Product Life Cycle

By
Shashank Joshi
 Products and Processes
• The effect and the efficiency of operations management,
just-in-time manufacturing, and total quality management
all depend on the way products are designed and the
processes selected.
• The way products are designed determines the processes
that are available to make them. The product design and
the process determine the quality and cost of the product.
• Quality and cost determine the profitability of the
company.
• There are relationship between product design and process
design and the costs associated with different types of
processes.
 Need for New Product
• Products, like people, have a limited life span. A
product passes through several stages, known as
the product life cycle, beginning with its
introduction and ending with its disappearance
from the marketplace.
• Figure gives a simplified view of the profit and
volume relationships in each phase of the cycle.
No time scale is implied.
• The life cycle may take months or years to
complete depending on the products and the
market.
Product Life Cycle
 Product Life Cycle
• Introduction phase. This phase is the most
expensive and risky stage. To get customer
acceptance of the product the firm will usually
spend heavily on advertising and sales
promotion, hoping these costs will be
recovered in future sales. If the introduction
fails the firm loses money, a fact that
underlines the importance of thoroughly
researching a new product before introducing
it.
 Product Life Cycle
• Growth phase. In this phase, sales of a successful
product increase at a rapid rate.
• Production increases and the unit cost of the
product drops. The increased sales volume and
the lower unit cost cause profits to increase
rapidly.
• However, the success of the product usually
attracts the attention of competitors. Their
entrance into the market forces prices down,
possibly reducing the firm’s sales.
• At this point profits are squeezed.
 Product Life Cycle
• Maturity or saturation phase. Nearly
everyone interested in the product has
sampled or owns the product and sales begin
to level off. The market is saturated.
• Price competition is often severe and profits
start to decline.
 Product Life Cycle
• Decline phase. Sales drop as customers begin
to lose interest in the product or to buy
improved versions from competitors. As
profits decline still further, companies will look
for ways to maintain profitability.
 Product Life Cycle
• Introduce new products.
• Improve existing products.
• Improve the methods of production
 Product Life Cycle
• Depending on the firm’s resources it may do
these things through its own research and
development, by copying competitors’
products, or by relying on customers or
suppliers to do the research and development
work.
 Product Life cycle and life cycle cost
• Manufacturing systems are dynamic and liable
to change over time. Thus there is a
traditional relation between a product's life
cycle and the kind of manufacturing system
used to make it.
 Product Life cycle and life cycle cost
• The life cycle consists of the following steps:
1) Start-up: new product or new company, low
volumes
2) Rapid growth: product becomes standardized
in the market, higher volumes
3) Maturation: designs become standard,
process development becomes important
 Product Life cycle and life cycle cost
4) Commodity: long life, standard of the industry
type of product
5) Decline: product replaced by improved
products.
• Through television and newspaper advertisements and word-of-mouth
communication, a
• growing number of consumers learn about the product and its
capabilities. Meanwhile,
• the management works on improving the performance and eliminating
the shortcomings
• through minor design modifications. It is also the time for some custom
tailoring of the
• product for slightly different customer needs, in order to serve a wider
variety of consumers.
• As a result, the customer acceptance is enhanced, and the sales
accordingly increase
• at a remarkable rate during this stage, which is known as the growth stage.
• However, this trend does not continue forever, and, at a certain point, the
sales level out.
• This is, in fact, the maturity stage of the life cycle. During this stage, the product is
usually
• faced with fierce competition, but the sales will continue to be stable if the
management
• succeeds in reducing the cost of the product and/or developing new applications
for
• it. The more successful the management is in achieving this goal, the longer the
duration
• of the maturity stage will be. Finally, the decline stage begins, the sales fall at a
noticeable
• rate, and the product is, at some point, completely abandoned. The decrease in
the sales is
• usually due to newer and better products that are pumped into the market by
competing
• manufacturers to serve some customer need. It can also be caused by diminishing
need for
• the uses and applications of such a product.
• A clever management would start developing
• and marketing a new product (B) during the
maturity stage of the previous one (A) so as
• to keep sales continuously high, as shown in
Figure 1.5.