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Product Life Cycle

In: Business and Management

Submitted By lievinlenga
Words 1417
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Have you ever stopped to imagine how fortune 500 companies continually flourish, or why aren’t other enterprises blooming like them? If so, it is imperative to note that the key element for success is fully understanding how “Product Life Cycle” (PLC) works. Product life Cycle, in a business context, is defined as “the cycle through which every product goes through from introduction to withdrawal or eventual demise ”(webster dictionary). It is an illustration of a product's lifespan, which goes through various stages, the first of which is, the introduction stage followed by the growth stage, the maturity stage then concludes with a declining stage. Each stage has its own unique attributes. According to the website businesscasestudy.com PLC serves as a tool for managing cash flow. The following outline illustrates the characteristics and the marketing objectives of each stage.

Introduction stage:
Innovated products are brought forth into the marketplace.
Products are promoted in the marketplace for public awareness
The objective is for the product to gain recognition in the marketplace.
Prices of merchandise are low due to intense competition in the marketplace.
Losses of revenues may very well occur.

Growth Stage:
Their is a rapid increase in sales and productions.
Large amount of money is spent on advertisements Numbers of competitors increase in the marketplace while, other notice how expeditious products are selling.

Maturity Stage:
When a product reaches its peak in sales and gain stability
Reduction of items
Differentiation of a product from others.

Declining Stage:
Sales are gradually declining
Loss of profits
Competitors are gradually dropping off

According to the above outline on PLC, they are various strategies that need to be applied if one desires to advance from each stage to the next. The introduction stages consist of two strategies, the penetration and the skimming strategy. Implementation of either strategy could advance one’s product to the next stage. Penetration strategy is when one places his or her product in the marketplace at a high price and then reduces it over time. This strategy is effective when there's a few competitors in the marketplace. Whereby, skimming strategy is when one sets his or her price very low and then gradually increases it as it gains awareness. This strategy is best used when there is lots of competitors in the market. In the growth stage, one should advertise his or her product heavily. This will help advance the product to the maturity stage. There, the price of the product should be reduced or differentiated by other items. Eventually, the product is doomed for a decline.

Another point make about the introduction stage is that it is a critical stage as far as product and development is concerned. Also, not to mention, most of the time--on this stage, product and process design changes, short production runs, high production costs, and limited models. Moreover, newly products are introduced to the market in hopes that customers demand for it. As noted in the above outlined, one method used in this stage is lowering the cost of newly innovated products; consequently businesses may incur losses. The big picture is that their could potentially be high demand for new products and, by this manner the innovation could graduate to the next stage. If you forget anything I have stated, the most important thing to remember is that, the objective of the introduction stage is to create product awareness by introducing it to the consumer. As a sales men/women your object is to make the customer aware of your new product and its features. This is done by hosting events, press releases that would promote and praise your item. Demonstration is also any important technique, as it helps to establish a close relationship with customers, buyers and the press. Also, marketers use the feedback from the product launch to perfect the product’s marketing mix. Additionally, in this stage, revenue is not expected since the costs involved with promoting the product are still very high.
The growth stage experiences a rapid increase in sales and profits. At this point, the number of competitors tends to increase, as others in the market take notice of how well the product is selling. While forecasting critical product and process reliability, Company increases capacity and shift toward product focus and enhance distribution. The objective of the growth stage it to maximize profits and services while maintaining product quality. The strategy in this stage is to fight against any competition. Companies strive for bigger markets and to build customer loyalty. They will spend heavily for advertisement (TV, periodicals and radio). Furthermore, internet ads and social media applications are used to retain customer loyalty.
At the maturity stage the product reaches its peak in sales. Businesses may try to secure their positions by lowering prices or differentiating their products. At this stage, The Company will try to standardize the product by making fewer changes with more minor changes with optimum capacity. The objectives of the maturity stage is to make your product stand out and differentiate with competitors. Since the market is saturated with similar product by this stage, the strategy here is to eliminate competition by revitalizing the product. This is done by spending in the product development or expanding the product. If these efforts are successful, then the product is re-launched, and the company re-starts the product cycle. Otherwise, the product will enter the next stage which is the decline stage.
In the decline stage, sales will start falling and the product profits will decline. This is the stage that the company will look for ways to minimize cost, reduce capacity and eliminate items not returning good margin. At this point, if losses continue, the only option left is to liquidate the product and stop spending time money and other resources toward the product.

On the other hand, International product life cycle serves a different purpose. It can be best described as an optimal tool that helps to achieve the needs of the customer and their wants. The company in the developed country wants to benefit from technological progress with the launch of new products in the domestic market. These markets are likely to begin the development of the nation, as a higher-income consumers can buy and are willing to try new, expensive items (elastic low price). In addition, easier access to capital markets to finance development of new products. The product design and manufacturing processes are becoming more stable. Foreign direct investment (FDI) in production to reduce unit costs as the costs of labor and transportation costs fall. Offshore production facilities are designed to serve local markets, as a substitute exports from its domestic market. Production still requires highly skilled, highly paid employees. Competition from local companies gets started quickly on these non-domestic markets advanced.
The shift of productive capacity from the advanced countries to poor countries can be viewed as a commonality of interest among advanced country business groups and Third World elites, who act in concert against workers both in the U. S. and in developing countries. It can also be viewed as a strategy to change the balance of power between Capital and Labor. By shifting production to jurisdictions which favor Capital, owners gain a larger share of revenue and power, while workers everywhere suffer. Multinational enterprises (MNE's) had provided huge number of the employment in countries like Indonesia, Vietnam and China. This will help these countries improve their unemployment rate furthermore it will increase the country GDP and lead to the industrialization process of the country by learning the technical know-how's and other industrial automation process.
The international product life cycle theory stresses that a company will begin to export its product and later take on foreign direct investment as the product moves through its life cycle. Eventually a country's export becomes its import. Although the model is developed around the U.S, it can be generalized and applied to any of the developed and innovative markets of the world.
The U.S is no longer the only innovator of products in the world. Today companies design new products and modify them much quicker than before. Companies are forced to introduce the products in many different markets at the same time to gain cost benefits before its sales declines. The theory is challenged by the fact the more companies are operating in international markets. Also small companies are more often teaming up with companies in other markets to develop new products or production technologies.…...

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