| Description |
Aggravated by increased competitive forces, the process of introducing new products into the market has become increasingly difficult, risky, and necessary. Thousands of new products fail each year, costing American businesses billions of dollars. Some estimates place the new product failure rate at thirty five percent. The reasons for product failures range from bad timing of product introduction to poor product quality. However, the common denominator in new product failure is the lack of coordination between product development, manufacturing, marketing and a company's strategic plan. This lack of coordination causes an unnecessary increase in product costs and decreases favorable economic conditions that allow products to succeed. Solutions to the product introduction dilemma are difficult. However, recent developments in cost accounting suggest that an answer to coordination problems lies in the basic tenets of activity based accounting. Through a use of activity based principles, companies may coordinate development, manufacturing, marketing, and business strategy to introduce new products successfully into the market. This paper will examine the fundamental factors that create coordination problems for new products, analyze the costs associated with lack of coordination, discuss how activity based costing might be used to solve coordination problems, and then apply these concepts to analyze the new product development process of a small manufacturing company. |
