Factors determining the scope of the product line

The extent to which a company can add new products is not unlimited.  Very often, the scope for having new products is in some way related to the existing conditions of the firm.  The goods may be :

1. Cost Related Goods

A company may decide to add a product which may be the result of a common production process.  For example, a company which strikes oil may decide to produce petrol or mobil oil, kerosene, gas, wax, etc.  A company producing sugar may decide to produce molasses.

2. Demand Related Goods

A firm may decide to add a product which is jointly demanded.  For example, manufacturers of Sulekha Ink have gone in for production of other related items of stationery like sealing wax.  Food Specialities Ltd. added Maggi to their various food products.  Weston Electronics, manufacturers of tape recorders, colour TV sets, two-in-ones, calculators, video games, audio duplicating machines, video tapes and cassettes.  They plan to enter into medical electronics (e.g. blood pressure instruments).

Sometimes, a firm having earned reputation for its products may like to add to its product-line in the hope that people will continue to patronize its goods because of the reputation established by it.  For example, Hindustan Lever Ltd., manufacturers of Dalda, went into production of dehydrated vegetables, pure ghee and mustard oil in the hope that consumers who are after quality will purchase ghee, oil and other products manufactured by them.

Sometimes, manufacturers of quality products may add to their product-line to utilize raw materials found sub-standard for their quality product.  While the quality product is sold under the company’s brand name to attract quality customers, the inferior product may be sold under a different brand name without emphasizing the name of the manufacturers.  Production of different brands of goods by the same manufacturer may be the result of a number of factors : (i) Merger or amalgamation of firms producing the same goods but under different brand names – the different brand names may be retained to retain customer loyalty.  (ii) Known consumer preferences for different varieties – here the firm may like to cater to the requirements of most of the customers by producing different varieties according to the demand of the customers.  (iii) The keenness of the firm to cater to the requirements of the customers who are choosy and want wide variety of goods to select from.  Some brand variety may appeal to one class; the other variety to some others.  Advertisement efforts may also be geared accordingly, to appeal to different types of customers.  (iv) To retain dealer loyalty, a firm may produce goods of different brands, though more or less of the same quality, one brand being sold through exclusive dealers and the other one being sold to all other dealers.  Bata produces two types of goods : one under the brand name of Bata to be sold exclusively at Bata shops, the other BSC (standing for Bata Shoe Company) for distribution through other dealers.

3. Commodities Related in Advertising and Distribution

Frequently, firms may find it advantageous to handle multiple products because they are related in advertising or distribution.  For example, a number of travel goods can be conveniently advertised together, say, holdalls, suitcases, etc.  Likewise, one salesman can conveniently sell tea, coffee, Bournvita, etc.

4. Commodities Related in Research

Common research facilities may enable a company to produce an additional product or commodity.

5. Common Raw Materials

Companies often decide to add products using the same raw materials or its by-products.  Sometimes, the basic source of raw materials may be controlled by the companies and this also helps in the addition of a particular product.

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