Product Life Cycle

In the introduction stage, the company patents and trademarks its product, then establishes the quality level and branding. Because the product is new to the market, this introductory price range is low. Marketers use social media networks such as Facebook and Twitter to attract potential consumers because they have the ability to reach millions of people. The distribution of the product is dependent on the amount of potential buyers the product has attracted.

After the product has been introduced to the market and has gained enough consumers, modifications and support features are added. As consumer awareness and the demand for the product increases, so do the production costs. This will eventually necessitate a price hike.

At the maturity stage, other companies create similar products so that they can gain the same amount of attention. Due to the amount of competition, the company may decrease the price of their product, and make changes to their products to keep their position in the market and also to keep their patrons.

The declining stage occurs when the market suffers a financial loss that causes the company and its product to become obsolete. This is a result of the competition creating better and updated products that lead to a loss of the customer base and financial trouble. The company has to decide whether it should try to improve its product, discontinue sales, or sell its inventory to a third party that agrees to sell their product.

In the product life cycle of an international business, there are three stages: stage 1, the new product stage, stage 2, the maturing product stage, and stage 3, the standardized product stage. In stage 1, a company introduces a new market concept that does not get an export market until late in the new product stage.

When the product has matured, it has caught the attention of both the domestic and the international market. The demand increases and it continues to increase over an extended length of time. Towards the end of the maturity stage, we see an increase in overseas sales and the company establishes foreign manufacturing plants.

When a product has been standardized, other companies see the success of the product and begin making similar products. This forces the company to lower its prices to remain competitive. As the company searches for ways to lower its production costs, it begins looking overseas and may eventually start to import goods it used to export.

Here in the United States, the government has established rules and regulations that businesses must abide by in order to operate. These rules address issues such as work hours, coffee breaks, lunch time, overtime pay, employee benefits, taxes, child labor laws, unions and safety. All of these issues add enormous costs to their operating expenses. Along with these costs, they have to be able to keep up with changes in their industry and with their competitors.