It is well established that products (and services) generally pass through a life cycle, ranging from birth (first introduction) through growth into maturity and eventually into decline. The life cycles of various products differ widely, e.g., from the very rapid "boom and bust" pattern of a fad (pet rocks, etc.) to the long-lasting maturity of the incandescent light bulb. Further, the life cycle pattern and span can be affected greatly by actions within the industry, e.g., to develop new uses, customers, and product extensions. It is important to consider the stage of a product (please read "product or service" whenever "product" is mentioned here) both in diagnosis and in formulation because what may be an appropriate strategy for a product in one stage of its life cycle may be disastrous for that product in a different stage (or for a different product) .
The main value of the product life cycle model is (a) to help evaluate in diagnosis how appropriate are the strategies in use for each major product line, and (b) to help formulate more effective strategies where the present ones are not appropriate for the life cycle stage of each product line. It not only helps us recognize the need to change strategy over time for a given product, but also to use different strategies for various products that are in different life cycle stages.
The PLC model considers two factors: industry-wide sales rate of a product category (e.g., industry-wide sales of running shoes, not Reebok's sales of DMX10 running shoes) versus time. In using the model, one needs to estimate where the product is in its life cycle (by looking at sales rate and profitability trends, plus forecasts), then consider what are appropriate strategies for the estimated stage in the life cycle.
Unfortunately, the situation is complicated because, although the life cycle stage of a product is a very important variable in determining strategy, there are many other factors that may need to be considered, e.g., a company's competitive strength, type of product, rate of technological change, market segmentation, and elasticity of demand. Despite such other contingent factors, it still is useful to consider some of the generally-appropriate strategies for each of the four commonly-defined stages in the product life cycle (recognizing that the boundaries between these stages are not sharp). The following strategy guidelines are broad generalizations for a company in a strong competitive position:
For a company with a relatively weaker competitive position, the appropriate strategies would be somewhat different, e.g.:
|Last modified July 14, 2009||Copyright 1997-2009 Rex Mitchell|