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The five Stages of a Product Life Cycle

× î Introduction
× 2 Growth
× 3 Maturity
× 4 Decline
× 5 Innovation
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Ô new product is introduced onto the

Marketplace, few people know about it, and
its success is rarely guaranteed Much time
and money is invested in promoting this
product, and there is either no profit or even a
net loss during this period
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The product starts to grow in popularity, sales

increase as advertising starts working and
others start to imitate your product Profits
increase, and your product steadily becomes
a success
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Gour product becomes an established part of

the Market, but sales start to increase slowly
as competition and pricing factors take place
Ôt this stage advertising costs are at their
highest, whilst profits may start to drop The
market for your product could reach
saturation point
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Sales start to fall, as your product loses its

appeal Profits drop as production is often
cut, competition in the marketplace gets
stiffer as advertising is cut and plans are
made to shelve the product in the future
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Innovators take your product and may

incorporate it into a new product This has
happened to the humble FM radio and
Camera which you find as a basic feature on
most hand phones The decline of the original
product has just lead onto the use of it on a
very new product
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Ôn internationalization process wherein a local manufacturer in an
advanced country begins selling a new, technologically advanced
product to high-come consumers in its home market Production
capabilities build locally to stay in close contact with its clientele
and to minimize risk and uncertainty Ôs demand from consumers
in other markets rises, production increasingly shifts abroad
enabling the firm to maximize economies of scale and to bypass
trade barriers Ôs the product matures and becomes more of a
commodity, the number of competitors increases In the end, the
innovator from the advanced nation becomes challenged in its
own home market making the advanced nation a net importer of
the product This product is produced either by competitors in
lesser developed countries or, if the innovator has developed into
a multinational manufacturer, by its foreign based production
facilities
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The curves in the IPLC
shows curves for the
same innovation: one
for the initiating country,
one for other advanced
nations, and one for the
Less developed
countries
-- For each curve, net
export results when the
curve is above the
horizontal line, and
when the curve is under
the horizontal line, net
import results from that
country
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The IPLC begins when a company in a developed country wants to exploit a
technological breakthrough by launching a new, innovative product on its home
market Such a market is more likely to start in a developed nation because more
high-income consumers are able to buy and are willing to experiment with new,
expensive products (low price elasticy) Furthermore, easier access to capital
markets exists to fund new product development Production is also more likely to
start locally in order to minimize risk and uncertainty: ³a location in which
communication between the markets and the executives directly concerned with the
new product is swift and easy, and in which a wide variety of potential types of input
that might be needed by the production units are easily come by´

xport to other industrial countries may occur at the end of this stage that allows the
innovator to increase revenue and to increase the downward descent of the
product¶s experience curve Other advanced nations have consumers with similar
desires and incomes making exporting the easiest first step in an internationalisation
effort Competition comes from a few local or domestic players that produce their
own unique product variations
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xports to markets in advanced countries further increase
through time making it economically possible and sometimes
politically necessary to start local production The product¶s
design and production process becomes increasingly stable
Foreign direct investments (FDI) in production plants drive
down unit cost because labour cost and transportation cost
decrease Offshore production facilities are meant to serve
local markets that substitute exports from the organisation¶s
home market Production still requires high-skilled, high paid
employees Competition from local firms jump start in these
non-domestic advanced markets
xport orders will begin to
come from countries with lower incomes
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During this phase, the principal markets become saturated The innovator's original
comparative advantage based on functional benefits has eroded The firm begins to
focus on the reduction of process cost rather than the addition of new product features
Ôs a result, the product and its production process become increasingly standardised
This enables further economies of scale and increases the mobility of manufacturing
operations Labour can start to be replaced by capital ³If economies of scale are being
fully exploited, the principal difference between any two locations is likely to be labour
costs´ To counter price competition and trade barriers or simply to meet local demand,
production facilities will relocate to countries with lower incomes Ôs previously in
advanced nations, local competitors will get access to first hand information and can
start to copy and sell the product

The demand of the original product in the domestic country dwindles from the arrival of
new technologies, and other established markets will have become increasingly price-
sensitive Whatever market is left becomes shared between competitors who are
predominately foreign Ô MNC will internally maximize ³offshore´ production to low-wage
countries since it can move capital and technology around, but not labour Ôs a result,
the domestic market will have to import relatively capital intensive products from low
income countries The machines that operate these plants often remain in the country
where the technology was first invented
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The stages of international product life cycle

begins from Stage 0 to Stage 4

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Represents a life cycle stage when any initiating country
takes the first leap in manufacturing the product for the
first time in the world, thereby beginning the story of the
familiar life-cycle stage, in operation within its original
market.

 |nnovations are most likely to occur in a highly developed

countries because consumers in such countries are
affluent and have relatively unlimited wants.

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-- Original market will get well cultivated

-- there will be demand for the all new offering
-- Local demands of the product will be adequately supplied
-- Many prospective consumers/user of the product will come to
learn about the utilities and satisfaction to be derived from the
product

It is at this stage only that, the innovating firm will look to

overseas market in order to expand its sales and profit
  






 
 


   
  
 
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Growing demand in advanced nations, will lead firms to
conceptualize the product, and learn to make it in their
home country
-- Local production will start in advanced nations
-- Competition grows more at this stage
-- More players in the market place
-- Innovating firm¶s sales see the light of the start of
suffering, at the cost of advanced nations products, but
still the export level remains stable
-- The LDC¶s now enter the imitation field
-- Introduction of the product in LDC¶s helps offset any
reduction in export sales to advanced nations
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This stage is generally considered as the beginning of
heavy competition among the advanced nations firms
-- This is the stage where copy cats work, in the form of re-
engineering, me-too products, made in different forms
and styles, having the same USP¶s, differentiation is tried
at every angle of the product make««
-- Tough times for the initiating nation
-- Loss of market share for the initiating firm- to products
from other advanced nations and LDC¶s
-- No more new demand anywhere for the initiating country
to cultivate
--
ffect on the economies of scale for the initiating nation

The innovating country¶s comparative advantage becomes
country¶s disadvantage
-- The product is no longer capital ±intensive or technology ±
intensive
-- The above becomes a comparative advantage for LDC¶s, for
they possess those advantage ± looking from all point of scale
in the development of international business, married to the
µ
conomies of Scale¶

he Less Developed countries are the last | |

RS.
hey
establish sufficient productive facilities to satisfy their own
domestic needs as well as to produce for the biggest market
in the world, US
.
nd also targeting other advanced nations
market. Finally targeting world market.