 is a method of costing that looks at a product’s

entire value chain from a cost perspective

 Tracks and evaluates costing from the research and
development phase of a product’s life, through to
the decline and eventual conclusion of a product’s
life
 looks at product costs postsale (warranties,
customer service, marketing, and distribution
costs).
 focuses on reducing costs throughout a product’s
life
 Costs must be calculated from the point of
the initial idea for the product is no longer
made. managers to get a
This process can help product
realistic view of the total cost of a product, so they can
design and adjust accordingly.
Product life - cycle

Product life – cycle is the course

of a product’s sales and profits
over its lifetime.
Begins when the company finds and develops a
new product idea.

During this stage, sales are zero and the

company’s investment costs mount.
 Is a period of slow sales growth as
•The
the primary
product isgoal is to establish
introduced a market and
in the market.
build primary demand for the product class.
 Profits are negative in this stage because of
the heavy expenses of product introduction
•Samples or trial incentives may be directed
toward early adopters. The introductory
promotion also is intended to convince potential
resellers to carry the product.
 - A period of rapid market acceptance and
increasing profits
- The goal is to gain consumer preference and
increase sales.
- more customers become aware of the
product and its benefits
- new competitors will enter the market =
market will expand
Firm uses several strategies to
sustain rapid market growth:
- - improves product quality enter new
- - adds new product features and
models
- -enter new product segments and new
distribution channels
- lowers prices at the right time to
attract more buyers
  A period of slowdown in sales growth
because the product has achieved
acceptance by most potential buyers.

 Profits level off or decline because of

increased marketing outlays to defend
the product against competition

MATURITY STAGE
Competitors begin marking down prices,
increasing their advertising and sales
promotions, and upping their research and
development budgets to find better versions
of the product.

Primary goal is to maintain market share

and extend the product life cycle.

MATURITY STAGE
 • Isthe period when sales fall off and profits
drop
•Sales may plunge to zero, or they may drop to
a low level where they continue for many
years.
• Sales decline for many reasons, including
 During this stage, the firm generally has three options:
1. maintain the product in hopes that competitors will exit.
2. reduce costs and find new uses for the product
3. harvest it, reducing marketing support and coasting along until no more profit can be made or discontinue the
Characteristic Introduction Growth Maturity Decline
s
Sales Low sales Rapidly Peak sales Declining sales
increasing sales

Costs High cost per Average cost Low cost per Low cost per
customer per customer customer customer

Profits Negative Rising profits High profits Declining

profits

Customers Innovators Early adopters Middle Laggards

majority

Competitors Few Growing Stable number Declining

number beginning to number
decline
 Limitations of the Product Life
Cycle Concept
The term “life cycle” implies a well-defined life cycle as
Nonetheless,
observed the product
in living organisms, but products do life cycle
not have such
aconcept
predictablehelps
life andmarketing
the specific life cycle curvesto
managers followed
plan
by different products vary substantially. Consequently, the
alternate
life marketing
cycle concept strategies
is not well-suited for the to address
forecasting of
the challenges
product sales. Furthermore,that critics
theirhaveproducts
argued that arethe
product life cycle may become self-fulfilling. For example,
iflikely
sales peaktoandface. It also
then decline, managers ismayuseful
conclude for
that
monitoring
the product is in sales results
the decline over
phase and timecutand
therefore the
advertising budget, thus precipitating decline.
comparing them to those of products
having a similar life cycle.
 Business Process- is a set of logically related tasks
performed to achieve a defined business outcome ; also
known as business process redesign , business
transformation, or business process change management.
 Re-engineering – is the basis for many recent
developments in management
 Business Process Reengineering (BPR)- began as a
private sector technique to help organizations
fundamentally improve customer service, cut operational
costs, and become world-class competitors.
 Is one approach for redesigning the way is done to better
support the organization’s mission and reduce costs.

 Reengineering starts with a high-level assessment of the

organization’s mission, strategic goals, and customer needs.

 Reengineering identifies, analyzes, and redesign an

organization’s core business processes with the aim of
achieving dramatic improvements in critical performance
measures, such as costs, quality, service, and speed.
  Reengineering recognizes that an organization’s
business process are usually fragmented into sub
processes and tasks that are carried out by several
specialized functional areas within the organization.

 Reengineering maintains optimizing the performance

of sub processes can result inn some benefits, but
cannot yield dramatic improvements if the process
itself is fundamentally inefficient and outmoded.

 Reengineering focuses on redesigning the process as a

whole in order to achieve the greatest possible
benefits to the organization and their customers
1. Develop or validate the strategic plan
2. Develop or validate the business system
plans
3. Develop or validate the annual business
plan
4. Construct performance cells (performance
measures) for processes
5. Establish the process improvement project
business case