Product by Value Analysis Product-By-Value Analysis in Essay

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Product by Value Analysis

Product-by-Value Analysis

In order to understand the concept of product-by-value analysis, one must first understand the correct concept of a product. A product itself is the "need-satisfying" offering of an organization, which may be defined as a good or a service. In understanding this fact, one can then gauge a deeper understanding of how these products are levied through the use of product-by-value analysis within a firm or an organization.

In dealing with product development, production, and distribution, companies must ask themselves the following question: how can we determine which products to develop? Product-by-value analysis is one such tool in terms of assessing whether or not the production of existing products within a company remains one that keeps an organization on the path to profit with a loyal consumer base. Heizer and Render (2010) note that product-by-value analysis is a concept that lists products in descending order of their individual dollar contribution to a firm (Heizer and Render, 2010, p. 64). This strategy is used as a tool to help management evaluate alternative strategies within their own business models.

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In order to understand the individual dollar contribution that a firm gains from a product, companies look at the life cycle of a product in terms of the type of costs and revenue streams that the production and distribution of such a product can bring into the company. In assessing which products cost the most money for a firm to produce in comparison with the actual financial contribution that each product brings into a company, that respective company is more capable of designing a product line that is conducive to long-term financial market success.

In viewing product-by-value analysis in terms of industry use, one must note that the use of such a tactic can help management in increasing….....

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