Effects of Commonality Strategy in Product Line Design on Social Welfare

제품군 디자인에서 공통속성의 활용이 사회적 효용에 미치는 영향

  • Published : 2008.09.30

Abstract

Commonality strategy is a popular design practice in designing a product line as it enables the firm cost saving and simplification in design, manufacturing, and distribution processes. However the issue of commonality has been mostly analyzed from a profit maximizing firm's perspective and, to our knowledge, there is no literature that deals with the issue from a different perspective. in this paper, we consider the issue of commonality strategy from a social welfare maximization perspective, and argue that commonality strategy used in designing of public goods can bring certain benefits not just for a firm but also for consumers, i.e., for society as a whole. While we assume certain cost saving in production process due to economies of scale under commonality strategy, we conceptualize two different effects of commonality strategy, utility effect due to cost saving and weighted-averaging effect, and show how these two effects interplay to determine the design of common attribute and desirability of commonality strategy. We also discuss how the implementation of commonality strategy differs under different objectives of a product line designer : social welfare and firm's profit maximization.

References

  1. Chernev, A., "The Effect of Common Features on Brand Choice : Moderating Role of Attribute Importance," Journal of Consumer Research, Vol.23, No.4(1997), pp.304- 311. https://doi.org/10.1086/209485
  2. Desai, P., S. Kekre, S. Radhakrishnan, and K. Srinivasan, "Product Differentiation and Commonality in Design:Balancing Revenue and Cost Drivers," Management Science, Vol.47, No.1(2001), pp.37-51. https://doi.org/10.1287/mnsc.47.1.37.10672
  3. Fixson, S.K., "Modularity and Commonality Research:Past Developments and Future Opportunities," Concurrent Engineering, Vol. 15, No.2(2007), pp.85-111. https://doi.org/10.1177/1063293X07078935
  4. Heese, H.S., and J.M. Swaminathan, "Product Line Design with Component Commonality and Cost-reduction Effort," Manufacturing and Service Operations Management, Vol.8, No.2(2006), pp.206-219. https://doi.org/10.1287/msom.1060.0103
  5. Kim, K., and D. Chhajed, "Commonality in Product Design:Cost Saving, Valuation Change, and Cannibalization," European Journal of Operational Research, Vol.125 (2000), pp.602-621. https://doi.org/10.1016/S0377-2217(99)00271-4
  6. Kim K., and D. Chhajed, "An Experimental Investigation of Valuation Change Due to Commonality in Vertical Product Line Extension," Journal of Product Innovation Management, Vol.18, No.4(2001), pp.219-230. https://doi.org/10.1016/S0737-6782(01)00093-5
  7. Kim K., and D. Chhajed, "Product Design with Multiple Quality-type Attributes," Management Science, Vol.48, No.11(2002), pp. 1502-1511. https://doi.org/10.1287/mnsc.48.11.1502.265
  8. Krishnan, V., and S. Gupta, "Appropriateness and Impact of Platform-based Product Development," Management Science, Vol.47, No.1(2001), pp.52-68. https://doi.org/10.1287/mnsc.47.1.52.10665
  9. Moorthy, K.S, "Market Segmentation, Selfselection, and Product Line Design," Marketing Science, Vol.3, No.4(1984), pp.288- 307. https://doi.org/10.1287/mksc.3.4.288
  10. Moorthy, K.S., and Png, I.P.L., "Market Segmentation, Cannibalization, and the Timing of Product Introductions," Management Science, Vol.38, No.3(1992), pp.345-359. https://doi.org/10.1287/mnsc.38.3.345
  11. Salvador, F., "Towards a Product System Modularity Construct : Literature Review and Reconceptualization," IEEE Transactions on Engineering Management, Vol.54, No.2(2007), pp.219-240. https://doi.org/10.1109/TEM.2007.893996
  12. Tversky, A., "Features of Similarity," Psychological Review, Vol.84, No.4(1977), pp. 327-352. https://doi.org/10.1037/0033-295X.84.4.327
  13. Ulrich, K.T., and K. Tung., "Fundamentals of Product Modularity," Issues in Design Manufacturing/Integration, ASMEDE-39 (1991), pp.73-79.