Question

Explain Vernon’s Product Cycle Theory and how the development the Indian Pharmaceutical Industry illustrates both those principles and further illustrates some advantages in being a late comer from a developing country

Answer 1

The product life cycle refers to the pattern of trade in which the product is initially recognised in the place where it was originated or invented but later the domestic market knows about the product and thus it’s sales increades to all the domestic markets. After some time that product reaches the international markets and thus sales is now worldwide. The following are the stages involved in the product life cycle-

1) Introduction

2) Growth

3) Maturity

4) Decline

The Indian pharmaceutical Industry has seen the same stages of their product development life cycle. Indian Pharma Industry started mainly in 1960’s when it was the Introduction stage for it. In the later years when the Foreign companies entered India then it was the time for Indian companies to grow in the era of compitition. Due to the then finance minister of India Dr. Manmohan singh deciding to remove the patency. This helped the Indian Pharma Industry to grow and produce medicines at such a low cost which helped them increase their sales world wide. Being a developing country India had the advantage of cheap or low cost labor which helped in producing the low cost medicines and compete with the multinationals with exorbitant price of their medicines. Thus from introduction stage it went to growth stage here it started exporting the medicines and thus eventually came the saturation point. Now the pharma industries are trying to cope with the environment and coming up with new medicines. And now the pharma industry is heavly investing in R AND D department to further explore new and cheaper ways to produce medicines.