INTRODUCTION:Like Human Beings the product also has a limited life cycle which passes through several stages of its existence in the market. The Product Life Cycle explains the period of time the product stays in different phase of its life. Vernon established the product life cycle, a theory that every product has its own lifespan and goes through various phases from Introduction to Decline. Some products linger in one stage longer than others, but they all eventually progress through the cycle from start to finish.
The idea of product life cycle theory was adapted from biology and an analogy is drawn with the birth of an organism. The first product life cycle theory was explained in earlier 1950’s which was further developed by Raymond Vernon in his published article “International Investment and International Trade in the Product Cycle” in 1966. Raymond Vernon was part of the team that looking the Marshall plan, the US investment plan to rejuvenate Western European economies after the Second World War. He played a central role in the post-world war development of the IMF and GATT organisations. He became a professor at Harvard Business School from 1959 to 1981 and continued his career at the John F. Kennedy School of Government.1In 1966 when the model was published he looked at the transformation of how United States were evolving into Multinational Corporations and their contribution to global trade.
The product life-cycle theory is based on the assumption that places may be available for the manufacturing of a particular product based on the life-cycle and during the cycle the manufacturing will be transferred to regions with best conditions for manufacturing.Whereas on the other side Warren Keegan, a marketing scholar, refers to the International Product Life Cycle in the following manner: “The International Product Life Cycle model suggests that many products go through a cycle during which high income, mass consumption countries are initially exporters, then lose their export markets, and finally become importers of the product.”2 These are clear scenarios where trade cycle and product life cycle have been defined almost identically in the international context. The goal of managing a product’s life cycle is to maximize its value and profitability.
Vernon’s International Product Life cycleInternationalisation of companies were noticed in USA and later spread in the world. Vernon focused on the comparative advantage and drew inspiration from the product life cycle to explain how trade patterns change over time. The life cycle of the product is based on how the local manufacturer in an developed country begins selling a new, technologically advanced product to high-come consumers in its home market. As demand from customer in other markets rises, production increasingly shifts to other country. These product are produced either by competitors in lesser developed countries or, if the creator has developed into a multinational manufacturer, by its foreign based production facilities.3The 4 stages in the model:1. IntroductionWhen a product is first introduced in any country’s market, it sees rapid growth in sales because the market demand is unsatisfied for certain period. When the same demand has been satisfied, product sales decline to certain level for product replacement.
In developed countries market, the product life cycle rapidly grows due to the presence of “follower” economies that rarely introduce new innovations but quickly imitate others.Example: Nintendo Gaming Console: When word first leaked about production of a miniature, classic Nintendo console, it was summertime. People should have been more concerned with beach vacations and summer grilling than a remake of a gaming unit featuring the original Super Mario Bros. from three decades prior.
But, that’s not what happened.The internet went wild with anticipation of the console. Reviewers debated the pros and cons of the mini machine. Old-time gamers reminisced about their childhood favourites. Retailers like Amazon posted the console on their website, quick to add wording telling would-be buyers that it was not yet available for purchase.2.
GrowthIn a developed country where the standard of living is high their wants are also insatiable in such scenarios any new product in the market booms up the expectation and the urge for new product. In an era of internationalisation it is more continent for the supply and availability of the product. An effectively marketed product meets a need in its target market.
The supplier of the product has conducted market research and has established for market size and composition. When a product’s sale begins to increase drastically and when the product experiences high demand. This initial stage of the product life cycle is high prices, high profits and wide promotion of the product in the market. The producer of the product may export it, even into follower economies.Holographic Projection: Only recently introduced into the market, holographic projection technology allows consumers to turn any flat surface into a touch screen interface.
With a huge investment in research and development, and high prices that will only appeal to early adopters.3D Televisions: 3D may have been around for a few decades, but only after considerable investment from broadcasters and technology companies are 3D TVs available for the home, providing a good example of a product that is in the growth stage. 3. Maturity:It is a not always that product passes to all the stages of the cycle.
There are few products that never get beyond the introduction and growth stage, whereas few products stay in the maturity stage for a considerable length of time.For example, the Philips light bulb was one such product found to stay in maturity stage for decades. The time it stays in a particular stage purely depends on the graph of demand and supply.
Low production cost and a high demand results longer product life. When production costs are high and comparatively low demand for the product, it doesn’t survive long time and, eventually, it will be withdrawn from the market and enter the decline stage.4. Decline:The product in the decline stage is due to low or negative growth which results in new inventions and advancements. It is hard for the companies to relive the product either by slashing the prices or withdrawing it from the market completely by clearance.
For example I pod Launched in 2001, but 12 years and 26 devices later, the generation-defining iPod range looks like it’s about to fade into history without so much as a whimper. “I think all of us have known for some time that iPod is a declining business,” said Apple boss Tim Cook earlier this week.Limitations:1. No empirical support2.
Different products have different properties so their life cycle also varies.3. It appears that life comes to an end with decline, but there are examples when after decline the product may have found new popularity and rejuvenation.4.
The model worked well when the environment was relatively stable, not subject to uncertainty as it is today.5. Reality seldom conforms to theory. Marketing executives believe in the PLC concept – but streetwise marketers point out unusual circumstances might interfere with expected life cycle behaviour. It may result in different shape of PLC.References:1.
Raymond Vernon. International Investment and International Trade in the Product Cycle. Quarterly Journal of Economics, May, 19662. Louis T. Wells, Jr.
A Product Life Cycle for International Trade? Journal of Marketing, July 1968.3. Warren Keegan.
Global Marketing Management. (4th edition) Prentice-Hall,Englewood Cliffs, NJ.4. Sak Onkvisit and John J. Shaw. An Examination of International Product Life Cycle and Its Application Within Marketing.
Columbia Journal of World Business, fall 19835. Nariman K. Dhalla and Sonia Yuspeh. Forget the Product Life Cycle Concept Harvard Business Review, January-February 1976.
6. Philip Kotler. Marketing Management (6th edition) Prentice-Hall Inc.,Englewood Cliffs, NJ. Pp. 369-373.
7. Louis T. Wells, Jr.
A Product Life Cycle for International Trade? Journal ofMarketing, July 1968.8. Philip Kotler. Marketing Management (6th edition) Prentice-Hall Inc., Englewood Cliffs, NJ.
William J. Stanton, Michael J. Etzel and Bruce J. Walker. Fundamentals ofMarketing (9th edition) McGraw-Hill, New York, NY. P.