Product Life Cycle Approach To Strategic Management

Importance Of Understanding the Product Life Cycle

Deliver more innovative products and services Reduce costs and improve quality Improved relationships with their customers, suppliers, and business partners

The Product Life Cycle

The Introduction Stage

Features

Profits are Low or Negative Promotional Expenditure is high Focus is on those buyers who are ready to buy

Strategic Thrust

Market Development

Strategic Considerations

Time of Entry

First, Parallel or Late entry

Target Market Innovation Target Customers

The Growth Stage

Features

Rapid climb in Sales and hence increase in profits Promotional Expenditure is maintained or slightly increased New Competitors enter attracted by oppurtunities

Strategic Thrust

Penetration

Strategic Considerations

Improve product quality Addition of new models Enter new market segments Increase distribution coverage and enter new distribution channels Lowering of price to attract new customers

The Maturity Stage

Features

Declining Sales Very Low Profit Margin

Very few customers and Competition

Strategic Thrust

Cut costs, reposition or withdraw

Strategic Considerations

Increase firms investment to dominate or strengthen its position Maintaining firms investment until uncertainties pass

Decreasing firms investment level by dropping unprofitable customers

Harvesting the firms investment to recover cash quickly

Divesting business by quickly disposing assets

The Decline Stage

Features

Profits are Low or Negative Promotional Expenditure is high Focus is on those buyers who are ready to buy

Strategic Thrust

Market Development

Strategic Considerations

Time of Entry

First, Parallel or Late entry

Target Market Innovation Target Customers

Marketing Mix In Different PLC Stages

Stage
Product

Introduction
Unique offering

Growth
Improvement on early innovation Low with High Volume

Maturity Decline
Different Variety Maintain Margin Rationalize Range Smaller Margin

Price

Low or Premium

Promotion

Incentive to use

Heavy

Parity, Loyalty Formation

Value for money Choose specific territory

Threshold level for reminder

Rationalize

Advertising Focus Distribution

Awareness Building

Brand name , Performance Fast Spread out

Build Network

Limited Coverage or Enter new market

Weakness of the Product Life Cycle Concept

Undefined Concept No Uniform Shape Unpredictable turning points Unclear Implications Product Oriented

Recap

Stage
Sales

Introduction
Low

Growth
Fast Growth

Maturity Decline
Slow Growth Decline

Profit

Marginal or even loss

Rapid rise

Falling Margins Defend Share

Low Margin

Strategic Thrust Consumer Targets Competition

Market development

Penetration

Cut cost, Penetration or withdraw Selective; Explore new market

Non-users, Innovators Form New Segments Few, less known Intensive, Growing with time

Shed segments

Many efficient Limited ones Price, unique service Business experience, low cost producer

Differential Advantage

Superior performance, Brand name, New benefit features Corporate identity