INTERNATIONAL PRODUCT

LIFE CYCLE THEORY

Reshma C. P.

INTRODUCTION
Published by Raymond Vernon in 1966.
Looks at the potential export possibilities of a
product through its lifecycle

INTRODUCTION (CONTD..)

Holds primarily for products such as consumer

durables, synthetic fabrics and electronic
equipments.

Begins when a developed country has an

innovative product and sell through international
markets.

Later when developing countries catch upon to the

innovation they will start the production of the
product.

IPLC CURVE

0 1 2 3 4

STAGE 0: LOCAL INNOVATION

Innovations most likely to happen in developed

countries

Consumers are affluent and relatively untimely

wants.

Highly developed in technology

Abundant capital

STAGE 1: OVERSEAS INNOVATION

Local Demand Supplied

look to overseas market to

expand sales and profit : Pioneering or international

introduction stage

Technological gap due to similar need and high income

Competition from US Firms since other countries dont

have much knowledge of this innovation

Decreasing production cost

Low introductory price is not desirable

STAGE 2: MATURITY

Advanced nations will start the production of the

product due to the growing demand often with
the help of Government to preserve infant
industries.

Need created in developing companies.

So, Initiating countries export levels wont
change.

STAGE 3: WORLDWIDE IMITATION

No more new demands

Increase in cost of production for the Innovating firms in

US

Other advanced countries will start exporting the product

with product differentiation techniques which will affect
US exports lethally.

Imitation picks up in a faster pace

In the end US exports dwindle to nothing

Only local consumption will be there.

STAGE 4: REVERSAL

Functional characteristics: Product

standardization and Comparative disadvantage

Product is no longer capital intensive or

technology intensive but labour intensive:
Comparative disadvantage for US and advantage
for LDCs

Thus LDCs will start producing for US as well as

themselves

THANK YOU