Product Life Cycle

A product life cycle goes through 4 distinct phrases: introduction, growth, maturity and decline. It is measured by sales over time. 

Introduction:
– costs are very high
– slow sales volumes to start
– little or no competition
– demand has to be created
– customers have to be prompted to try the product
– makes little to no money at this stage

Growth:
– costs reduced due to economies of scale
– sales volume increases significantly
– profitability begins to rise
– public awareness increases
– competition begins to increase with a few new players in establishing market
– increased competition leads to price decreases

Maturity:
– costs are lowered as a result of production volumes increasing and experience curve effects
– sales volume peaks and market saturation is reached
– increase in competitors entering the market
– prices tend to drop due to the proliferation of competing products
– brand differentiation and feature diversification is emphasized to maintain or increase market share
– Industrial profits go down

Decline:
– costs become counter-optimal
– sales volume declineprices, profitability diminish
– profit becomes more a challenge of production/distribution efficiency than increased sales

Source: http://brainbees.com.my/programme/international-product-life-cycle-theory-of-fdi&page=2

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