6.5.3 Setting the constraints

Product development does not occur in a vacuum! There is an environmental situation that sets the parameters and constraints for the project. All the layers of the environment - society, industry, market and company - limit or constrain the area of the project as can be seen in Fig. 6.6.

Fig. 6.6 Parameters that develop constraints in Stage 1 of the PD Process.
(- click to enlarge)

Parameters that need to be considered at the beginning and throughout the project are the needs and wants of the consumers, the processing and marketing technology available, the knowledge capability, the time and the resources. Some important company parameters are the business strategy, the innovation level, expertise, management style, location of plants and markets, distribution system, product development organisation and management. Some of the environmental parameters are local government, national government, industry agreements, farmers' agreements, economic and technological status, business cycle as well as any social restrictions and attitudes.

Constraints caused by the different parameters are identified. Constraints can be set on the product, processing, marketing, finance, time and resources. These constraints are often quantitative, for example on the product there can be chemical composition, microbiological level, nutritional value, and a specific requirement such as the use/non-use of an ingredient. Some of the constraints important in product development projects are shown in Table 3.1 on page 100.

Three important areas to develop constraints are the competitors, government regulations, user needs with their related societal attitudes (Holt, 1983). The company selects the important competitors, and the areas for competition, for example product technology, marketing, costs and prices, and the position of the new product as related to the competing products. Functional requirements or some other product quality may then be set according to the qualities of the competing products. These will then be part of the product design specifications and limit the area for design. Another important area to develop constraints on the design of the product is government regulations, both internal to the country and at entry to the country. These must be identified early in the project. There is little point in designing a canned fruit in syrup only to discover that there are high import duties related to the level of sugar in the product; or there is a quota on certain meat or dairy products into a country and these are already filled; or that only certain ingredients are allowed in bread; or there is a basic vitamin content if the label says vitamin-enriched. The government regulations need to be surveyed and the important parameters and constraints identified to avoid developing products that will violate the law. The very important area for setting constraints is the study of the user - what their needs, wants and fears are, and how these relate to the product design specifications; their attitudes to pollution, farming practices, environmental sustainability. Various factors may be constrained, for instance for a nutritional drink:

     product - nutritional, minimum percentage of protein, maximum percentage
        of fat;

     processing - minor adaptation of present production;

     marketing - existing distribution channels;

     financial - maximum level of investment in the project;

     company - two project members, one technical, one marketing;
        functional departments as support groups;

     food regulations - no preservatives, nutritional labelling required.

The parameters that can constrain product development are many and it is not possible to study them all when identifying constraints on the product development project. It is important to identify the critical constraints and not to have these constraints any tighter than is necessary to meet the parameters. One always needs to ask is this constraint valid? Is it necessary? If the constraints are very tight, then the opportunity for creativity is reduced. The constraints are important in the product screening and project evaluation, and are used in building up the product concept and product design specifications. It is important that they are clear and as quantitative as possible.

Some parameters for the Mexican and US markets for tortillas are identified in Box 6.1.

Box 6.1 Mexican tortilla firms stage US bake-off Few things are more Mexican than the tortilla. But when it comes to making money off the ancient disks, most of the action today is north of the border. That's why two of Mexico's biggest food companies, Grupo Industrial Maseca SA (Gruma) and Grupo Industrial Bimbo SA have chosen the US as the main battleground for their fight to control the $5 billion world tortilla market. So they're pitching their mass-produced, packaged tortillas to a foreign audience and honing their marketing skills for the day when Mexico's tortilla market joins the modern world. Mexico Mexicans eat 360 billion tortillas per year, 10 times the number of tortillas per capita as Americans. The market is overwhelmingly dominated by tortillerias, small businesses. More than 96% of all tortillas are sold in little shops licensed by the government. These outlets, many grinding tortillas on hand-powered conveyor belts, are virtual monopolies in their neighbour- hoods, with a captive market that so far has resisted modern sales efforts. In part the reason is cultural: Mexicans like their staple fresh, hot off the press. But more importantly, Mexico subsidises small tortillerias with cheap prices on corn flour, making it possible to sell corn tortillas for less than the production cost. 'People stand in line for two to three hours for tortillas. It's worth it because they are so cheap.' Thus, despite modern baking technology, companies such as Gruma and Bimbo simply are unable to make tortillas cheaply enough to compete with the small businesses, however inefficient they may be. Once tortilla subsidies are phased out, millions of Mexicans will buy their tortillas just like Americans do, in plastic bags in supermarkets. If Mexican companies could raise their packaged-tortilla sales to 20% of the Mexican market from 5%, they would match the tortilla output in the USA. USA There is a Mexican immigrant market but tortillas are also making in-roads among Anglo families. The US market is growing 10% per year in dollar terms, compared with just 2% for Mexico. Gruma purchased Guerrero Foods, an East Los Angeles tortilleria founded by Mexican-Americans, in 1988. It works with Mission Foods, another Gruma operation. Guerrero's nemesis is La Tapatia, another family start-up, snatched by Bimbo last year. Mission is the more upscale product, packaged with Mexican recipes in English on the back, for sale to Anglo supermarkets and institutional customers like PepsiCo Inc.'s Taco Bell unit. The play to national sympathies is obvious. Immigrant tortillas are packaged in bulky two-dozen, three-dozen and five-dozen, even 100-count bags, usually with a logo heavy on corncobs. Anglo tortillas are sold in slimmer packs with flashier logos; there are kid-size tortillas with green carton dinosaurs on the package, fat-free tortillas for the health conscious, and 'home-style' with lots of lard. Bimbo has battle-hardened sales forces in the USA and the best distribution system in Mexico. Gruma's edge is its tortilla technology, with high speed mass production. In Los Angeles, it has the biggest tortilla factory in the world, runs three separate lines, one for institutional clients like Taco Bell, one for retailers and one for snack foods like tortilla chips. Gruma's R&D produce most of the industrial tortilla machinery used today. It also keeps down its raw material costs, because it mills its own flour in the USA and Mexico. Gruma is the biggest US player, with a 15% market share. Analysts say that the future belongs to the tortilla-maker that can transfer US marketing practices to the home market. Source: From Millman, 1996, reprinted by permission of the Wall Street Journal, 1996. Dow Jones & Company Inc. All rights reserved worldwide.

Think Break In Box 6.1, there is a comparison between two markets and two companies in the tortilla industry. 1. Compare the parameters in the USA and the Mexican market affecting     the development of 'commodity' tortillas, specialised consumer tortillas     and institutional tortillas. 2. Identify the constraints that limit product development in the three     product areas. 3. If the two companies were to consider entering the Mexican market     when the corn flour subsidy was reducedby 50%, what constraints     would each company have in developing tortillas? 4. What would be the major innovations for each company in product     development? 5. What would be the major differences in the product development of the     two companies?