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To what extent does a mature and cyclical product market drive corporate restructuring - Essay Example

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An interesting definition of mature product market is found in Economics in Business Context by Colin Haslam, Alan Neale and Sukhdev Johal (2002, p.92). As per this definition, “a product market reaches maturity when demand for the product is determined by replacement”. I…
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To what extent does a mature and cyclical product market drive corporate restructuring
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Download file to see previous pages Does maturity necessarily lead to deterioration of market? This question can be answered using the concept of cyclicality.
Economics in Business Context (Haslam et al. 2002, p.92) further defines cyclical markets as “generally mature markets in which volume fluctuates at or around steady pattern of demand”. Depending on the replacement period of the product, the product will be required by the customers every few years, months or weeks. During the period when maximum customers replace the product, the demand for the product will be at its positive peak. This period is followed by a period of low sales. Thus, fluctuation in the demand for a mature product makes it cyclical. Some products have longer replacement periods than the others, making them cyclical. For example, a refrigerator may be replaced after every ten years but cold drinks manufactured by Coco Cola or Pepsi are bought by billions of people every day. Therefore, refrigerators may be termed as mature and cyclical. Coco Cola and Pepsi have reached maturity but they are not cyclical.
Let me illustrate with the help of a hypothetical example. Consider a product XYZ. Say, I had introduced XYZ in the market in 1990. The replacement period of this product was five years. Using excellent marketing strategy, XYZ had gained popularity amongst the customers by 1991. But, I had not yet sold XYZ to maximum number of targeted customers. I had to maximize my sales as well as confront a new problem; a competitor introduced a similar product called ABC in the market in the year 1992. After a research on XYZ, I realized that the product could be manufactured in a better way, leading to an increase its durability. The replacement period after increase in durability became 8 years. Increase in the durability of XYZ attracted more number of customers. Because it was a very popular product, XYZ reached maturity by 1995. It was sold to maximum number of customers. If I had not ...Download file to see next pagesRead More
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