products - product life cycle

We define a product as "anything that is capable of satisfying customer needs. This definition includes both physical products (e.g. cars, washing machines, DVD players) as well as services (e.g. insurance, banking, private health care). Businesses should manage their products carefully over time to ensure that they deliver products that continue to meet customer wants. The process of managing groups of brands and product lines is called portfolio planning. The stages through which individual products develop over time is called commonly known as the "Product Life Cycle". The classic product life cycle has four stages (illustrated in the diagram below): introduction; growth; maturity and decline

Introduction Stage At the Introduction (or development) Stage market size and growth is slight. it is possible that substantial research and development costs have been incurred in getting the product to this stage. In addition, marketing costs may be high in order to test the market, undergo launch promotion and set up distribution channels. It is highly unlikely that companies will make profits on products at the Introduction Stage. Products at this stage have to be carefully monitored to ensure that they start to grow. Otherwise, the best option may be to withdraw or end the product.

Growth Stage

The Growth Stage is characterised by rapid growth in sales and profits. Profits arise due to an increase in output (economies of scale)and possibly better prices. At this stage, it is cheaper for businesses to invest in increasing their market share as well as enjoying the overall growth of the market. Accordingly, significant promotional resources are traditionally invested in products that are firmly in the Growth Stage. Maturity Stage The Maturity Stage is, perhaps, the most common stage for all markets. it is in this stage that competition is most intense as companies fight to maintain their market share. Here, both marketing and finance become key activities. Marketing spend has to be monitored carefully, since any significant moves are likely to be copied by competitors. The Maturity Stage is the time when most profit is earned by the market as a whole. Any expenditure on research and development is likely to be restricted to product modification and improvement and perhaps to improve production efficiency and quality. Decline Stage In the Decline Stage, the market is shrinking, reducing the overall amount of profit that can be shared amongst the remaining competitors. At this stage, great care has to be taken to manage the product carefully. It may be possible to take out some production cost, to transfer production to a cheaper facility, sell the product into other, cheaper markets. Care should be taken to control the amount of stocks of the product. Ultimately, depending on whether the product remains profitable, a company may decide to end the product. Examples Set out below are some suggested examples of products that are currently at different stages of the product life-cycle: INTRODUCTION GROWTH Third generation mobile Portable DVD Players phones E-conferencing Email All-in-one racing skinBreathable synthetic suits fabrics iris-based personal identity Smart cards cards MATURITY Personal Computers Faxes Cotton t-shirts Credit cards DECLINE Typewriters Handwritten letters Shell Suits Cheque books

Product life cycle management (or PLCM) is the succession of strategies used by business management as a product goes through its life cycle. The conditions in which a product is sold (advertising, saturation) changes over time and must be managed as it moves through its succession of stages.

Product life cycle (PLC) Like human beings, products also have a life-cycle. From birth to death, human beings pass through various stages e.g. birth, growth, maturity, decline and death. A similar life-cycle is seen in the case of products. The product life cycle goes through multiple phases, involves many professional disciplines, and requires many skills, tools and processes. Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures. To say that a product has a life cycle is to assert three things:

Products have a limited life, Product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller, Products require different marketing, financing, manufacturing, purchasing, and human resource strategies in each life cycle stage.

The four main stages of a product's life cycle and the accompanying characteristics are: Stage Characteristics 1. costs are very high 2. slow sales volumes to start 3. little or no competition 4. demand has to be created 5. customers have to be prompted to try the product 6. 1. 2. 3. 4. 5. makes no money at this stage costs reduced due to economies of scale sales volume increases significantly profitability begins to rise public awareness increases competition begins to increase with a few new players in establishing market

1. Market introduction stage

2. Growth stage

3. Maturity stage

6. increased competition leads to price decreases 1. costs are lowered as a result of production volumes increasing and experience curve effects 2. sales volume peaks and market saturation is reached 3. increase in competitors entering the market 4. prices tend to drop due to the proliferation of competing products 5. brand differentiation and feature diversification is emphasized to maintain or increase market share 6. 1. 2. 3. Industrial profits go down costs become counter-optimal sales volume decline or stabilize prices, profitability diminish

4. Saturation and decline stage

4. profit becomes more a challenge of production/distribution

efficiency than increased sales

Product Life Cycle

The product life cycle is defined as the period that starts with the initial product design (research and development) and ends with the withdrawal of the product from the marketplace. It is characterized by specific stages, including research, development, introduction, maturity, decline, and obsolescence. Each stage is often linked with changes in the flows of raw materials, parts and distribution to markets. Conventionally, four main stages compose a product's life cycle:

Introduction. This stage mainly concerns the development of a new product, from the time is was initially conceptualized to the point it is introduced on the market. The great majority of ideas do not reach to promotion stage. The corporation having an innovative idea first will often have a period of monopoly until competitors start to copy and/or improve the product (unless a patent is involved as it is the case in industries such as pharmaceuticals). Generally, associated freight flows take place within developed countries and/or close to markets where to product is likely to be adopted. Growth. If the new product is successful (many are not), sales will start to grow and new competitors will enter the market, slowly eroding the market share of the innovative firm. The product starts to be exported to other markets and substantial efforts are made to improve its distribution since competition mainly takes place more on the innovative capabilities of the

product than on its price. This phase tends to be associated by high levels of profits. Maturity. At this stage, the product has been standardized, is widely available on the market and its distribution is well established. Competition increasingly takes place over cost and a growing share of the production is moved to low cost locations, particularly for labor intensive parts. Associated freight flows are consequently modified to include a greater transnational dimension. Decline. As the product is becoming obsolete, production essentially takes place in low costs locations while developing countries become net importers. Production and distribution economies are actively sought as profit margins decline. Eventually, the product will be retired, an event that marks the end of its life cycle.

Conventionally, as a product went through its life cycle the least profitable functions were relocated to lower costs locations, notably in developing countries. This dichotomy is being challenged since it is becoming more common, even for high technology products, that the manufacturing of a new product immediately takes place in a low labor cost location. Multinational corporations have global production networks that enable them to efficiently allocate design, production and distribution according to global factors of production. This also relies on outsourcing and subcontracting.