To strive in this competitive environment the firms should have an edge over the competitors.
Industries experience a similar cycle of life. Just as a person is born, grows, matures, and eventually experiences decline and ultimately death, so too do industries and product lines.
The stages are the same for all industries, yet every industry will experience these stages differently, they will last longer for some and pass quickly for others.
Even within the same industry, various firms may be at different life cycle stages. A firms strategic plan is likely to be greatly influenced by the stage in the life cycle at which the firm finds itself. Some companies or even industries find new uses for declining products, thus extending their life cycle.
The growth of an industry's sales over time is used to chart the life cycle. The distinct stages of an industry life cycle are: Sales typically begin slowly at the introduction phase, then take off rapidly during the growth phase.
After leveling out at maturity, sales then begin a gradual decline. In contrast, profits generally continue to increase throughout the life cycle, as companies in an industry take advantage of expertise and economies of scale and scope to reduce unit costs over time. Perhaps a new, unique product offering has been developed and patented, thus beginning a new industry.
Some analysts even add an embryonic stage before introduction.
At the introduction stage, the firm may be alone in the industry. It may be a small entrepreneurial company or a proven company which used research and development funds and expertise to develop something new. Marketing refers to new product offerings in a new industry as "question marks" because the success of the product and the life of the industry is unproven and unknown.
A firm will use a focused strategy at this stage to stress the uniqueness of the new product or service to a small group of customers.
These customers are typically referred to in the marketing literature as the "innovators" and "early adopters. According to research by Hitt, Ireland, and Hoskisson, firms establish a niche for dominance within an industry during this phase.
For example, they often attempt to establish early perceptions of product quality, technological superiority, or advantageous relationships with vendors within the supply chain to develop a competitive advantage. Because it costs money to create a new product offering, develop and test prototypes, and market the product, the firm's and the industry's profits are usually negative at this stage.
Any profits generated are typically reinvested into the company to solidify its position and help fund continued growth.
Introduction requires a significant cash outlay to continue to promote and differentiate the offering and expand the production flow from a job shop to possibly a batch flow. Market demand will grow from the introduction, and as the life cycle curve experiences growth at an increasing rate, the industry is said to be entering the growth stage.
Firms may also cluster together in close proximity during the early stages of the industry life cycle to have access to key materials or technological expertise, as in the case of the U. Silicon Valley computer chip manufacturers. Growth Like the introduction stage, the growth stage also requires a significant amount of capital.
The goal of marketing efforts at this stage is to differentiate a firm's offerings from other competitors within the industry. Thus the growth stage requires funds to launch a newly focused marketing campaign as well as funds for continued investment in property, plant, and equipment to facilitate the growth required by the market demands.
However, the industry is experiencing more product standardization at this stage, which may encourage economies of scale and facilitate development of a line-flow layout for production efficiency.This strategy involves the firm winning market share by appealing to cost-conscious or price-sensitive customers.
This is achieved by having the lowest prices in the target market segment, or at least the lowest price to value ratio (price compared to what customers receive).
Each one of the above strategies has a specific objective.
For instance, a concentration strategy seeks to increase the growth of a single product line while a diversification strategy seeks to alter a firm’s strategic track by adding new product lines.
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“The stages through which a product develops over time is called Product Life Cycle (PLC)”. OR “It is the period of time over which an item is developed, brought . Stage 1. Market Development. This is when a new product is first brought to market, before there is a proved demand for it, and often before it has been fully proved out technically in all respects.
The main characteristics of the maturity stage which help to define the appropriate marketing strategies are. At some point of time, growth rate slows down and the product enters the maturity stage.