broader market did not serve, defining new uses for the product, or repositioning the product, creating a new image for it and thereby increasing demand. In all three of these cases, the transformation is accomplished primarily through increased marketing and promotion expenditures. Also, a mature product can be revitalized by introducing new technology. This appears to have happened within the automobile industry (Abernathy, Clark, and Kantrow 1983), and in many other areas. In some cases, a company may be unable or unwilling to do anything about a products decline. The latter might be the case if, for example, the company has chosen to streamline its product line or to raise capital with which to enter a more profitable business. Shrinking profits may be a primary reason for exiting a market, but once the decision to exit has been made, profits may increase because the company has stopped investing in research or marketing. Customers will continue to

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buy the companys products if the cost of switching to another product is high. However, the company may have to spend a significant amount of money to close a plant and dispose of assets in an environmentally safe manner. It may also agree to maintain an inventory of spare parts for existing customers. During the decline stage, a company will want to dispose of product-specific assets as quickly as possible to obtain the highest price possible for them. Some assets are not highly product-specific and can be modified to produce new products. For example, Motorola was able to reuse 75% of the robot modules it used to produce the Bandit pager to produce several successor pagers. The original capital investment for the Bandit line was $7 or $8 million, but new lines can be started now for half that amount (Wasko 1993). Exhibit 5 summarizes the mix of marketing parameters that best fit each product life cycle stage (Onkvisit and Shaw 1989). During the start-up stage, product line breadth is generally limited to a single product that is distributed through specialty channels. Since few brands exist, promotion focuses on the benefits of the generic product class. The initial selling price is usually high, unless a market penetration strategy is pursued. During the growth stage, the product line broadens to meet the needs of different market segments. Distribution channels and promotion are targeted for alignment with selected market segments, and prices start to decline. During the maturity stage, product lines are broadest. Distribution channels expand in number and type, but promotion remains tailored to each targeted market segment, and prices remain stable. Finally, in the decline stage, the products of a shrinking line are distributed through differentiated channels that are linked to their traditional market segments. Promotion focuses again on the benefits of the generic product class, but this time in

comparison to potential new product classes. Price initially declines, but starts to rise as volume shrinks and demand elasticity decreases among the remaining customers. Engineering Considerations Traditionally, R&D departments have worked with marketers to design products, while production departments have designed the processes that make them. These relationships are beginning to change as companies seek the reductions in product development time and cost that are needed in todays competitive environment. Since 80% to 90% of their impact on life cycle costs will take place before the end of the design stage, the necessity of early involvement by all parties is certain. Actions can be taken by organizations during the conception and design stages of the development cycle to reduce the non-recurring costs of developing and launching a product. For example, a significant contributor to non-recurring development costs is typically engineering hours. Therefore, development time and development cost are highly correlated. Any technique that reduces development time will tend to reduce development costs. Also, the shorter the product development cycle, the sooner the product will earn revenue, perhaps even commanding a premium price by being first to market. Design for manufacturability, design for assembly, and design for automation are labels that encompass a variety of techniques that can lead to the design of products that better match their manufacturing processes and thus reduce unit product costs. For example, products can be assessed to see if any parts can be eliminated because their functions are redundant, or if fasteners can be eliminated by using one part instead of two fastened parts. Products can also be assessed and redesigned to reduce the labor required to assemble

Exhibit 5 The Mix of Marketing Parameters Over the Product Life Cycle
Marketing Parameters Product Line Distribution Channel Promotion Target Price
Adapted from: Onkvisit and Shaw 1989.

Start-up Narrow Exclusive Product Class Highest

Growth Broader (segmented) Selective Selective Brands Declining

Maturity

Decline

Broadest Narrow (highly segmented) Intensive Selective Brands Stable Selective Product Class Declining, then stable, and rising later

Product Life Cycle Management

them (Boothroyd and Dewhurst 1987) or to make them more amenable to automated assembly. Some products can be modularized, so that each subsystem is self-contained and connected to other modules with a standard interface. With such modular products, each subsystem can be worked on independently so that two or more modules can be designed simultaneously. Whole families of products also can be derived from the design of a single platform. The families share common parts that dont have to be redesigned whenever a new product is developed from the platform. The percentage of parts that are common among products in the same family can be as high as 60% to 70%, as was the case with Xeroxs highly successful 9900 copier series. Similar approaches can help design products for ease of distribution and disposal. For example, packaging is coming under increasing environmental scrutiny. More and more customers and governments demand that packages be refillable or easily disposed of. There is also increasing interest in recycling and returning products. A products degree of recyclability will depend on the existence of a recycling infrastructure (such as deposit depots) and on the existence of a secondary market for recycled materials. Service Considerations Some companies only service products that other companies produce. The service life cycle for such service companies is essentially the same as a product life cycle. However, companies that produce and service products can generate a significant supplemental revenue stream that extends well beyond that generated by the original sale of the product. Such companies can link their product and service strategies to give them a competitive advantage over independent service companies. Companies generate little service revenue during the rapid growth stage of a products service cycle if they offer a warranty. In such cases, the service revenue is buried in the original product price. This tactic increases product sales and prevents independent service companies from making inroads into potential future service business. Producer companies have another advantage over independent service companies: they can study warranty claims and re-engineer a product throughout its

life cycle to reduce its failure rate. Another reason companies make little or no profit during the rapid growth stage of the service cycle is because of the expenses associated with building a spare parts inventory and training a service workforce. Most companies continue to raise their service prices during the remaining service life cycle stages in order to compensate for lower initial prices. Spare parts inventories stabilize and start to shrink as the life cycle progresses and the installed base stops growing and then starts to decline. Companies should continue to study their service records for clues on how to re-engineer a product to further increase its reliability or reduce the mean time needed to repair it. They can encourage their existing customers to buy the next generation of that product by establishing a reputation for good service and offering an attractive migration path toward the purchase of the new product. MEASURING PRODUCT LIFE CYCLE PROFITABILITY Historical cost accounting follows the GAAP convention of capitalizing only costs associated with manufacturing and distributing a product (mainly expenditures for plant and equipment). GAAP requires that virtually all product development costs, as well as promotional costs associated with launching a new product, be expensed. The failure to capitalize such costs creates predictable and unacceptable decision-making biases. For example, treating such costs as period expenses may limit the number of new products developed and introduced in a given year or limit those that are developed and introduced to minor modifications of existing products. GAAP also requires that costs associated with abandoning a product, such as closing a plant, be expensed. This encourages management to keep marginal plants open rather than close them and bear the impact of closing costs on current profits. Operating profits tend to be underreported in the start-up stage, overreported in the growth and maturation stages, and underreported in the decline stages. This can lead managers to make decisions on the basis of profit reporting considerations rather than on their strategic merit. Cumulative operating profits can be used to measure life cycle profits. However, a product can meet projections for operating profits, revenues, unit costs, etc., and

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still not provide an adequate return on invested capital. Net present value (NPV) corrects this shortcoming. The calculations are generally straightforward for product line extensions and product modifications. More sophisticated calculations can be used for new products in uncertain markets, such as more heavily discounting the projected cash flow of riskier projects, or calculating the option value of entry into an emerging market even if the first product introduced was unsuccessful. The option value is an assessment of the learning benefits and greater likelihood of succeeding with the next product introduced (Nichols 1994). Another way to deal with the limitations of GAAP is to develop a separate database in which development costs that are traceable to specific products are capitalized rather than expensed. For example, Peavey (1990) suggests allocating product development costs on the basis of revenues from units of product shipped rather than expensing these costs as they are incurred. He also suggests using a production-based method for depreciating plant and equipment rather than a time-based method. He offers an example that shows plant and equipment fully depreciated after allocating their costs over the number of units of product that the plant and equipment were expected to produce. Under the traditional time-based method, the undepreciated plant and equipment would have been expensed in the period in which the product was abandoned. Any additional costs associated with shutting down the plant would also have been expensed in the same period. Such costs can be capitalized for internal reporting purposes. IMPLEMENTING PRODUCT LIFE CYCLE MANAGEMENT Top Management Commitment and Support Product life cycle management cannot be implemented successfully unless top management creates conditions that support its implementation and demonstrates a consistent commitment to the concept. For example, top management could require that all business proposals related to new product development include reserves for warranty claims, contingency costs, and product abandonment costs.

It is important that top management articulate and reinforce values that support a product life cycle management culture. This can be done, for example, by publicly praising employees whose actions are consistent with product life cycle management, and by designating them as role models to be emulated by others. Appraisal and compensation systems should also reward employees who carry out actions that are consistent with product life cycle management. None of the above actions by top management is sufficient on its own to ensure that product life cycle management is implemented successfully. They must all be carried out so that they reinforce each other. Mutual reinforcement is necessary if product life cycle management is to become institutionalized (i.e., to survive the departure of any single manager who has been the champion of product life cycle management). Appropriate Organizational Structure A key determinant for the successful implementation of product life cycle management is the structure and process of an organization. Broad vision and integration of all employees and activities are required to achieve the objective of product life cycle management: to maximize life cycle profitability. The appropriate organization structure for achieving this objective depends in part on the industry and the stage of the industry life cycle. Organizational structures are typically: small autonomous business units; function-based; matrix-based; or product-based. Small autonomous business units that contain all relevant functions are generally appropriate for industries with most of their products in the start-up stage, or in which innovation is a continuous basis for competitive advantage. Variations of this structure have been used by HewlettPackard, 3M, and Johnson & Johnson. Function-based structures are usually appropriate for companies in mature industries where efficiency takes precedence over innovation. However, such companies may find innovation so hampered that they have to create independent spin-off organizations if and when

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they decide to revitalize their products in a fundamental way. GMs Saturn Corporation is an example of such a spin-off. Matrix-based structures, in which a productbased management structure overlays a function-based structure, are appropriate for industries in which innovation is continuous but incremental, generally consisting of derivatives or modifications of existing products, or of improved manufacturing processes (Strebel 1987). Product-based structures can be organized by product lines or by product families that are derived from the same platform. Products within these product lines or families might vary by features (e.g., stripped versus loaded models) or by updates and revisions of existing products. In either case, management would have to manage a portfolio of products that were in different life cycle stages. There are risks involved in organizing in this way because of the difficulty of being attentive to a range of products that all require different actions. The risk may be lower when the organizing is by product families, particularly when there is high commonality of parts among products and the new products introduced are updates of existing products. In the latter case, the decline and virtual disappearance of an existing product is accelerated dramatically by the introduction of its successor. Thus, there is no need for concern about managing a mature product along with a new one. There need only be concern about managing the latest model of the product. One of the dilemmas in organizing to match a particular product life cycle stage is how to manage the transition to a structure that is appropriate to the next life cycle stage. This can be accomplished in either of two ways. First, the company can set up separate structures that specialize in only a particular life cycle stage. For example, one organizational unit can specialize in developing and launching new products, while other units specialize in manufacturing and selling more mature versions of the products. The first type might have a loose, organic structure to encourage innovation and entrepreneurship; the second type might have a mechanistic structure to encourage accountability and efficiency. The first organizational unit would hand off the product to the second unit as the product neared its transition from the growth stage to the maturity stage.

A second way to engineer the transition between structures is to transform the existing organic structure into a mechanistic one. This is difficult to do. Selection may have played a conscious or unconscious role already in placing personnel with styles and preferences that are better suited to organic structures. The presence of these personnel and their practices may lead to the development of a culture with norms and values that support innovation. For example, product-based managers may believe that they will impress their superiors more by introducing a new blockbuster product than by revitalizing an old one. They also may be trained to expect the former to be more intellectually challenging than the latter. It is probably worthwhile to spend the time and effort needed to make this transition if a companys product line is maturing at the same pace as its industry, and if most or all of its products are at the same stage of maturity, with no near-term prospect of backtracking to earlier stages. Any new products that the company might introduce could be managed within the type of organizational spin-offs discussed earlier. In either of the transition modes discussed, the critical issue is whether top management is alert and perceptive enough to know that a product is undergoing the transition between one life cycle stage and the next, and that an appropriate change in structure is needed. Cross-Functional Product Development Teams Cross-functional product development teams can be formed that include specialists who collectively possess a diverse and well-rounded set of experiences, information, and skills. Some teams may be responsible for an entire product development cycle, from conception to full-volume production. Such teams avoid the throw it over the wall mentality that is pervasive among product designers in organizations with function-based structures, where products are designed without much concern for manufacturability and quality. Manufacturing personnel are left to figure out how to make the product and meet quality standards. The career path and reward systems that are common in function-based structures encourage specialists to think in very limited terms. Strong project team leaders and meaningful team-based rewards are needed to overcome the myopia of these specialists.

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Another solution to the specialist syndrome is to assign some specialists permanently to product development teams that have broad responsibilities for designing both products and related processes. Some teams have gone further still and are responsible for a product or product family over the entire product life cycle. The team members shift their activities from developing the product to manufacturing, selling, and servicing it. (For more information on implementing cross-functional teams, see The Society of Management Accountants of Canada. 1994. Managing Cross-Functional Teams. Management Accounting Guideline. Mississauga, ON: The Society of Management Accountants of Canada.) Life Cycle Budgeting Life cycle budgeting involves estimating the revenues and costs attributable to a product during its life cycle. This is the planning function of the budget. Once the budget has been established, it can be used as a standard by which to compare actual costs against planned costs. This is the control function of the budget. Finally, the budget can be used to assess and reward employees for accurately estimating budgeted costs or for meeting the cost standards set by their supervisors. This is the motivational function of the budget. Czyzewski and Hull (1991) show evidence that managers tend not to distinguish among a products life cycle stages, using the budget instead for control purposes throughout the entire product life cycle. Such inappropriate use undermines the value of life cycle budgeting. It is important for managers to appreciate what purpose the budget serves during each product life cycle stage. For example, the budget should be used primarily for planning during the start-up and growth stages of the product life cycle. It should be used primarily for control purposes during the maturity stage of the product life cycle. Finally, attention should shift toward using the budget primarily for motivation purposes during the decline stage. Performance Measurement and Reward Systems Top management will need to modify the reward system to encourage behavior that is consistent with the demands of product life cycle management. For example, marketing managers may have been rewarded

previously for enhancing product revenue without regard to product cost or profitability. Designers may have been rewarded for minimizing the hours needed to release product designs, regardless of whether they were difficult and expensive to make. However, managers have excluded life cycle costs (e.g., plant closings and land reclamation) from capital approval requests because including them has lowered the return on investment calculation below the companys hurdle rate for project approval. Cross-functional product development teams can be encouraged to emphasize profitability over any functions contribution to the product by placing the most weight on team-based performance. The feasibility of doing this depends on identifying and assessing meaningful team-based or product-based performance measures. For example, a team could be assessed on the basis of meeting targets for development and unit costs, quality, schedule, and product performance. More direct measures could include frequency of changes in product definition, match of product tolerances to manufacturing process capability, product rework, and initial warranty claims. Team members could be rewarded on the basis of profits generated from new products. However, most companies devote a small percentage of their product development resources to products that are new-to-the-world or new-to-the-company; the remaining percentage of their resources is devoted to product enhancements and derivatives of existing products. Thus, only a few teams could be rewarded for increases in profits. Teams that focus on product enhancements and derivatives could be rewarded on the basis of the profit retention rather than on increases. Management can usually forecast the rate at which its existing products will lose profits and market share if they are not enhanced or modified; a team could be rewarded on the basis of how successfully it retarded or reversed the predicted losses. Assuming that product profits can be tracked and assigned equitably to the team responsible for the product, the next question is whether the rewards should be based on operating profits alone or compared against the capital needed to generate these profits, i.e., the internal rate of return or the net present value. In the

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latter case, the problem is being able to assign capital appropriately to products. This can be difficult when two or more products are produced in the same facility and use the same manufacturing equipment. Some Japanese companies avoid the problem of linking products to utilized capital; they reward teams and other product-based units on the basis of return on sales and on reducing the capital that all the teams share (Sakurai, Killough, and Brown 1989). Product development teams should be encouraged to manage in the interest of long-run product profitability. Paradoxically, such encouragement starts by recognizing that product profitability is not an appropriate basis for measuring and rewarding teams during all life cycle stages. For example, profits may be non-existent, or even negative, during the start-up and growth stages. Thus, team members should be rewarded on another basis (e.g., growth in market share) during this time. Companies too often track product performance on the basis of criteria that are appropriate only to the mature stage of production, such as utilization efficiency and return on invested capital. These criteria are appropriate for assessing mature products when maximum profitability is the key competitive issue, but they may be entirely inappropriate for products in the startup or growth stages of their life cycles (Richardson and Gordon 1980). Criteria that are appropriate for the growth stages include capacity growth and utilization, order backlogs, and stockouts. These criteria are assumed to be accompanied by appropriate rewards and organization structure. Sometimes the first generation of a product is not profitable, but the second or third generation, which incorporates modifications made on the basis of customer feedback, is. A measure of profits generated by the entire product family might be appropriate for such cases. Also, assigning the same team to successive generations within the same product family will reduce the temptation to hit a home run with the first generation with all the risks this implies instead of improving the product gradually but steadily. Rewarding the team on the basis of profits generated by the entire product family will assure this longer and more appropriate time perspective.

Developing measures of product development team effectiveness and product success is difficult, but devising an equitable system to distribute rewards based on such measures is even more difficult. Thus, the link between measurement and rewards may have to be looser than has been suggested thus far. Team members can be awarded one-time monetary bonuses for successful projects. Also, team members thrive on work that is interesting and challenging and would feel properly rewarded by new assignments that are also interesting and challenging. Plaques for team members and other symbols of recognition will be deeply appreciated by team members and be a source of continued motivation. Each succeeding managerial level above the team has responsibility for a larger number of products than does the preceding level. Each product is likely to be at a different life cycle stage and to require differential attention and action. The aggregation of profits and cash flow from such products should encourage managers at these levels to make appropriate strategic decisions with regard to any particular product, even if doing so creates or prolongs a negative cash flow for the product. If enough other products in the aggregate or portfolio of products are at life cycle stages that generate positive cash flows, the net cash flow for the portfolio still will be positive. Companies can develop a supplemental database for internal use only in which product development and disposal costs are capitalized when it seems appropriate to do so, even though GAAP requires that these costs be expensed for external reporting purposes. Capitalization of product development expenses will reduce nearterm expenses, thereby reducing the time required for a product to become profitable. Capitalizing product development expenses will reduce the chances that a manager will forgo a product development opportunity because of its negative impact on short-term operating profits. Furthermore, a new product proposal will look more favorable if the requisite disposal costs are capitalized instead of expensed. Product development teams should be encouraged to take all relevant costs and benefits into account when products are being conceived and designed. In order for this to occur, senior management must

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require product managers to address specific issues in their new product proposals. Without this requirement, product managers may be reluctant to address such issues as product support and disposal costs, for example, because their inclusion will lower the return on investment calculated in the proposal unless such costs can be shown to be offset by projected benefits such as enhanced revenue. The requirement for the inclusion of such cost vs. benefit issues in a new product proposal assures that team members will consider them, but the best way to assure that related costs and benefits are balanced and optimized is to invite team members who specialize in these issues to participate in the conception stage of the product development process. A problem that occurs in designing products for enhanced serviceability, maintainability, disposability, etc., is that few companies collect the appropriate data on a product basis. Instead, specialty departments collect whatever data exists and aggregate the data over all products. Team members who advocate design options that reduce such costs will have difficulty convincing other team members to accept their options because they have no historical database with which to support their arguments. Even if their preferred design options were included in the product, it would be difficult to track their impact after the product is launched. Companies should therefore explore the feasibility of developing a database of product-related costs and benefits. If it is not feasible to develop such a database, then the members of all product development teams could be rewarded for reducing the overall aggregate measure of targeted costs. Some teams would get a free ride if their own projects did not contribute to the reduction of these costs during a particular reward period. The hope is that they would contribute to the reduction of such costs at a later time when other teams didnt. New Career Paths One of the primary reasons managers with product-related responsibilities dont take product life cycle concepts seriously is that they seldom remain in their positions long enough to reap the long-term benefits of decisions that have short-term negative consequences for their performance evaluations. This problem is compounded by

career paths that lead to promotion within functions, thus encouraging managers to think of their long-term interests in function-based rather than product-based terms. There is some evidence, however, that the average length of time that a North American manager stays in a given position is increasing. Combined with the decreasing length of the product life cycle, there is an increased chance of a manager being responsible for a product over its entire life cycle. Consequently, the reluctance to make some types of short-term decisions might be eliminated. For example, managers might be more willing to make capital investments that are in the future best interest of a new product even though doing so increases the asset base for calculating return on investment, or more willing to invest in new product development even though the investment costs are expensed in the current period. Continuous Employee Education Continuous education of all team members reinforces and increases the effectiveness of all the product life cycle concepts and practices discussed in this guideline, and creates employees with multiple skills and broad product perspectives. In the long term, the probability of a companys success is increased by having employees who are better able to contribute to the fast development of high-quality, innovative products. This requires employees with skills that enable them to be innovative. Although education is a prerequisite to implementing product life cycle management successfully, it will not assure that managers will be flexible enough to change their priorities and actions with transitions in life cycle stages. Employee education needs to be accompanied by selection of managers with appropriate skills and attitudes. It also must be supplemented with appropriate performance measures, compatible career paths, and longer tenures in product-based positions. Employee Resistance Some employees will resist the transition to product life cycle management because it requires that they learn new concepts and skills. Employees who have succeeded previously in their organizations by mastering traditional concepts and skills may resent having to perform under new rules. They may fear that they cannot perform as

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well under the new rules as they did under the old ones. Such resentment and fear is natural, and can be lessened by one-on-one dialogues or open forums with concerned employees. Education can reduce the resistance that results from inexperience with product life cycle concepts. For example, a product designer may distrust calculations submitted by a service manager who has requested that a product be designed for maintainability and serviceability. Such calculations may be based on assumptions about how and where the product will be used that the designer does not think are realistic. Calculations of the discounted future value of revenue and costs, which are based on assumptions about rates of inflation in future years, may not seem credible to managers who have to make decisions based on such calculations. Management will need to develop policies to help some groups cope with the impact of product life cycle management. For example, purchasing, quality, or maintenance groups may shrink as a result of designing for reliability, manufacturability, or serviceability. Also, the increased use of life cycle concepts may lead to shifts in influence among functional groups. For example, product design groups may have to share decision-making authority with the groups responsible for producibility or testability. Managers may believe that they will have a more difficult time obtaining additional capital dollars to produce more expensive products with lower life cycle costs than to retain the dollars they already have in their operating budget to maintain current products. MANAGEMENT ACCOUNTING CHALLENGES Product life cycle management presents new challenges for organizations and management accountants. The first challenge is to apply product life cycle concepts to appropriate product-based organizational units. Companies have been experimenting recently with novel bases for assigning products to organizational units. For example, DuPont calculates return on investment on the basis of the combined sales of electronic imaging equipment and film, both of which are produced within the same business unit. Boeing categorizes planes into wide and narrow body types, then categorizes the

types into modifications and extensions of planes (e.g., passenger, cargo, and stretch versions of the 767). Companies are organizing on the basis of core competencies at the highest level (Prahalad and Hamel 1990) and on the basis of products at increasingly lower levels, by, for example, forming autonomous business teams that contain all relevant functions. Such teams motivate employees and increase their responsiveness to customers. At the same time, companies are seeking efficiencies by having the lowest product-based units share common product platforms and manufacturing technologies. These developments raise questions about the definition of a product and the meaning of tracking its life cycle. Once these questions are settled, it will be easier to match organizational structure, rewards, and personnel to product life cycle stages. The second challenge is to bring methods for estimating life cycle costs and life cycle revenues into closer alignment. Many tools and techniques exist for estimating both life cycle costs and life cycle revenues, but few tie the two together. Minimizing costs and maximizing revenues by themselves are not necessarily strategic objectives. They are both desirable outcomes in isolation, no matter what strategy is pursued. Product life cycle management will not take on a truly strategic perspective until the two elements are better linked and trade-offs between the two can be assessed easily. Net present value is a promising tool for accomplishing these tasks. A third challenge is to bring capital expenditures and product profitability into closer alignment. The current lack of alignment results from a failure to assess product profitability against capitalized and non-capitalized product-related investments. When senior management allocates capital to product-based managers and evaluates their performance on the basis of operating profits, it is allowing these managers to manage as if capital were free. These operating profits should be assessed against the total capital required to generate these profits. Techniques for assessing the return on this capital exist, using, for example, net present value or internal rates of return. These techniques are often used to justify investments in new products or manufacturing processes, but they are seldom used to assess the performance of these investments in existing organization-

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al units on a systematic basis. An increasing number of companies are using a variant of these techniques, e.g., economic value added (EVA), to assess organizational units and to reward managers on a regular basis (Tully 1993). A fourth challenge is to deal effectively with the discrepancies between GAAP and cash-flow analyses so that decisions can be made in the best interests of a products life cycle. Management accountants need to help product-based managers develop an internal, non-GAAP database that the latter can use to make appropriate and distortion-free product life cycle decisions. For example, product development investments can be expensed for external GAAPbased reporting purposes, but capitalized for the internal database. The internal database can then be used to make decisions and to evaluate managerial performance. Only senior management should have the authority to make decisions that trade off the consequences of outcomes on GAAPbased versus internally reported data. A fifth challenge is to increase the use of product life cycle data by appropriate managers. There are many barriers to the use of such data. The calculations needed are complex and often based on assumptions that managers may question (e.g.,

average use and the harshness of the user environment). Analyses with calculations that stretch beyond five years also are viewed skeptically by managers. The solution is either to educate managers to understand these assumptions and appreciate the basis for making them, or to simplify the analyses used. CONCLUSION The importance of using life cycle concepts will continue to rise as product lives shorten and opportunities to use the development and introduction of new products as a source of competitive advantage increase. The range of issues covered by life cycle concepts is broadening from estimation of costs to complete competitive analyses, and the related tools and techniques are becoming more sophisticated. Product life cycle management can be introduced more easily into new companies where existing practices do not have to be confronted and changed. However, the challenge for new companies is only slightly less formidable than for existing ones, because of the demands that product life cycle management makes on companies to change their structures, rewards, and personnel as product life cycle stages and competitive conditions change.

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APPENDIX: CASE STUDY Consolidated Medical (CM), a medical equipment company, has been selling 5,500 X-ray machines annually at $5,000 per unit. Sales peaked in 1992 and represented about 12% of total industry sales. CMs recent market research suggested that the market for X-ray machines has changed dramatically since the current model was introduced. Increased public concern over rising health care costs is requiring health care providers to limit increases in their fees. In turn, this has led them to shift their priorities in medical equipment purchases from product features to price and reliability. CM is not a technology leader in its industry. It does not conduct research with the same intensity as its competitors. However, its engineering capability allows it to adapt quickly to innovations introduced by others. With the recent shift in priorities in the market for X-ray machines, CMs top management thought that its engineering capability might be a source of competitive advantage. Market research conducted in January 1993 suggested that CMs competitors planned to introduce new products in 1994. If CM did not introduce a new product in 1994, sales of its current X-ray machine would decline by 20%. Customer focus groups suggested that if CM introduced a new product that was more reliable than those of its competitors and at the same price, then sales for the new product would surpass those of the current product by at least 10%. Top managements business plan was to introduce a basic or stripped-down model of the X-ray machine in 1994 for CMs most cost-sensitive customers, mainly health maintenance organizations or HMOs, and then introduce a deluxe model in 1995 for less cost-sensitive customers, such as larger research-oriented laboratories and hospitals. The target price for the basic model was set at $5,000 and the length of the warranty period was extended from twelve months, the current industry standard, to thirty-six months. The target price for the deluxe model was set at $7,500, and included the same extended warranty. In order for CM to maintain its current profit margin, the unit cost was targeted for a reduction of 15%. This led the product development team to consider an

investment of $450,000 in automated tooling, which would lower product costs by 5% per unit and improve product reliability (mean time between failures) by a factor of two. Moreover, the automated tooling could be reprogrammed easily for use in manufacturing the deluxe model, which was scheduled for introduction in 1995. The team leader asked the management accountant to analyze the cost of service and warranty claims on the earlier product. The analysis indicated that the warranty costs on the new product would be fully covered by reserving 5% of the selling price, or $250 per unit sold. After the three-year warranty period, the company could expect to generate revenue from service charges for repair of the installed base of products. The net present value calculation considered the net cash flow (including the 10% increase in sales of the basic model between 1994-1996, the same level of sales on the deluxe model between 1995-97, and future service revenue after 1997, minus the targeted product cost) against all required investments (including $450,000 for automated tooling). The net present value was projected to be positive within three years. Given the current lowinflation environment, and the negligible market and technical risk due respectively to the companys understanding of its customers and the companys engineering capability, the projected cash flow was not discounted. The planned 15% reduction in product cost took into consideration that the company would have to absorb 5% of the selling price in warranty costs for three years. The product development team needed to find ways beyond its investment in automated tooling to reduce product cost by another 10%. It achieved the 10% reduction by expanding team membership to include functions that usually provided input late in the product development cycle. Manufacturing suggested ways to design the product to take maximum advantage of the new automated tooling, quality suggested changes in specifications to improve the match with tooling capabilities, purchasing suggested using product parts that were already being used in other products so that it could negotiate with vendors for volume discounts. The parts vendors were invited to some of the early team meetings so that they could suggest changes in the product design that

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would make it easier for them to accept the negotiated price for parts and to get a head start in designing and manufacturing the parts. The basic model of the X-ray machine was introduced in December 1993, six months ahead of schedule. Since CM introduced the machine at least three months before its competitors, it experienced a surge in orders by March 1994

that was 25% above the original projections. The revised projections suggest that sales for 1994 will increase by 15%, and industry market share will increase to 14%. Assuming the same level of sales for the deluxe model when it is introduced in 1995, the net present value will become positive four months sooner than had been originally projected.

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BIBLIOGRAPHY Abegglen, J., and G. Stalk. 1985. Kaisha: The Japanese Corporation. New York, NY: Basic Books. Abernathy, W.A., K. Clark, and A. Kantrow. 1983. Industrial Renaissance: Producing a Competitive Future for America. New York, NY: Basic Books. Abernathy, W.J., and J.M. Utterback. 1978. Patterns of industrial innovation. Technology Review (June-July): 40-47. Boothroyd, G., and P. Dewhurst. 1987. Product Design for Assembly. Wakefield, RI: Boothroyd Dewhurst, Inc. Cooper, R.G. 1986. Winning at New Products. Reading, MA: Addison-Wesley. Czyzewski, A.B., and R.P. Hull. 1991. Improving profitability with life cycle costing. Journal of Cost Management (Summer): 20-27. House, C.H., and R.L. Price. 1991. The return map: Tracking product teams. Harvard Business Review (January-February). Nichols, N.A. 1994. Scientific management at Merck: An interview with CFO Judy Lewent. Harvard Business Review (January-February). Onkvisit, S., and J.J. Shaw. 1989. Product Life Cycles and Product Management. New York, NY: Quorum Books. Peavey, D.E. 1990. Battle at the GAAP? Its time for a change. Management Accounting (February): 31-35.

Popper and Buskirk. 1992. Technology life cycles in industrial markets. Industrial Marketing Management (February). Potts, G.W. 1988. Exploit your products service life cycle. Harvard Business Review (September-October). Prahalad, C.K., and G. Hamel. 1990. The core competence of the corporation. Harvard Business Review (May-June). Richardson, P.R., and J.R.M. Gordon. 1980. Measuring total manufacturing performance. Sloan Management Review (Winter): 47-58. Sakurai, M., L.N. Killough, and R.M. Brown. 1989. Performance measurement techniques and goal setting: A comparison of U.S. and Japanese practices. Japanese Management Accounting, ed. Y. Mondane and M. Sakurai. Cambridge, MA: Productivity Press. Strebel, P. 1987. Organizing for innovation over an industry cycle. Strategic Management Journal, 8, 117-124. Tully, S. 1993. The real key to creating wealth. Fortune (September 20): 38-50. Wasko, K. 1993. New product and process developments in pager lines. Highlights of Presentations at the Twenty-Ninth Meeting of the Advanced Manufacturing Forum. Pennsylvania State University, Center for the Management of Technological and Organizational Change (Winter).

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