{"id":163,"date":"2025-06-12T08:53:16","date_gmt":"2025-06-12T08:53:16","guid":{"rendered":"https:\/\/www.edudorm.com\/learn\/?p=163"},"modified":"2025-12-18T10:05:44","modified_gmt":"2025-12-18T10:05:44","slug":"effects-of-product-development-on-profitability-in-smes","status":"publish","type":"post","link":"https:\/\/www.edudorm.com\/learn\/study-hub\/business-and-management\/effects-of-product-development-on-profitability-in-smes\/","title":{"rendered":"Effects of product development on profitability in SMEs"},"content":{"rendered":"\n

Using System Dynamics to understand the effects of product development on profitability in SME’s: A Case Study of Kuwait<\/h2>\n\n\n\n

Effects of product development on profitability in SMEs that meets a consumer\u2019s needs is a very important aspect of business growth and gives a business a competitive edge in the rapidly changing global market.  Many companies are focused on meeting the consumers\u2019 needs by investing in product development and innovation. By implementing a pull or push strategy the focus for these companies has shifted to either educating the consumer on why they require the company\u2019s product or identifying the consumers need and tailoring their products to suit this needs. This has in turn shifted the focus of the company to be production oriented without considering how new product development is affecting their company\u2019s production process. This particularly affects SME\u2019s since they do not have the same resources to constantly produce new products as compared to their larger competitors in the global market. As a result there is constant pressure for an SME to invest in product development but they are however faced with various challenges like limited resources, lack of adequate skilled labor and insufficient resources required for successful development of a product.<\/p>\n\n\n\n

In this very dynamic business environment companies attempt to create products and services that exceed the customers\u2019 expectations. According to Meivorich (2006) a company has to find a balance between their product features and customer needs and expectations, as well as the quality of a design in the market and the external aspects of quality. Mascitelli (2006) stated that new product development process can be classified into three dimensions that is: product management costs, the speed of launch\u00ading a new product onto the market and the market price a product reach on the market. This study aims to identify the various costs that are associated with new product development for an SME and the implications they have on the company\u2019s profitability whether negative or positive. Writers who offer marketing management assignment help<\/a> at Edudorm essay writing service notes that this will be accomplished through a thorough analysis of some of the theories talked about in NPD such as Advanced Product Quality Planning (AQDP), Design for Six Sigma (DFSS) and Stage gate. In addition to theories, the study will analyze established SMEs like, Kuwait Flour Co. and Americana in order to acquire the identify their Best practice in order to establish whether the science adopted in this study can be applicable to other organizations worldwide.<\/p>\n\n\n\n

Problem definition on effects of product development on profitability in SMEs<\/h2>\n\n\n\n

Understanding the product lifecycle is a very important aspect of product development. This does not however provide a basis for one to understand the full effects of the product design and development until it is at its final stage. Dimitrov (2006) established the fact that the impact development on both the company and the product itself are much greater during the final stages of its lifecycle. This means that a company that is willing to invest in product development faces greatest risk since they might fail to meet consumer expectations and as a result their product may fail despite the costs acquired in researching and designing the new product. Experts who offer strategic management assignment help<\/a> at Edudorm essay writing service indicates that this is why the study targets this final stage of the product lifecycle by focusing on the effects of product development on SMEs profitability. The study will use system dynamics to gain a deeper understanding on how the process of developing a new product affects the profitability of an SME with limited resources and facing great competition from larger corporations.<\/p>\n\n\n\n

Research Objective <\/h2>\n\n\n\n

The main objective of this research is to gain better understanding on how product development in an SME affects its overall profitability. By using System dynamics the study will try to obtain a greater understanding on the relationship between product development and profitability of an SME based in Kuwait.<\/p>\n\n\n\n

Research Methodology and Design<\/h2>\n\n\n\n

The study will encompass the use of various methods in order to acquire all the required information required to draw conclusions. This will include:<\/p>\n\n\n\n

Literature Review about Effects of product development on profitability in SMEs<\/h2>\n\n\n\n

This will involve an analysis of various literature works that have been published on the selected problem. There is however very little literature available that focuses on the product development of SMEs and its implications on a company hence the selection of this topic to research on. Tutors who offer change management assignment help<\/a> at Edudorm essay writing service notes that the review will mostly involve the analysis and understanding of various theories that have been developed and applied in product development. It will also include a deeper understanding of how to use systems dynamics to get the required result as in our situation.<\/p>\n\n\n\n

The study will then apply a longitudinal case study methodology in order to facilitate information gathering among the staff of the SME\u2019s in Kuwait. The selection criteria used to select these companies includes:<\/p>\n\n\n\n

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  1. The company has to be small or medium sized according to its scale of production with not more than 50 employees.<\/li>\n\n\n\n
  2. The company should be engaged in traditional production and manufacturing of goods. This will make it easier for the researcher to observe the impact of new product development easily in the market and the company\u2019s profitability.<\/li>\n\n\n\n
  3. The company\u2019s directors should be willing to participate in the study. Any type of resistance may hinder the results obtained during the study.<\/li>\n<\/ol>\n\n\n\n

    Theoretical Framework Effects of Product Development on Profitability in SMES<\/h2>\n\n\n\n

    There exists a direct correlation between a firm\u2019s profitability and new product development (Atuahene-Gima, 2010; Sinkula, 2009). This research affirmed the fact that firms that have invested in new product development<\/a> are significantly more successful than their non-innovative counterparts. Among the factors that can be used to identify the success of a new product, its profit is considered to be the surest way (Montoya-Weiss and Calantone, 1994). However before the success of a product there are various factors that are essential in its development process and these factors have a major effect on the performance and thus the profitability of a product (Griffin, 1997b; Henard and Szymanski, 2001; Jayaram and Narasimhan, 2007; Montoya-Weiss and Calantone, 1994; Smith and Reinertsen, 1998; Swink et al., 2006).<\/p>\n\n\n\n

    Assumptions<\/p>\n\n\n\n