Every business process begins with an Idea followed by a set of tasks and processes that ends with the delivery of a product to a client. The product realization cycle above illustrates all the steps and processes required to finish a product.
All the processes in the realization cycle occur concurrently, i.e they overlap.
The first step in the development of a product is to understand customer requirements. There are three main customer requirements (General and Engineering) which are depicted in the image below:
There are also several types of business process types and business model one can employ (depending on the type of product) in the course of the product and process development. These are illustrated in the image below:
Below is a video of one of the assignments, guess my business process, which was completed during this module. This taught me that business process can range from any variety of things and can be applied to our daily lives.
Furthermore, a company must use a cost benefit analysis to determine to what extent they want to be vertically integrated. This implies that they go through make vs buy decisions. The higher the vertical integration, the more the company makes. Make/buy decisions are guided by core competencies; intellectual, physical abilities, and assets most directly related to why customers want your product.
Finally, apart from ethical considerations, before the decision to carry on with a product, one has to carry out an investment analysis. Important terms to know for the investment analysis are as follows:
NPV (Net Present Value): Used to analyze profitability of an investment. Converts yearly net cash flows into an equivalent amount of money at a present time.
Discounting/Hurdle Rate: This is the expected rate of return/ target rate one aims at.
IRR (Internal Rate of Return):Computes an equivalent return on the yearly net cash totals.
COC (Cost of Capital): This is the opportunity cost of an investment and the return the investor receives.
***In order to accept a project, IRR ≥ Hurdle Rate***
