CAIE A-Level Business A2 8.1.2 Product Development Topic Practice

Evaluate the importance of new product development to CD's future success.

4(b)

Indicative content

Responses may include:

AO1 Knowledge and understanding

- New product development is the design, creation and marketing of new goods and services.

- Research and development is the scientific research and technical development of new products and processes.

Benefits of new product development:

- Attract repeat purchase by offering a product that is new and better.

- Meet customer needs more effectively.

- Gain a competitive advantage over competition.

- Product differentiation.

- Control over pricing.

- Refresh the brand.

- Cost of product development.

AO2 Application

Limited application, ${ }^{\text {APP }}$ applies knowledge to CD once.

Developed application, ${ }^{\text {APP }}+{ }^{\text {APP }}$ applies knowledge to CD twice.

- Competitive market.

- Consumer product tests showing CD products not as good for cleaning.

- Environmental credentials of CD have been questioned.

- Cost of R&D - increase in expenditure to 3% of revenue (that would be $ 639000 in 2024).

- Shareholder pressure for returns.

- Reference to price inelastic demand (-0.6).

AO3 Analysis

Limited analysis AN - candidate shows one link in the chain of analysis.

Developed analysis L2AN - candidate shows two or more links in the chain of analysis.

- Improvements in cleaning power of products will maintain consumer interest and prevent the product becoming less effective relative to products of competitors AN. This will result in higher sales and increased profit L2AN.

- R&D can improve sustainability of CD's cleaning products further differentiating them from MNCsAN and attracting customers L2AN.

4(b)

- R&D can enable CD to launch new products and maintain growth in revenue AN which can help meet shareholder expectations for higher returns L2AN.

- Improved products could make CD's detergents more price inelastic AN.

- R&D is costly and may therefore negatively impact CD's cashflow and liquidity AN.

- R&D may be classified as an operating expense and can therefore result in a decrease in profit AN.

AO4 Evaluation

Limited evaluation ${ }^{\text {Eval }}$ - limited supported judgement and/or a weak attempt at evaluative comment.

Developed evaluation $\left.{ }^{\text {L2 }}\right|^{\text {Evat }}$ - supported judgement and/or reasonable evaluative comment.

Developed evaluation in context ${ }^{\left\lfloor\mathbf{L 3}^{\text {Eval }}\right.}$ - supported judgement in context and/or reasonable evaluative comment in context.

- Without product development CD will lose its competitive edge in the market. Products need to be continually improving.

- Can R&D match the results of the spending by MNCs which will be significantly more than CD can afford?

- R&D is risky and may not bring improvements to products.

- Is product development the most important factor to future success:

- Role of marketing to support new products.

- Role of marketing research as part of NPD.

- Competitor decisions.

Accept all valid responses.