Three stages in the international product life cycle theory - Essay Example

International Product Life Cycle Theory al affiliation The product life cycle theory developed by Raymond Vemon is a theory thatbreaks down the life cycle of a product into stages. These stages portray the effect of shifting supply and demand on the sales of the products on the target market. Conclusions about the theory took a long period of study of the behavior of different products from the time of launch into the market. The theory divides product life cycle into four stages. However, when sales volume is considered it is divided into three stages which are growth, maturity, and decline.

Growth is the first stage according to the theory. Production of a particular product in a certain region is based on market analysis regarding resource availability, needs, and purchasing power of the target market. The characteristics of this stage are that the sales volumes and prices are high. At this level, the demand is greater than the supply with little competitors in the niche thus allowing for expansion of the business. Furthermore, at this stage the advertisement is at its peak with the technique having tremendous effect on the target market.

During the growth stage, international imitators have had no chance to create imitations at a cheaper price that eventually destabilizes the market. A good example of a company that vividly elaborates this stage is Chinese Tecno Mobile Phone Company. The company based in the most populated country came up with a product to meet the demand for cheap Smartphone. The company realized massive profits in 2004 when it started.The next stage of the cycle is the maturity stage. In this stage, the demand becomes level, and the rate of increase of sales is reduced.

At this level, the imitators have had enough time to create a product that creates competition in the available market at a cheaper price. However, esteemed customers who enjoy services of the original product which explained a level demand of the product as no new customers are using the product. Producer of the original product at this stage might opt to reduce prices if competition on the available market becomes stiff. The decreased sales volume and prices lead to a reduction in the amount of profits realized at a specific financial period (Funk, 2004).

A good example of this is the Antex Knitting Meals located in Los Angeles. The profits realized by the company after establishment in 1979 were high compared to the current profits selling 2.7 million yards of fabric per week. Currently, the company sales add up to 1.5million yards of fabric per week.Decline is the third stage of the cycle. The stage is characterized by a significant drop in sales volume to an extent that products are phased out of the market. The imitators have mastered the art of production of the competitor product and have now invaded the home market reducing sales of the original product tremendously.

Producer of the original product experiences difficulties in balancing costs and benefits which in the end brings production to a halt. Motorola Company is a good example of a company that experienced this phase. After dominating the market for a decade, the company was later forced to stop producing cell phones due to competition from imitators and other companies targeting the same market.In conclusion, the product life cycle theory is an essential tool in the quest to establish long life span of a particular company.

It grants one a chance to realize that the market is full if imitators who with time will invade the market. Such knowledge enables the original producers to formulate a strategy to establish better in the market and minimize the effect of competition.ReferencesFunk, J. L. (2004). The product life cycle theory and product line management: the case of mobile phones. IEEE Transactions on Engineering Management. doi:10.1109/TEM.2004.826020