Question

In: Operations Management

Explain international product life cycle model, and draw a figure to illustrate. And what are the...

Explain international product life cycle model, and draw a figure to illustrate. And what are the critiques to this theory?

Solutions

Expert Solution

The Product Life-Cycle represents the five stages that a product experiences from when it enters the market until its decline in the market.

  1. Introduction – In the introduction stage, the consumers are unaware of the product and hence there is a lot of investment in marketing and promotional activities. There is a low level of competition during this stage. It is the introduction stage that gives the company an idea about the consumer response to their product. The costs are kept high and the main objective of the introduction stage is to increase the demand for the product with the hope of capitalizing on it in the future stages.
  2. Growth – During this stage, the effective marketing strategies carried out in the introduction stage have reaped their rewards. There is an increase in the volume of sales and the revenue generated, thereby acknowledging its popularity. If there is an increase in competition, then the product might still be heavily advertised and modified to suit the demands of the customers.
  3. Maturity – In the maturity stage, the level of increase in demand and sales volume is comparatively low. Most people are aware of the product, and hence obtaining new customers is difficult. There is increasing competition and hence the prices have to be dropped. The marketing activities are mainly directed towards the innovative features in a bid to keep the competition at bay. Although there is a decrease in the profit margin, the sales volume remains fairly high.
  4. Saturation – In the saturation stage, the sales volume has peaked and there is no scope for further growth. The sales will reach a saturation point and will more or less remain stable throughout this stage. The competitors will take some of the market share and hence the companies have to search and promote alternate applications of the product.
  5. Decline – This is the last stage of the product life cycle. This stage is characterised by an inevitable decline in sales. There is a decrease in demand combined with the loss of market share, as the increased competition causes the sales to falter. Marketing activities are kept to a bare minimum and prices are greatly reduced

Eventually the product retires out of the market unless it is innovated and finds relevance amongst the customers.

Critiques of PLC

  1. A Product’s success is not guaranteed. Many products will never be able to leave the introduction stage to achieve growth or maturity. Every product does not follow the product life cycle. It is not a reliable method and there can be variations to it.
  2. It is difficult to predict how fast or slow the product will move ahead in the cycle.
  3. The graph is totally reliant on sales data. Thus, if there is any fluctuation in the sales data, then the PLC graph will be unable to predict the overall rise and fall of the product.
  4. Different markets have different conditions. Therefore, products which suffer a decline in one market may not suffer the same fate in other markets.

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