Product Development Process

Strategy Planning
 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

Current situation
Savion is a manufacturer of standard and high end coaches:
▪ The market for standard coaches is (comparatively) high volume but there is also tighter competition
with a number of competitors on a par. Critical success factors are low product and operating costs.
▪ The high end market has smaller sales volumes but higher margins and only little competition with
some niche players. However, customers in that segment require a premium interior, outstanding
design and quality as well as customer specific configuration leading to a high number of variants.
Safety and clean technology are also critical success factors.
Market growth of both segments was poor in recent years. Savion lost market share in the standard
segment, sales volumes are declining continuously, and the profitability is bad. In the high end segment
the situation is better as Savion is the technology leader and has a good product quality and customer
orientation. Otherwise sales volumes are low and the long term outlook on that market is vague.
Against that background the management board decided to realign the business and to set up a new
product strategy. The long term goal is to achieve a market share of 8% in the standard coach segment
and increase return on sales to 6%. The annual turnover shall reach 2 bn €.
On the following pages you will find further information about the two market segments, their sub
segments and related products supporting your strategic analysis.
Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 1
 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

Assignment:
Please analyse the market and company situation from a strategic point of view. That analysis shall
include a sales and earnings structure and a portfolio on market attractiveness and competitiveness.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 2

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

Total Sales Sales Sales Sales Market

Return on Earnings
market Related volume volume volume volume segment
Market segment sales 2019 2019
volume products 2018 2018 2019 2019 share
(%) (m €)
2019 (m €) (units) (m €) (units) (m €) 2019 (%)
35 seats 4.500 Atlantis 2.100 210 2.000 200 4,4 2 4
35 seats/
Standard 3.000 Brabant 1.500 180 1.350 162 5,4 -4 -6.56
High decker
coach
45 seats/
double 7.150 Teralis 5.500 605 5.100 561 7,9 1 5.61
decker
25 seats 480 Helios 300 90 320 96 20,0 14 1.44
High end
coach
35 seats 144 Phoenix 2 230 52,9 250 57,5 40,0 9 5.175

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 3

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

15%

Market growth 2018-2019 (market segments)

Loss in market share

10%

Helios Phoenix 2
5%

Atlantis

0% Brabant

Teralis
-5%

Gain in market share

-10% -5% 0% 5% 10% 15%

Sales growth 2018-2019 (product)

Market growth vs. sales growth.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 4

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

1.250
Cumulated sales (m €)

1.000

Note: this is a total

750 sales for 2018 and
2019 in volume
1166 market.
500

250
410 312
186 116.4
0
Atlantis Brabant Teralis Helios Phoenix 2

Analysis of the sales structure.

Product name

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 5

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

30
Cumulated earnings (m €)

24

18

12

6
-6.56 5.61 5.175
4
1.44
0
Atlantis Brabant Teralis Helios Phoenix 2

Analysis of the earnings structure..

Product name

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 6

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

Market attractiveness Weight Atlantis Brabant Teralis Helios Phoenix

Criteria for evaluation (%)
E ExW E ExW E ExW E ExW E ExW

Total market volume

3=high (>=5 bn €)
2=medium (>=1 bn €) 30 2 0.6 2 0.6 3 0.9 1 0.3 0 0
1=little (>=200 m €)
0=very little (<200 m €)
Total market growth
3=strong growth (>= 5%)
2=medium growth (>= 1%) 50 2 1 1 0.5 0 0 3 1.5 3 1.5
1=stagnation (>= 0%)
0=decline (<0%)
Competition
3=some smaller competitors
2=some equal competitors 20 2 0.4 2 0.4 2 0.4 3 0.6 3 0.6
1=many strong competitors
0=cutthroat competition
Market attractiveness 100 2 1.5 1.3 2.4 2.1

Evaluation of market attractiveness.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 7

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

Competitiveness Weight
Atlantis Brabant Teralis Helios Phoenix
Criteria for evaluation (%) E ExW E ExW E ExW E ExW E ExW

Market share
3=very high (>=15%)
2=significant (>=6%) 30 1 0.3 1 0.3 2 0.6 3 0.9 3 0.9
1=low (<6%)
0=negligible (<3%)
Development of sales
3=strong growth above market
2=growth above market 40 0 0 0 0 0 0 2 0.8 3 1.2
1=growth with market
0=losing share
Return on sales
3=high (>=10%)
2=medium (>=5%) 30 2 0.6 0 0 2 0.6 3 0.9 3 0.9
1=low (>=0%)
0=losing
Competitiveness 100 0.9 0.3 1.2 2.6 3

Evaluation of competitiveness.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 8

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

3
Market attractiveness

2 Revenue 2019
500 m €
100 m €
50 m €

0 1 Competitiveness 2 3
Market attractiveness-Competitiveness-Portfolio.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 9

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

Assignment:
Beside the portfolio analysis please think about the future of the coach business especially from a
market and customer perspective. To do so, develop two future scenarios for the bus tourist travel in
the distance range 200 to 2000 km in the year 2030.
First, draw a picture of the system “bus tourist travel” and suggest a set of 10 influencing factors.
Now, identify 3 key factors based on the results of a Design Structure Matrix.
Please describe two different future developments of each key factor and evaluate how they fit
together with the help of a consistency analysis. Please also try to set up two different but consistent
future scenarios based on that analysis.
Finally use the future scenarios as well as the outcome of the strategic portfolio analysis to suggest
appropriate actions to realign the product strategy and to optimize the product program.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 10

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

System picture and respective influencing factors.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 11

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Availability of resources
Strategy planning practice

Market environment

Politics and society

Technology trends

Activity index
market segments

Trade channels
Element Y

Supply chain
0: no or very weak influence

Competition

Customers
on each over
Influencing 

Industry
1: weak influence on each
over
2: medium/proportional Element X
influence on each over
3: strong, disproportionate 1-market segments 2 3 2 0 3 3 2 3 3 21
influence 2-Industry 2 1 0 3 2 3 2 0 0 13
3-Competition 3 0 0 0 3 3 1 3 3 16
4-Supply chain 0 2 0 3 1 0 0 0 1 7
5-Availability of resources 0 3 0 2 0 3 0 1 0 9
6-Market environment 3 2 2 1 0 3 2 1 2 16
7-Technology trends 3 3 3 0 0 2 1 0 3 16
8-Politics and society 3 3 2 2 0 0 2 1 2 15
9-Trade channels 0 3 3 3 1 0 1 2 3 16
10-Customers 3 2 3 0 0 2 2 1 2 15

Passivity index 17 20 17 10 7 13 20 11 11 17
Design structure matrix.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 12

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

1
Activity index

9 3
7 1-market segments
8 6 10
2-Industry
2 3-Competition
4-Supply chain
5 5-Availability of resources
4 6-Market environment
7-Technology trends
8-Politics and society
9-Trade channels
10-Customers
Passivity index
System diagram.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 13

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

Key Factor Projections

1A: can effect on the timeline production
1-Availability of resource
1B: can effect on demand of market

2A: important on select the manufacture technique

2-Industry
2B: important to cover all needs on design of product

3A: control the product design

3-market segments
3B: control the channel of marketing

Future projections of key factors.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 14

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

-2 – totally inconsistent/mutually exclusive

-1 – partially inconsistent/not compatible Key factor 1: Key factor 2: Key factor 3:
0 – independent from each other
1 – consistent/compatible
2 – Strongly consistent/supports each other
1A 1B 2A 2B 3A 3B

Key factor 1: 1A:can effect on the timeline production

1B:can effect on demand of market

Key factor 2 2A:important on select the manufacture 1 0

technique

2B:important to cover all needs on design 0 1

of product
Key factor 3: 3A:control the product design 1 0 1 2

3B: control the channel of marketing 0 2 0 0

Consistency matrix.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 15

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

Short description of scenario A.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 16

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

Short description of the scenario B.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 17

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

Actions

Atlantis -

Brabant -

Teralis -

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 18

 You are in the department of product strategy of the bus and coach manufacturer Savion. To
support management decisions concerning the future strategy of the business you are assigned
to analyze the current situation and draw a picture of the future product strategy.

Strategy planning practice

Actions

Helios -

Phoenix 2 -

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 19

 Based on the results of your analysis and the chosen segment strategy a product innovation
strategy shall be developed. Ideas for product innovation shall be evaluated, selected, and
assigned to the product cycle plan.

Strategy planning practice

Assignment:
Based on the results of your strategic analysis please select a market segment you want to focus
your R&D activities on. Then select appropriate project ideas from the given innovation project
portfolio (see next slides) which support your business strategy best and also have a good return on
investment. You might use the idea portfolio to evaluate and select the project ideas.
Please put the selected innovation projects on a development roadmap. Here, you have to keep the
following constraints:
▪ Each innovation project has to be allocated to the launch of a new vehicle generation or a product
upgrade.
▪ The innovation project has to be finalized one year ahead of the respective vehicle SOP. This is
necessary to be able to integrate the new content into the vehicle.
▪ The available annual R&D budget is 50 million €. However, a portion of that budget has to be held
available for the basic development (30 million € p.a. over 4 years for a new product generation,
15 million € p.a. over 2 years for a product upgrade).
Also pay attention to a balanced budget allocation (= capacity utilization) over time and a continuous
supply of new product innovation to the market. As a result, please visualize and present your
planned innovation roadmap and required R&D budget per year.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 20

 Based on the results of your analysis and the chosen segment strategy a product innovation
strategy shall be developed. Ideas for product innovation shall be evaluated, selected, and
assigned to the product cycle plan.

Strategy planning practice

Return on Development Required R&D

Product idea Short description
Investment time budget p.a. (€)
Combination of both an internal combustion engine and an
Parallel hybrid electric motor that can individually drive the bus or coupled
8% 3 years 25 m
propulsion system up jointly giving drive, supporting regenerative braking and
additional boost during acceleration
Organic Rankine cycle Heat recovery from exhaust gas and conversion into
4% 5 years 6m
module electricity using the Ranking cycle
Emergency braking Detection of a possible collision with a standing or slow
2% 3 years 8m
system moving object by radar and automatic braking intervention
Development of an innovative low-wear, mechatronic brake
New brake system 6% 3 years 6m
system
Rear view mirror system using intelligent camera
Digital rearview mirror 5% 2 years 5m
technologies (mirror substitute)
Composite material Use of synthetic materials for body construction to reduce
-2% 5 years 15 m
chassis weight and cost

List of proposed innovation projects (Return on Investment within 3 years after SOP,
illustrative values for development time and required R&D budget).

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 21

 Based on the results of your analysis and the chosen segment strategy a product innovation
strategy shall be developed. Ideas for product innovation shall be evaluated, selected, and
assigned to the product cycle plan.

Strategy planning practice

Return on Development Required R&D

Product idea Short description
Investment time budget p.a. (€)
Further development of the existing route guidance system
Situational navigation to include traffic and topographical information supporting a 8% 4 years 4m
situational driving operation
Measurement of vehicle speed and comparison with
Turning/curve assistant navigational data, alert in case of speeded curve entry, 14% 4 years 2m
prerequisite: situational navigation
Measurement of engine speed and torque and comparison
Gear shift with navigational data, suggesting shift strategy and
18% 4 years 4m
management acceleration and braking behavior, prerequisite: situational
navigation + hybrid propulsion system

List of proposed innovation projects (Return on Investment within 3 years after SOP,
illustrative values for development time and required R&D budget).

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 22

 Based on the results of your analysis and the chosen segment strategy a product innovation
strategy shall be developed. Ideas for product innovation shall be evaluated, selected, and
assigned to the product cycle plan.

Strategy planning practice

Return on Development Required R&D

Product idea Short description
Investment time budget p.a. (€)
Night Vision Infrared object recognition and display in instrument panel 12% 3 years 5m
Image recognition for traffic signs and driver information
Traffic sign recognition 5% 3 years 6m
(e.g. in case of speeding)
Bio sensory driver Driver supervision by bio sensors (heart rate, eye
10% 5 years 4m
monitoring movement)
Adaptive interior lighting dependent on environmental
Ambient Light 12% 2 years 2m
conditions or passenger configuration
High performance and energy efficient LED main-beam
LED headlamp 15% 3 years 4m
headlight
Rotatable passenger Flexible passenger seat configuration by moving and
5% 2 years 4m
seats rotating the seat up to 180°

List of proposed innovation projects (Return on Investment within 3 years after SOP,
illustrative values for development time and required R&D budget).

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 23

 Based on the results of your analysis and the chosen segment strategy a product innovation
strategy shall be developed. Ideas for product innovation shall be evaluated, selected, and
assigned to the product cycle plan.

Strategy planning practice

Required budget p.a.

phps 25 m €
high
15 m €
5m€
Strategic value

NBS

medium

The chosen projects:

EBS
1- Parallel hybrid
CMC GSM
DRM
T/C A
propulsion system.
low SN 2- New brake system.
TSR NV
BSDM
orcm RPS LHL AL (For a high ROI)

low (< 5%) medium (5-10%) high (>10%)

Return on investment
Idea portfolio.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 24

 Based on the results of your analysis and the chosen segment strategy a product innovation
strategy shall be developed. Ideas for product innovation shall be evaluated, selected, and
assigned to the product cycle plan.

Strategy planning practice

50 m € PHPS

NBS

30 m 30 m 30 m 30 m 30 m 30 m

15 m 15 m

today + 5 years + 10 years

Budget planning.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 25

 Based on the results of your analysis and the chosen segment strategy a product innovation
strategy shall be developed. Ideas for product innovation shall be evaluated, selected, and
assigned to the product cycle plan.

Strategy planning practice

B1 PG B3 Market cycle
B2a UP
B2b PG
Product
B3 PHPS development
project
Required budget:
Innovation projects PG: 30 m p.a.
NBS
UP: 15 m p.a.

today + 5 years + 10 years

Innovation Roadmap (PG = market launch (SOP) of a new product generation, UP = market launch (SOP) of a product upgrade).

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 26

 A decision between alternative projects proposals is needed. The decision should be based on
a business case considering the required investment and the expected return.

Strategy planning practice

Assignment:

Due to significant funding shortage a model upgrading of the Helios series planned for 2025 is
coming under scrutiny. Two alternatives are considered:

▪ A: No model upgrading saving the R&D expenses but expecting a loss in market share up to
2 percentage points per year as from 2025 (basis: market segment share 2019)

▪ B: Model upgrading with R&D expenses of 15 million Euro per year in 2023 and 2024 and
maintaining the market share of 20 percent.

Please provide a business case evaluating both project alternatives on the basis of their respective
net present value (NPV). The NPV can be calculated according the following equation:

NPV = S (CFt) * (1+i) -t

CFt = Cash flow per payment period t (CF = cash inflow – cash outflow), i = internal discount rate, here: i=10%, t = time of the cash flow, here: 1…6).

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 27

 A decision between alternative projects proposals is needed. The decision should be based on
a business case considering the required investment and the expected return.

Strategy planning practice

Assignment:

Please build the business case on the following assumptions:

The total market volume of the Helios segment amounts to 1,600 units or 480 million € per year and
shall be considered as stable during the given period. The market share of Savion is 20%. The period
under consideration is 6 years starting from 2023 and ending in 2028. In the case of alternative B
annual R&D expenses of 15 million € need to be taken into account. Other cash inflow and outflow
can be included as from 2025, that is (simplified) manufacturing costs of 200,000 € per unit, sales
price of 300,000 € per unit, and overhead costs of 4 million € per year.

Please also provide an alternative NPV calculation assuming an annual loss of 3 percent points in
market share (sensitivity analysis).

Discuss the results of the different business cases and make a proposal how to decide on the
alternatives.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 28

 A decision between alternative projects proposals is needed. The decision should be based on
a business case considering the required investment and the expected return.

Strategy planning practice

2023 2024 2025 2026 2027 2028

Total market volume (units) 1600 1600 1600 1600 1600 1600
Market share (%) 20 20 18 16 14 12
Sales volume (units) 320 320 288 256 224 192
Cash outflow (m €) 83 83 76.6 70.2 63.8 57.4
Investment (m €) 15 15 15 15 15 15
Manufacturing (m €) 64 64 57.6 51.2 44.8 38.4
Overhead (m €) 4 4 4 4 4 4
Cash inflow (m €) 96 96 86.4 76.8 67.2 57.6
Sales (m €) 96 96 86.4 76.8 67.2 57.6
Cash flow (m €) 13 13 9.8 6.6 3.4 0.2
Discount rate [= (1+i)-t] 1.1 1.21 1.331 1.4641 1.61051 1.771561
Net present value (m €) 14.3 15.73 13.0438 9.66306 5.475734 0.3543122 58.5669062

Business case alternative A.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 29

 A decision between alternative projects proposals is needed. The decision should be based on
a business case considering the required investment and the expected return.

Strategy planning practice

2023 2024 2025 2026 2027 2028

Total market volume (units) 1600 1600 1600 1600 1600 1600
Market share (%) 20 20 20 20 20 20
Sales volume (units) 320 320 320 320 320 320
Cash outflow (m €) 83 83 68 68 68 68
Investment (m €) 15 15 0 0 0 0
Manufacturing (m €) 64 64 64 64 64 64
Overhead (m €) 4 4 4 4 4 4
Cash inflow (m €) 96 96 96 96 96 96
Sales (m €) 96 96 96 96 96 96
Cash flow (m €) 13 13 28 28 28 28
Discount rate [= (1+i)-t] 1.1 1.21 1.331 1.4641 1.61051 1.771561
Net present value (m €) 14.3 15.73 37.268 40.9948 45.09428 49.603708

Business case alternative B.

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 30

 A decision between alternative projects proposals is needed. The decision should be based on
a business case considering the required investment and the expected return.

Strategy planning practice

2023 2024 2025 2026 2027 2028

Total market volume (units)
Market share (%)
Sales volume (units)
Cash outflow (m €)
Investment (m €)
Manufacturing (m €)
Overhead (m €)
Cash inflow (m €)
Sales (m €)
Cash flow (m €)
Discount rate [= (1+i)-t]
Net present value (m €)

Business case alternative A (different market share scenario).

Dr.-Ing. Christoph Baumberger Product Development Process, Strategy Planning 31