New technology product introduction strategy with considerations for consumer-targeted policy intervention and new market entrant

Abstract

The emergence of new technology products brings systematic changes to the market, and appropriate responses to such changes are essential for the survival and success of firms. This study investigated producers' optimal new product introduction (and positioning) strategies in various situations that require different sets of decisions. Specifically, we considered the diffusion of hybrid electric vehicles and battery electric vehicles (BEVs) in the South Korean automotive market. A model incorporating the strategic, forward-looking behaviors of both producers and consumers was used to derive producer's optimal new product introduction plan based on long-term market forecasting. Then, we conducted simulation analyses to investigate the benefit of forward-looking planning and how optimal strategies change depending on the policy interventions and market entrance of the new producer. The results show that a forward-looking strategy could improve the market performance of new products by up to 40 % compared to the myopic strategy, and the plan adjustment of the incumbent in response to competition could reduce competition-related losses by up to 9 %. Finally, stronger policy intervention and new market competition will motivate producers to introduce more, less-expensive BEVs in their product portfolio. Such responses significantly expand the BEV market, which is also a socially desirable outcome.