Market-Oriented Product Derivation Condition And Product Family Scale Decision

With the development of supporting technology of mass customization, enterprisesplan and develop product platform, design product family to deal with the competitionand meet consumer demand for diversity. Product family is located in the associatedmarket and share common technology, a group of products derived from a commonproduct platform, an effective mean to meet the needs of diversity at lower cost. Theproduct family scale is the number of product items that shares a common technologyfor the association market. More product projects are conducive to expand the marketshare and to gain competitive advantage, but too much product projects can easily leadto a sharp rise on the cost caused from multi-products production organization andmanagement, or even offset the advantages of market share expansion brought about bythe multi-products, product derivation and decision-making of product family scalehave been matter of dilemma. The product item of a product family face similar marketsegments, add or remove a product item of product family with product alternativebetween products will impact the overall market of the product family, making thedecision of the product family scale to become more complex.In the early stage of mass customization, product family scale is mainly restrictedby technology, and it’s the primary problem faced by product family derivation andscale decision. With the development of modular, product configuration and platformtechnology, more and faster product derivation is available, product derivation becomefrequent. For market determines the return of product derivation, enterprise start tomeasure the influence of product derivation on market and cost to guide relevantdecision-making. With this starting point, the paper mainly analysis the market-orientedderivative condition of product family, product family scale and related decisions, theoptimization of product family based on interaction between product family items.The first is the derivation of product family. Product derivation based on change ofproduct attributes become very extensive, but some technically easy derivation productis not much in the market, and some companies even provide a single product for aspecific market. The paper extendes the Hotelling market model, define factors ofconsumers’ payment, and judges the market of product items border accordingconsumers’ payment, discusses the product derivation condition of the product family,and reveals that the derivation condition of product family has close correlation with market structure. In oligopolistic market, derivation decision is according to the marketcompletely covered or not. Under the the monopoly circumstances, If one firm carry outproduct derivation, the competitor would carry out product derivation finally and gainthe largest profit, the competition game promotes the product derivation.The next is the problem of product item number or product family scale when thefirm carries out product derivation. The paper discusses the cases of horizontaldifferences and vertical differences product families based on the differences of productno-quality attributes and quality arributes. The horizontal differences are based onnon-quality product attributes deviration The paper introduces distribution of consumers,variable cost distribution of product family, utility of the product family scale, productfamily demand elasticity, discusses their influence on product family scale and pricingdecision-making. The vertical differences are based on quality attributes deviration.Using optimal control theory, the paper gets the optimal decision path of quality andpricing under the restriction of product quality attribute value range that derived fromthe derivation based on a specific product platform, finds that the optimal pricing ofderivative products do not necessarily have to increase to follow the improvement ofquality when the cumulative total sales of the product family will influence the sales ofthe next derivative product.Product family products orient to similar market segmentation, there are certaindegree of substitutability between products from functional view. And the product itemsof product family will also affect production costs for sharing production system. Thepaper uses conjoint analysis methods to measure the product utility for consumers andcharacterize the market, weakens the distinction between product non-quality attributesand quality attributes. Intruduce product substitutability within product family andrelative distance of product utility to depict consumption change caused by productitem’s change, introduces degree of production synergy ratio to depict the cost structurecharacteristics of the product family. For product family profit maximization, the paperoptimal the combination of product items of product family and gives the calculations.The results show that the degree of product substitutability and production synergy ratiohave significant effects on products selection, but the degree of production synergy ratioshows no significant effects when the number of product items is assigned; higherdegree of product substitutability, or low degree of production synergy ratio, provideless product items may obtain higher profits.