The Theory of the Corporate
Life Cycle
Barrie G. James*
Manager, Planning and Administration,
Syntex Europe A.G., Zurich, Switzerland
There appears to be a widespread
management belief that the corpora-
tion is endowed with an inbuilt
elixir for survival and gro wth, despite
recent corporate declines.
ln this article, the author outlines
and illustrates the operation of one
of the newest theories on corporate
activity-the corporate life cycle-
and its use as a planning aid in
determining where the company is
and where it is going and as a
relationary tool in predicting corpo-
rate trends for comparison with
corporate objectives and the future
operating environment.
A
MAJOR WEAKNESS IN CURRENT CORPO-
rate activity is that long term plann-
ing and investment decisions by manage-
ment are based on the supposition that
the life of the corporation is indefinite.
The events of the last few years demon-
strate that companies with internationally
quoted stocks and global reputations. such
as Rolls-Royce. Lockheed Aerospace and
the Penn Central Transportation Com-
pany, have been faced with near or actual
bankruptcy. This is even more poignant
when one considers that the combined
:Lssets of these three companies in the 1969
i970 period’ were larger than the com-
bined national incomes of Burma. Cevlon
and Ghana-countries with a combjned
population of over 48 million inhabitants.?
The trends toward greater governmental
direction of business acriviry, the increasing
pace of commercialization of technological
*The author has been associated with several
multinational corporations, primarily in the mar-
ketlng function, and has operating experience
I? North America, Europe, Africa and the Middle
East. He has lectured m Business Administration
and has published several articles on a variety
crf Management and Marketing topics.
1’ Copyrtght B. G. James
APRIL. 1974
innovations, the growing competitive in-
fluence of multi-national corporations and
the gradual movement towards domination
of certain industries by a few large com-
panies. are creating fundamental changes
in the structure of the environment within
which all companies operate.
The framework of corporate existence in
terms of its relationships with the social,
economic, political. financial and scientific
communities, has also changed radically
during the last decade. The rise of en-
vironmentalism, consumerism, liberalism
and feminism, together with the increasing
access to education, communications,
mobility and travel and rising standards
of living are added fuel to this wind of
change.
Management in general is only now be-
coming aware that these trends are not
merely passing phases but have real depth
and are changing the whole structure of
the corporate environment (see Figure 1).
The quantitative effect of these trends on
the future corporate environment calls for
radically new management attitudes and
planning technology if the corporation is to
both survive and grow in the future.
The following paper is an attempt to
outline one of the newest theories on cor-
porate activity, the theory of the corporate
life cycle, and its possible practical appli-
cations in the field of long range corporate
planning.
The Theory of the Corporate
Life Cycle
Any superficial survey of corporate
activity over the last decade tends to indi-
cate that the corporation as an entity is
rapidly turning into a macrocosm of the
products, services and processes on which
it bases its existence. In fact. the pattern of
corporate existence which is emerging
bears a striking resemblance to the con-
cept of the Product Life Cycle.’
At first glance, it would seem impossible
to relate a company’s activities over a
period of time to an actual life cycle.
Most people cannot visualise a company
having a life cycle since they relate life
cycles in terms of products in fairly short
time periods, from a few years with the
automobile industry to a matter of months
with the hula hoop in 1958. This tends to
ignore the fact that some products have
been increasing sales year after year, for
example, iron, discovered in the first
millenium B.C., or more recently, aspirin
(acetylsalicylic acid) in the 1890’s by
Bayer.
The classic product life cycle curve
(Figure 2) illustrates a product’s progres-
sion through the phases of Introduction,
Growth, Maturity and Recycling Decline.
By breaking down and analysing a com-
pany’s progression through four similar
phases and within these phases examining
the operation of four major functional
areas of corporate activity-Finance, Mar-
keting, Production and Administration-
one can gain some insight into a company’s
pattern of evolution and. to some extent,
the company’s position in its life cycle
(see Figure 3).
The illustration of this concept which
follows, traces the pattern of corporate
existence through the life cycle process and
carries practical examples. Of necessity
the illustration is oversimplified in order
to cover the widest possible range of
operating situations which a company can
face during its life cycle.
THE EMERGENT PHASE
Companies are generally formed with the
aim of exploiting the commercial oppor-
tunities of radically new. improved, or of
even similar products. processes or services,
to those existing in the market or to create
total!y new markets.
49
 Consumer Environment Mobility

Standard of Living

Commumcatlon

Administration

Environment

lnv.estment Opportunity / Cost Regulatory Affairs Taxation

’ Industrial Environment ’ ’ Political Environment ’

Figure 1. The Corporate Environment

Companies in this phase invariably have

a critical shortage of liquid cash with
which to meet their immediate liabilities
since revenue from their operations takes
some time to begin to Row in sufficient
quantity. Inadequate control of the cash
flow results in a high number of corporate
mortalities in the emergent phase-
strikingly similar to the high mortality
rate of new product introductions.

(b) Marketing
Emergent companies are frequently
faced with formidable odds when intro-
ducing a new product. Aside from the
high mortality rate of new products

1
1 Introduction I Growth I Maturcty 1 Decline
X
(variously assessed at anything up to 98
per cent), the company will have a costly
programme of creating consumer demand
4 c
I - ‘-‘/Recycling for the new product. The length of time to
- successfully stimulate this demand will
Time Period
depend largely on the product. the market
situation and the product’s symmetry in
Figure 2. Classic Product Life Cycle Curve
the consumer’s pattern of needs.
Premium pricing is often used as a major
(a) Finance The financial ownership of emergent com- marketing tool in the short term period
Initially, emergent companies are often panies is largely vested in the senior to gain an initially high return to cover
small entities dependent on one product. management of the company and’or in a not only high marketing costs but also to
process ot service and are privately owned. limited number of outside contributors. provide internal finance to meet the

50 LONG RANGE PLANNING

 Life Cycle Curve
(Salesor Profit lncom

Figure 3. The Corporate Life Cycle and Functional Areas of Corporate Activity

immediate liabilities and to build a fund for To avoid high labour costs the company offer to the general public of participation
expansion. is frequently non-unionized. This factor, in the ownership. This will provide an
coupled with the loose administrative infusion of cash on which to base this
(c) Production policies. enables the emergent company to expansion.
The amount of productive capacity and utilise labour to the optimum by con-
the production infrastructure will depend At the later stage in the growth phase the
centrating activity when and where it is
company may evaluate smaller entities for
entirely on the product. the technology needed.
acquisition as a means to provide further
involved, the amount of processing and
Flexibility of labour also reduces to some growth either by diversifying and ‘buyinp-
the scale of production. For example. to
extent the company’s dependence on costly in’ to new markets and technologies to
compete successfully in the bulk dye-
highly specialized personnel who would reduce company dependence or to con-
stuffs market the scale of production and
otherwise be under-utilized. solidate the company’s position in its
investment would obviously be far higher
existing markets.
than toproduceanewcoffeepercolatorfilter.
THE GROWTH PHASE
Jf the product is successful, emergent (b) Marketing
companies usually have to expand pro- Moving from the emergent phase to the
growth phase in a company’s life cycle To expand the company’s market base,
duction to meet demand otherwise the extensions are made to the basic product
product will eain only a brief sales success presents the company with the need for
radical changes in both policy and opera- line, such as new sizes, styles, strengths,
and then de&e as the consumer switches colours. flavours or forms. or introduc-
to substitutes due to non-availablity. tional activities.
tions of new products into markets com-
Funds. facilities and the ability to meet patible with the existing product, or new
the increased demand are not always markets are sought for the basic product
Although profits in the latter stages of
readily available and companies frequently line. Line extensions and compatible
the emergent phase have been re-invested
underestimate the product potential and product introductions enable the company
in the company. a point is reached where
the productive resources to meet demand. to take advantage of the existing sales,
major refinance is essential. New capital
will enable the company to finance the distribution and production systems to
increase in the scale of the company’s spread overheads across a wider base to
The comapny’s internal policies and
operations. reduce unit selling costs.
activities in the administration area tend
to be very loosely defined in the emergent The company will often, at this stage, During the growth phase the company
phase. sacrifice part of its equity by making an will often evaluate overseas markets for its

APRIL. 1974 51
basic product line. initially on an export or be levelling off for economic reasons size and pass this point towards the latter
licensing basis and later. as resources due to lower consumer demand-the stage of maturity.
become greater. into fully fledged com- U.S. aerospace industry at the end of Decreasing economies of scale together
pany owned or partly owned production the 1960’s is a case in point. Changes in with obsolescence of major capitai equip-
and marketing operatrons. fashion or style can also promote ment begin to seriously affect the unit cost
Acquisitions will also giv-e the company these trends, such as the situation when of production and contribute to the erosion
either greater strength in its own basic tights were introduced in 1964 1965. of the profit base. Massive re-equipment
industry or allow it to move into new which at first complemented the market is often necessary to compete with newer
markets. for ladies’ stockings and later virtually products which utilise more advanced
replaced this market. technology.
The marketing function will also tend to
become more involved (and consequently (2) By an accelerating trend towards a lack
of corporate entrepreneurial activity (d) Administration
more important) in creating new products
and creeping mediocrity in all func- Heavy dependence on systems and rigid
to meet future consumer demands and
tional areas as the company changes adherence to formalised control and ad-
researching the market requirements.
from an aggressive. thrusting company ministrative patterns begin to assume
(c) Production to a more conservative stance, largely more importance than the purpose and
New capital infusions will enable the to create a better image-one of outcome of the activity.
company to purchase new or additional maturity-with the financial, govern- Creativity and originality which pro-
plant and machinery to provide greater mental and consumer communities. vided the company’s momentum through
productive capacity and possibly lower The company often reaches a point its emergent and growth phases become
the relative cost of goods by taking ad- where the hard sell which provided stifled as conformity rather than indivi-
vantage of the increased production to the impetus during the ‘Emergent’ and duality are required and rewarded. Per-
obtain greater economies of scale. ‘Growth’ phases is relegated to a back sonnel turnover, particularly in the
seat as conservatism takes a firm hold specialist fields, tends to rise as the
(n) Adtninistrution on the direction of corporate activity. company neglects to improve the ability of
During the early stages in the growth its pioneer employees. This has a damaging
phase the company will strengthen its effect on morale for the long service em-
control systems and begin to apply a Income from sales and profits tends to
ployees are denied satisfaction, a sense of
formal personnel policy to enable it to be the highest in the company’s history and
purpose and achievement, as they become
regulate the activities of the growing investments in the ‘Growth Phase’ in new
by-passed by newer and more qualified
number of employees. products. acquisitions and overseas opera-
employees.
tions are now producing high returns and
The latter stage of the growth phase is the company is literally booming. During this phase the management’
often characterised by the introduction of employee relationship begins to develop
company-operated employee benefits such These results often tend to obscure the
serious flaws, particularly in the produc-
as pension, insurance and health schemes underlying trends in the company’s opera-
tion function which is often the only ared
and on a higher level management bonus tional environment. Gradual shifts in the
which is effectively unionised. Frustration
and stock option programmes, basically economy and consumer demands and
created by a lack of status and function
to offer benefits equal to its competitors rising labour and raw materials costs are
eventually turns to militancy and obstinacy.
to both keep personnel and to aid in beginning to produce higher unit produc-
hiring new personnel. tion costs and overheads, which together
with increasing upward valuations of Zenith Point
During the growth phase the company property are producing declining returns The company reaches a point during the
may well prefer unionization of its work on capital investment and eroding profit maturity phase where both management
force, particularly in the production margins. and stockholders become increasingly
function, to enable it to carry out fewer
aware that a major decision must be taken
direct company-employee wage negotia-
concerning the company’s future existence.
tions. Keener competition and more com-
petitors together with pricing pressures The company cannot maintain its exist-
begin to deteriorate the company’s market: ence for any period of time in the maturity
THE MATURITY PHASE profit base. phase as natural increases in costs. together
The company becomes ultra conserva- with stnbilised income, will eventually
The company progresses into the maturity
tive in its marketing, losing the initiative erode the profit margin to such an extent
phase when the growth rate in both sales
by adopting a ‘middle of the road’ policy that equilibrium is lost and the company
revenue income and profitability begin to
by introducing products with no measur- goes into the declining phase of its life
level off. At the latter part of the ‘Maturity
able consumer benefits over existing pro- cycle.
Phase’ the company enters a stagnation
period. ducts. rather than being a major innovative The company at this point is faced with
force in the market place. two alternative courses of action which
The reasons for these lower growth rates
Rigid centralized control of the mar- will either move the company into the
can be broadly categorised into two main
keting function and conservative policies ‘regeneration’ or ‘declining’ phases in the
factors :
tend to make the company less able to life cycle process.
(1) The markets in which the company
meet aggression from more flexible com-
operates can be nearing saturation
petitors and often results in the company REGENERATION PHASE
point or can be moving towards a
sacrificing valuable profit opportunities.
steady decline for technological reasons. Virtually without exception, companies-
For example, coal being gradually re- (c)Production like people-will go to any length to
placed by oil and atomic fuels as a During the early stage of maturity the regenerate themselves in an effort to
major power source. Markets can also productive resources near the optimum remain alive. With humans, regeneration

52 LONG RANGE PLANNING

is an automatic subconscious reflex action,
however, companies are not blessed with
such a system and it takes considerable
management skill and a fair measure of
iuck to regenerate a company.
Regeneration can be broadly classified
into Internal and External regeneration.
Internal Regeneration
This is where a company attempts
1hrough its own efforts and resources, to
Five itself a new lease of life.
i a ) Finance
The company can divest itself of un-
profitable or low return subsidiaries or
activities or run them down. A successful
example of a run down major unprofitable
operation was General Electric’s (U.S.)
move out of the computer field.
Due to the failure of several high-risk
real estate ventures in the past 2 years the
Boise Cascade corporation. a conglomerat
with annual sales of Sl710 m.. has been
selling off profitable divisions to remain
afloat.
Divesture of these operations and selling
off other assets such as land, buildings,
patents, investments, etc.. will gain time
for the company by providing short-term
infusions of cash. Frequently, rigid cost-
cutting is applied throughout the com-
pany’s operations to reduce the cash out-
flow and to improve profitability. This
technique often clashes with the marketing
function where heavy promotion is needed
to stimulate consumer demand for the
company’s products where sales have been
declining.
(b) Markering
The product line can be rationalised to
place greater emphasis on profitability and
sales volume, and product modifications
and new products can be added to gain
more market and profit opportunities.
Pricing is a major tool in regeneration
since prices can be increased to obtain a
higher profitability on sales or can be de-
creased to stimulate higher volume pur-
chasing. Promotion may also be increased
to generate sales.
The key to successful regeneration in the
marketing area depends largely on how
quickly the company can reverse the
decline in sales and profits of existing
products and how quickly successful new
products can be introduced.
((‘1Production
With the increasing mechanization em-
ployed in most industries, the only area
for regeneration, apart from initiall)
reducing work times and cutting overtime,
ic to close some production lines. which
APRIL. 1974
necessitates reducing the total work force
-the most frequent regenerative method
in the productive function.
(d) Administration
Reappraisals of corporate personnel
needs are made which inevitably lead to
reducing labour, particularly in the ‘non-
productive’ functions. It goes without
saying that new hirings would not be
made unless of an essential nature during
this period.
A factor to be considered in this area is
that short-term savings in the payroll by
reducing the labour force will have to be
balanced against increasing State legisla-
tion in many countries for redundancy and
severance payments.
Generally, the successful internal re-
generation will depend largely on the
ability of the company to re-orientate to
changing conditions and new opportunities
and upon the extent to which the company
has declined and where, when, and how.
effectively costs can be reduced whilst
maintaining and increasing sales revenue
income. This is a delicate balancing act,
since beyond a certain point it is im-
possible to maintain this equilibrium.
External Regeneration
The company discovers that it cannot
regenerate itself through its own re-
sources and is forced to make a choice
between the following alternatives:
0 Sacrificing the controlling interest in
its equity to another company for
cash infusions ;
a Look around for a merger partner,
and since the company may be at a
low state, sacrifice control to the
stronger partner. For example, in
the Warner-Lambert!Parke Davis
merger, the latter sacrificed control
to the former;
0 Be completely acquired by a larger
or even a more successful smaller
company which attaches value to the
company’s market position, pro-
ducts. patents. licences. personnel or
productive capacity and assets;
0 If the company is a major source of
employment and,or is vital to the
country for economic, social,
defence or prestige reasons? it may be
funded by Central or Local Govern-
ment resources. (For example, Rolls
Royce in the U.K. received Govern-
mental aid, whilst Lockheed received
support from the financial com-
munity. 1
Tf the company cannot regenerate itself
and enters the declining phase of its life
cycle or is forced into seeking external
regeneration by the merger or acquisition
route, the company as an independent
entity ceases to exist.
DECLINING PHASE
Companies can be considered as having
reached the ‘Declining Phase’ when both
profits and sales fall repeatedly below
those registered during the corresponding
period during the previous years and the
fails in profit and sales levels become pro-
gressively steeper with no indication of
reversal.
(a) Finance
Poor sales and profit performance can
effect the company in two ways. External
finance becomes increasingly difficult to
obtain as the market looses confidence and
stock holders begin to sell rather than to
buy the company’s shares. At this point,
additional stock offers will be taken up
only at marginal prices since the per-
formance of the company cannot induce
premium prices from the stock market.
Secondly, internal reserves of capital
begin to deplete as creditors start to reduce
their credit in both time and value to the
company. This can create an uneven flow
of raw materials which in turn affects
production and reduces the quantity of
finished products for sale, which slows
down the revenue income from sales.
During this phase of a company’s life
cycle, the cash flow balance progressively
develops towards a critical state until the
company is forced into liquidation.
(6) Marketing
The major market in which the company
operates may go into rapid decline as the
market is replaced by a revolutionary
form of technology. For example, the
market declined for radio valves on the
introduction of transistors which in turn
were eclipsed by integrated circuits. Alter-
natively, the products offered by a com-
pany can be supplanted in the same market
segment by newer products which offer
greater user benefits. The first generation
penicillins being replaced in the sophisti-
cated markets in the late 1950’s by tetra-
cyclines, are a case in point. Tetracyclines
offered the advantage of a broader anti-
bacterial spectrum, little sensitivity and
oral formulations which the then current
penicillins did not have.
Unless the company can at least match
competitive product offerings in the con-
sumer’s demand pattern. it will be forced
into insolvency since it is selling products
which nobody wants at prices no one is
prepared to pay.
(c)Production
Revolutionary manufacturing processes
53
can not only render existing equipment Unless existing vehicles. computers or Since a corporation’s sales and profit
obsolete but can make the cost of produc- photocopiers are made obsolete overnight performance can fluctuate widely over
tion with existing machinery prohibitive by by massive technological breakthroughs by even a short period of time whilst main-
expensive when compared to newer tech- competitors who are in a position to im- taining an overall upward growth trend.
niques. mediately supply consumer demand. there life cycle analyses should be taken over
Pilkington’s technique of floating plate is a very slim chance that mammoth cor- a reasonable period of time to flatten the
glass on water, rather than the traditional porations like General Motors, IBM or effect of these cyclical variances (see Figure
method of floating on tin. revolutionized Xerox will be forced into decline. 4). The reasonableness of time will depend
plate glass manufacture since it reduced Mismanagement, errors of judgement largely on the industry or industries in
time. costs and offered better quality. and plain incompetence are probably which the company operates. For example.
more numerous in billion dollar corpora- time is a major factor for a clothing manu-
Unless the company can produce its
tions than in million dollar corporations, facturer as style changes both rapidly and
products by technological processes. plant whilst to a pharmaceutical
due to the larger number of decisions to radically.
and machinery compatible with that of its
be made and the larger number of execu- manufacturer. time will largely depend on
competitors. it will suffer from disad- the inventiveness of its research and patent
vantages which will inevitably lead to its tives to make them. The billion dollar
corporations can survive all but the protection.
demise.
greatest catastrophe, however the smaller Life cycle curve analyses cannot be
Cd) Administration companies rarely have the resources, based on share prices since stock market
In this stage of the life cycle, personnel of reputation or ability to overcome major prices fluctuate widely and do not neces-
prime importance begin to perceive diffi- failures. sarily indicate the progress of a company
cult times ahead and tend to leave the
company before redundancy occurs. The
company’s image tarnished by adverse
press and investment coverage, tends to Y
create difficulties in hiring replacements,
particularly at the junior and middle
management levels.
Productive labour also sensing the Cyclical Sales/Profit Income
decline become increasingly more militant
as redundancies occur and disputes become
more frequent, which accelerates the
:IL Line
downward fortunes of the company. The
decline of the British shipbuilding industry
and the intensive labour disputes at the
Upper Clyde shipyard are a case in point.

THE INERTlA PHENOMENON

Probably the most frightening spectacle
revealed in any study of corporate existence
is the ‘Inertia Phenomenon.’
The interaction of forces within the
economy and within the framework of
corporate activity seem to produce a
synergistic effect which creates a mo- Time
mentum, propelling the company forward
in a snowball pattern. In fact, the company Figure 4. Trend Line Taken Over Specific Time Period to Smoothen Effect of Cyclical
when it reaches a certain point in size Seles/Profit Income
tends. through sheer physical size, to
succeed almost in spite of itself. OPERATION Of THE or reflect its true worth at any point in
CORPORATE LIFE CYCLE time. This is compounded by the fact that
The errors in judgement which RCA companies in most countries can increase
There are four basic questions concerning
made in entering the computer field, or their capitalization to authorized level and
the operation and use of the corporate
Ford made when it introduced the Edsel, or issue different categories of share
life cycte theory:
although costing both companies and their which makes share price comparisons over
shareholders vast amounts of money (the (a) On which data does one base a life cycle time extremely inaccurate data.
former at U.S. S490 m. being rated as the curve qf a company?
largest disclosed corporate loss in history), Sales and profits are the ony factors on (b) How and to what extent can the duration
seemed to have little visible long-term which one can base a life cycle curve. and slope qt’ each life cvcle phase be
effect since both companies are still in since these data are both tangible and predicted’?
existence and flourishing. meaningful in that they reflect the true The time factor between the various
Small companies cannot absorb set- fortunes of a company. phases of a company’s life cycle or the
backs of this magnitude-even if the losses To provide a basis for comparison over growth slope, as with a product life cycle.
are in the same proportion to the com- time a weighting is necessary to iron out cannot be predicted with any great ac-
pany’s sales. profits and assets as com- disparities created by the changing value curacy since the length of each phase is
puters were to RCA. of money. dependent upon a number of interlinked

54 LONG RANGE PLANNING

I’:tctors. The so&o-politico-economic con- the company will be forced to operate. By CONCLUSIONS
ditions, the rate of technological innova- looking at the future one can better assess Contrary to popular myth, companies, like
tion and its commercialization, competitive the state of the present. products and old soldiers, do die and do
activity, governmental regulations, changes Prediction of the next stage in a cor- not keep riding on into the sunset, despite
in the consumers’ preferences, the com- porate life cycle gives greater perspective the combined prayers of management,
pany’s product market industry mix and to the present than analysing the present employees, stockholders, suppliers and
the individual corporate policies and the alone. Analyses of the present situation consumers.
allocation of its resources are a few of alone are frequently distorted by the Unfortunately, many of the trends
the critical factors influencing time periods pressures of current operations which can underlying the maturity phase of a com-
between life cycle phases and the angle of give a very biased and unreal picture pany’s life cycle tend to be obscured by
incidence of the growth slope. of the true corporate position. the largets profit and sales returns in the
At present corporate life cycle pre- As Theodore Levitt points out ‘the company’s history and the approaching
dictions must be made on an amalgam of value of knowing the stage in a life cycle stagnation and decline are overlooked.
qualitative factors. based on subjective resides only in the way that fact is used.” There may be a tendency by manage-
evaluations of the future. supported by Thus to foresee the future corporate en- ‘ment to regard a life cycle for their com-
quantitative historic sales and profit data. vironment in which the life cycle data will pany as inappropriate since their own
There is a distinct possibility that syner- be used is frequently more functional to company may have been in existence for a
gistic effects can take place between the capitalize on knowledge about the present long period of time-sometimes for hun-
individual influences of some of the factors than knowledge about the present itselfe3 dreds of years. This tends to reinforce
which affect the corporate environment (d) How can the corporate ltfe cycle theorq the theory. as such companies have SUC-
which could potentiate the total effect or be eflectiveIy utilized as a management tool cessfully, and often unwittingly. managed
modify the effects of some other more ,for corporare long range planning? to adapt to the changing corporate
negative influences on the future operating environment over a long period of time.
The identification of a company’s
environment. For example, a change in Established 1770, however. is no
in
position in its life cycle presents manage-
the rate of corporate tax could partially passport to survival
in the competitive
ment with a valuable aid for both short
compensate for the loss of revenue created and complex business world of the 1970’s
term tactical decisions and long term
by a declining market for one of the com- and business history is littered with the
strategic planning since it can give indi-
pany’s major products. memories of corporations who failed to
cators to the rate and direction of cor-
If a formula existed for quantifying the porate growth. Such early warning is vital plan adequately for the future by respond-
subjective assessment of the many factors to management to aid the realignment of ing internally to changing conditions in
which influence the corporate environ- short to mid-term objectives and the the external corporate operating en-
ment. it would be subject to so many resource allocation programme in line vironment.
qualifications due to the widely varying with changing corporate environment Management, despite the events of
conditions existing for each company that conditions. recent years. does not seem fully con-
it may well not be universally applicable. By establishing the position in the life vinced that the survival and growth of a
Although prediction of the life cycle cycle, management can identify possible company is dependent upon sound judg-
curve is at best a ‘guesstimate’ at the short to mid-term problem areas which ments, based on accurate planning, com-
present time it is essential that such an can be eradicated or their effect modified bined with the necessity to anticipate
analysis be made. Even a ‘guesstimate’. before they seriously affect long term cor- and to rapidly follow, rather than resist,
provtding that it is well-based, is a useful porate performance. In 1923 General changes in the corporate operating en-
aid to prepare the company for a more Motors introduced the annual body vironment.
rational approach to its future planning styling change which enabled GM to take Until management recognises that these
and offers the opportunity to create a the commanding share of the U.S. prerequisites are fundamental to the con-
valuable breathing space for important passenger car market away from Ford- tinued existence of a company, the cor-
tactical and strategic management a position which it has continued to main- porate life cycle theory will remain in
decisions. tain for almost half a century. Ford, the laboratory stage of development and
whose market share was 51 per cent prior will not emerge as an effective predictive
(cl How can one determine at what phase to GM’s change in strategy. dropped to tool for corporate long range planning.
a rompaq~ is it? its Iffe cvcie? 9 per cent of the market in 1927 and on
The outline of the four phases in a cor-
In the meantime, corporate euthanasia-
adoption of the annual styling change
porate life cycle-Emergence. Growth, often not a painless experience for those
rose to 31 per cent in 1929.4 If Ford
Maturity and Decline Recycling-illus- connected with the company-will con-
would have followed GM’s styling strategy
trated previously. help to give indications within a shorter period of time, it would
tinue to be unintentionally practised. m
for recognition of the life cycle phases undoubtedly have retained a far higher
which also help in identifying where the portion of its market share in less time,
company lies in its life cycle. thus minimizing GM’s market advantage REFERENCES

As with any problem-solving situation, and obtained higher profit and sales in (1) Fortune ‘500’ list, June 1972, and Rolls
hindsight is always more accurate than a the years 1923-1928. Royce Annual Report 1969.

current vision of the situation. Probably More pointedly. if Ford had been the (2) OECD and UNO, Economic data.
the best method to determine where the instigator of the annual styling change and
(3) T. Levitt, Exploit the Product Life Cycle.
company is. is to predict the next stage had adopted a less conservative approach Harvard Business Review, November-
and work backwards. This approach has to its business. rather than the small December 1965, pp. 81-94.
several advantages in that it forces an more aggressive GM. the corporate posi-
(4) H. Paul Root, Should Product Differentia-
appraisal of both the future role of the tion of Ford and GM today may have been tion be Restricted 7, Journal of Merkefing.
company and the environment in which reversed. Volume 36, No. 3, pp. 3-9 (1972).

APRIL, 1974 55