to produce newer products, is made.

If not, old machinery is

PRODUCT LIFE CYCLE
The products life cycle follows the graph as shown. The graph
is plotted using product sales volume as a function of time.
From this graph, four phases of a products life can be studied.
These are Product introduction, product growth, product sales
stability and product sales decline.
In order to better understand product life cycle, we have to
examine each of the stages.
Product Introduction.
In the introduction phase a product is normally priced high.
Supplies are typically low. Demand outpaces supply.
Manufacturers usually try to recuperate the cost of product
development (R&D). Factors such as raw material, production
technology, marketing and public awareness, limited
distribution, all add to a higher price and limited production.
Product Growth.
At this stage, consumers are better informed of the product.
Manufacturers have recuperated a large part of the product
introduction cost. Costs of production are lowered and the gap
between supply and demand is narrower. The product now
becomes profitable. Distribution channels have increased and
the product exclusivity has slightly decreased. The slight
deduction in price allows makes the product affordable to
more consumers. People who believe that they “must have”
the product usually buy at this point.
Product Sales Stability.
At this stage, the manufacturer has recuperated almost all of
the production cost. Exclusivity based on previous patents no
longer exists allowing secondary manufacturers to enter the
market. Competition between manufacturers exists.
Manufacturers divert some of their products into additional
R&D making the existing product better. A further price
reduction followed by stability increases the customer base.
The product also attains brand recognition. Supply and
demand are relatively stable.
Product Sales Decline. (A)
The product availability has saturated the market. Lower
product prices as a result of increased competition. Discounts,
promotions and incentives are fairly common. Supply has
outpaced demand. Production levels drop. Inventory levels are
kept low. Innovations or retrofits to make the existing product
are introduced as a last attempt to make the product appeal to
consumers.
Product Sales Decline (B)
The product is no longer desirable. News of newer, more
advanced products that are intended to be introduced, make
customers weary of product purchase. Manufacturers cease
production. Investments in retrofitting production machinery
sold. Sales departments are asked to sell off all available
quantities to make room for new product. Product is sold for
the lowest price of its production cycle. Aggressive incentives
such as buy 1 get one free or buy a higher priced product and
get this one for free are normal.
XYZ CASE
In regards to the case of XYZ Corp, the problem states that
here has been a 50% decline in sales. The new CEO has to
increase sales by 20%. In order to that, we simply analyze
what products XYZ produces and sells, and where do these
products lie on the product life cycle chart.
Black & White TV’s
This product falls in the last category, Product Sales Decline
(B). Most technologically advanced markets no longer carry
this product. XYZ should look into exporting its stock to a
third world market. If that is not a viable option, it should
cease production and sell its production machinery.
Colour TV
This product falls in the last category, Product Sales Decline
(A). Advances in colour TV technology such as flat screens
and slimmer TV sets have been made. The number of
competitors has also increased. The TV is affordable for the
low-income bracket customer. Aggressive marketing,
advertising and discounts need to be made in order to move
product.
LCD TV
The LCD TV falls in the Product Sales Stability category.
Although other competitors are present, competition can be
controlled by price reductions, incentives such as extended
warranties. Packages can be offered whereby with the
purchase of a LCD, a home theater system is given.
LED and 3D TV
LED TV’s fall under the Product Growth Category. Price is
fairly high, but the product is experiencing a robust increase in
sales. The operation should focus on this sector. R&D costs
are being recuperated and the product is entering a
profitability range.
3D TV’s fall under the product Introduction Category. Price is
high for both sales and manufacturing. The technology is still
relatively young and unproven. R&D costs are still high. An
exclusive area on the sales floor should be dedicated to show
casing the product. Customers should be better informed of
the products capability.
Riyaz Bondre
Year 2 Section B
15/02/2011