Question

In the strategy and marketing literature there is continual discussion of the product life cycle. You are required to critically discuss, for each of the four stages of the product life cycle:

 Start-up

 Growth

 Maturity

 Harvest

Which system of product costing would be most useful for decision making and control, and why.

Explain briefly in your answer possible alternative organizational structures at each stage in the life cycle.

Answer 1

The product life cycle is followed four stages:-
-The Launch Stage
-The Growth Stage
-The Maturity Stage
-The Decline Stage
-THE LAUNCH STAGE
The lack of substitutes in the market results in inelastic demand, which encourages firms to charge higher prices and make higher profits. If competition or new entrants is possible then they might charge lower prices to get larger market share before new entrants.
the two factors to determine price are:-
*price elasticity of demand
*possibility of new firms to enter

-THE GROWTH STAGE
In this stage there is an increase in sale of the product. This attracts new firms to enter the market. It creates an oligopolistic market environment where firms offer product with some difference in the features.
-THE MATURITY STAGE
Due to entrance of new firms in the market the competition increases and collusion can break down . Price wars can break out and firms invest more in R&D for innovation. As the new fims enters in the market, price are kept low to compete.
-THE HARVEST STAGE
In this stage the sales will drop due to increase in competition . Some firms may be driven out of the market as they can’t retain sales. This stage forces firms to drive out of the market if the product becomes obsolete. The firm has no oher choice to raise price to cover up the costs and losses but increase in the price will drive them out of the market because of having no market share.