PRODUCT

DEVELOPMENT PROCESS
(Validate Service Description, Select Suppliers,
Discuss Value Chain)
Module in Entrepreneurship G11
Quarter 2 ● Module 2

FRANCES ANNE C. BERAQUIT

Developer
Department of Education • Cordillera Administrative Region

NAME:__________________________ GRADE AND SECTION ____________

TEACHER: ______________________ SCORE _________________________
 What I Need to Know

Welcome to this module on PRODUCT DEVELOPMENT PROCESS!

The primary objective of the Entrepreneurship subject is to aid students in acquiring

the most essential knowledge and competencies required in carrying out a business. This
module will help you understand the product development process, especially product
validation and supply chain management.

LEARNING COMPETENCY/CODE
1. Demonstrate the 4Ms of operations by describing the 4Ms (Manpower, Method,
Machine, Materials) of operations in relation to the business opportunity;
2. Validate the service description of the product with potential customers to determine
market acceptability;
3. Select/pinpoint suppliers of raw materials and other inputs necessary for the
production of the product or service; and
4. Discuss the value/supply chain in relation to the business enterprise.
(CS_EP11/12ENTREP-0h-j-12)

LEARNING OBJECTIVES
At the end of the module, you should be able to:
1) determine market acceptability;
2) enumerate the six steps in the product development process;
3) discuss the supply chain management flow or cycle;
4) create your own supply chain management cycle, and,
5) compute for the selling price of your product.

What I Know

Instruction: Write all your answers on your answer sheet. (One point each)
I. IDENTIFICATION. Choose from the pool words the answer that corresponds to each
question.
Product Development Process Value Delivery Network
Costing Gross Profit
Raw Materials Work-in-process goods
Manufacturing business Supply Chain Management
Market Acceptability Mark up

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 1. What is the process of developing a product which involves a wide range of
activities from generating ideas to introducing the product to the market?
2. What determines the interest of the market to buy your product?
3. What process starts with managing supplies from suppliers to the distribution of the
product to the end customers?
4. What refers to the network which is comprised of upstream partners and
downstream partners?
5. What is the last part of the product development process?
6. What refers to the value added to the cost of a product to determine its selling
price?
7. What refers to the total amount that the business gains before deducting any
expense?
8. What refers to the unprocessed goods of a manufacturing business?
II. SEQUENCING. Arrange the following steps according to the supply chain management
process. Write 1 for the first step and 7 for the last step.
___ 9. Purchasing of raw materials
___ 10. Outbound transportation to end customer
___ 11. Manufacturing
___ 12. End customer
___ 13. Storage of finished goods
___ 14. Canvassing of raw materials
___ 15. Inbound transportation

What’s In

The 4Ms of operations were previously discussed and, as an entrepreneur, it is

essential to understand this concept. To recall the 4Ms, let’s have an activity.

Activity 1: What’s your pair?

Instruction: Match the picture in Column A with the proper M in Column B. Write your answers
on your answer sheet. (One point each)

COLUMN A COLUMN B

1. a. Money

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 2. b. Manpower

3. c. Machineries

4. d. Method

Were you able to answer the activity correctly? Well, congratulations! It means that
you have successfully recognized the different M’s of operation. Remember that these M’s are
part of creating a product called product development process. This process involves series
of steps which brings a unique idea to the market. Every new product developed in an industry
has its own varied method but no matter what product you are developing, preparation should
always come first.

What’s New

Activity 2: Three Reasons Why

Instruction: Pick a product which satisfies you the most and another product which dissatisfies
you. Write down at least three (3) reasons why it satisfies or dissatisfies you.
Product (Kind of product or specific
Three (3) reasons
product)

a)
Satisfied b)
c)

a)
Dissatisfied b)
c)

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 What Is It

The product development process is a process that involves a wide range of

strategic activities to produce and offer a product to the market. The steps include ideation,
market research, market planning, product prototyping, sourcing, and costing. From the
beginning, you were told to generate ideas, conduct market researches and planning, and
create a product prototype. In your previous module, you were tasked to test your product and
gather feedback from your target market. This is a part of product prototyping stage and it is
necessary to validate your product to determine its market acceptability.

Market acceptability determines whether your product is interesting to your target

market. It measures whether the product you have created satisfies your market or not. When
satisfaction from the market is met, this will signal your enterprise to continue or increase the
supply of your product (Oxford University Press 2020). There are different methods of
determining market acceptability such as getting your customers’ feedbacks and conducting
random interviews with people in your target market.

For every product developed, there are always pros and cons. Getting inputs from your
market in the early stages of the product development process will help you build features for
your product to be as acceptable as possible. Take the activity given as an example. The three
reasons you have listed for a product you are dissatisfied with could be a problem of the
product that entails a solution. By giving feedback, it would aid the entrepreneur to improve
his product to satisfy more his target market.

A common framework of a product development process involves six (6) steps:

ideation, market research, market planning, product prototyping, sourcing, and costing
(Product Development Process (Definition and Overview) n.d.). At this point, you are already
finished with product prototyping. It is now time to gather the materials and secure partnerships
with suppliers. This stage is called sourcing, or more commonly known as supply chain
management (SCM).

❖ Servicing enterprise
Supply chain (or value chain) management starts
- a business mainly providing
service to customers. from the management of supplies from the suppliers
❖ Merchandising enterprise (source) to the distribution of the product to the end
- a business involved in “buy customer. Manufacturing enterprises are ones that
and sell”.
❖ Manufacturing enterprise
greatly invest in this area of marketing rather than
- a business which involves in servicing and merchandising enterprises. If your
creating and distributing the business involves creating and distributing the
product. product, then it is a manufacturing enterprise.
The SCM encompasses activities like canvassing raw materials from different
suppliers, purchasing and transporting raw materials, processing the work-in-process goods,
storage of the finished products, and delivering these products to your target market (ABC of
Marketing 2018). To visualize the flow of this process, look at Figure 1 below.

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 Canvassing of raw materials from various suppliers

Purchasing of raw materials from suppliers

Inbound transporation from suppliers

Manufacturing (conversion of raw materials to finished

goods)

Storage of finished goods

Outbound transportation to end customer

End customer

Figure 1. Supply Chain Management (figures from Canva)

Supply chain management requires building ❖ Raw materials

relationships with suppliers, wholesalers, resellers, and - these refer to
ultimately with customers. Together with your business, unprocessed goods.
these units form the value delivery network (formerly ❖ Work-in-process (WIP) goods
- these are goods which
known as supply chain) – a network made up of the are partially or almost
company, the suppliers, distributors, and customers who finished in the production
“partner” with each other to improve the performance of cycle.
❖ Finished products
the entire system (Kotler and Armstrong, Principles of
- these goods completed
Marketing (Global Edition) 2010). This network is the production cycle and
comprised of upstream partners (supplier of raw are ready to be sold in the
materials, machinery, information, finances, and expertise market.
needed to create a product) and downstream partners
(wholesalers and resellers). Using Figure 1, the upstream side would start from the canvassing
of suppliers of raw materials down to the storage of finished goods. On the other hand, the
downstream side involves transporting the finished goods to downstream partners which
makes them available to your customers.

Let us take a gadget company as an example. In making its gadgets, the company
manages an entire network of people within its company while it also communicates with its
suppliers of its raw materials and the resellers of its products. Although suppliers and resellers
are outside of the company, they work effectively to give the end customers satisfaction.

As an entrepreneur, you must be concerned with your business’ value delivery

network. Pay attention to your business’ upstream and downstream partners because your
business will shoulder all the costs incurred in the VDN. You should strive to achieve

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production efficiency to reduce these costs because these will then be added to the price of
your product. Let us assume that you will be establishing a bakery in Baguio City which
primarily offers pandesal. To identify your value delivery network, let us try to answer the
following questions:
QUESTIONS ANSWERS COST (good for 200
large pandesals)
1. What are your raw Raw Materials Cost Php 620
materials? Bread flour (1kg) Php80
Salt (500g) 15
Yeast (500g) 180
White sugar (500g) 20
Egg (1 dozen) 75
Water -
Butter (100g) 50
Cinnamon powder (500g) 200
2. Who are your possible Tiongsan, Victoria’s Supermarket, -
suppliers? C&AAA mart
3. Who will be your Tiongsan -
supplier/s?
4. How much will be the Own vehicle (gasoline) Php 100
transportation cost?
5. What are your Mixing bowl, baking rolling pin, oven -
machineries?
6. Where will you store You will have your own bakery thus -
your finished products? the products will be stored inside your
bakery.
7. Who will distribute my Since you have your own bakery, the -
products? products will be distributed through
your own store.

The last part of the product development process is the costing (Sutton 2020). It is
the process of adding up the cost of goods sold (COGS) to determine the selling price of your
product. In the table above, you have already determined the total cost incurred in the VDN.
Now, let us compute the retail price of your product.

Cost of raw materials Php 620.00

Add: Transportation cost 100.00
Total cost of goods sold Php 720.00
Divided by: Number of pieces produced 200 pieces
Cost per piece Php 3.60
Add: Mark up on cost 1.40
Selling price per piece Php 5.00
As you can see in the computation, the total costs incurred must be divided by the
number of pieces produced to determine the cost per piece of pandesal. The cost per piece
will be your basis for the mark-up. Mark-up refers to the value added to the cost of a product.
When mark-up is added to the cost per piece, you will be able to determine the selling price

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(the amount you are willing to offer your product to the market) per product. When mark-up is
multiplied by the number of pieces produced, the gross profit is computed. Gross profit refers
to the total amount that the business gains before deducting any expense. In your bakery
business, the gross profit is Php280.

What’s More

Activity 3: SCM Cyle

Instruction: The picture below shows the simplest supply chain management cycle of a
manufacturing business. Analyze the picture and answer the assessment.

Demand from Transporting to

customers site
Canvassing and
purchasing of
raw materials

End customers Manufacturing site

Selling of Logistics
products Management
Delivery to
resellers/
customers

Assessment of Activity 3
Instruction: Answer the requirements listed below. Refer to the rubrics given below.
CRITERIA ASSIGNED POINTS
Clarity of the content 6 points
Correctness of grammar 2 points
Organization of thoughts 2 points
TOTAL POINTS 10 points
Requirements:
1. Explain the supply chain management cycle in NOT MORE than ten (10) sentences.
2. Answer this question: Where do you think does the cycle starts? Explain in NOT MORE
than five (5) sentences.

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 What I Have Learned

Activity 4: You FILL me?

Instruction: Complete the following sentences by filling up the blanks. Write your answers
using your own words and be concise as much as possible. (One point each)
1. Market acceptability is _________________________________________________.
2. A production development process is comprised of six steps: ______________,
_________________, _________________, _______________, _______________,
and ________________.
3. Sourcing is __________________________________________________________.
4. Supply chain management is ___________________________________________.
5. A value delivery network is _____________________________________________.
6. An example of an upstream partner is ____________________________________.
7. One example of a downstream partner is __________________________________.
8. Costing is ___________________________________________________________.
9. We can compute mark up by ____________________________________________.
10. To get the gross profit, we have to _______________________________________.

What I Can Do

Activity 5: Supply Chain Management of Your Business

Instructions: Create the supply chain management of your business. Illustrate it through a
diagram (similar to Figure 1 or Activity 3 of this module). You may change or
add some steps in your SCM. Explain your work in NOT MORE than ten (10)
sentences. Be guided by the rubric below.

CRITERIA 10 points 8 points 5 points

Content of The diagram contains complete The diagram lacks one (1) to The diagram lacks more than
the steps of the supply chain two (2) steps of the supply chain two (2) steps of the supply chain
diagram management appropriate for management appropriate for management appropriate for
the chosen business. the chosen business. the chosen business.
5 points 3 points 1 point
Illustration The diagram/flowchart is logical The diagram/flowchart is logical There is no logic in the flowchart
and contains arrows which BUT arrows give misdirection to and do not contain arrows to
guides the readers through the the readers. guide the readers.
steps.

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 Post-Assessment

It’s time to test what you have learned from the lessons in this module.
Instruction: Write your answers on your answer sheet. (One point each)

I. IDENTIFICATION. Identify what is asked.

1. What determines the interest of the market to buy your product?
2. What is the first step in the product development process?
3. What is the process of developing a product which involves a wide range of
activities from the generating ideas to introducing the product to the market?
4. What process starts with managing of supplies from suppliers to the distribution of
the product to the end customers?
5. What refers to the network which is comprised of upstream partners and
downstream partners?
6. What refers to the business involved in “buy and sell”?
7. What refers to the partially completed goods of a manufacturing business?
8. What refers to the amount a business is willing to sell its product?

II. SEQUENCING. Identify the different steps of the supply chain management.
SUPPLY CHAIN MANAGEMENT

9. 10. 11. 12. 13. 14. 15.

Additional Activities

Activity 6: Costing
Instruction: Copy and complete the table below to compute the total costs, mark-up, and
selling price of your product. Write your answers on a separate answer sheet. You
will need this for the succeeding activities of this quarter.

For manufacturing or merchandising business:

Cost per Units
Raw Materials Supplier Total Cost
unit needed
1)
2)
3)
4)
5)
(You may add more rows)

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 Total cost of raw materials Php _______________________
Add: Other expenses related to acquisition _______________________
of raw materials
Cost of Goods Sold Php _______________________
Divided by: Number of units produced _______________________
Cost per unit Php _______________________
Add: Mark up on cost _______________________
Selling Price per unit Php _______________________

For servicing business:

Cost of Service (e.g. daily rate of staff) Php _______________________
Add: Mark up _______________________
Price of service provided Php _______________________

References
ABC of Marketing. 2018. Explain Channel of Distribution, Supply Chain Management, and
Logistics Management. https://www.abcofmarketing.com/explain-channel-
distribution-supply-chain-management-logistics-management/.
Kotler, Philip. 2002. Marketing Management, Millenium Edition. United States of America:
Pearson Custom Publishing.
Kotler, Philip, and Gary Armstrong. 2010. Principles of Marketing (Global Edition). Jurong,
Singapore: Pearson Education South Asia Pte Ltd. .
Oxford University Press. 2020. Market Acceptance - Oxford Reference.
https://www.oxfordreference.com/view/10.1093/oi/authority.20110803100134936.
n.d. Product Development Process (Definition and Overview).
https://www.productplan.com/glossary/product-development-process/.
Sutton, Mary-Rose. 2020. The Product Development Process: How to Create a New
Product. September 21. https://www.shopify.com.ph/blog/product-development-
process#:~:text=New%20product%20development%20is%20the,prototyping%2C%2
0sourcing%2C%20and%20costing.

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