Four Stages of Product Life Cycle - Coursework Example

Four Stages of Product Life Cycle Q. What are the four stages of product life cycle? A new product passes through a sequence of stages from its introduction to growth, maturity, and decline. This sequence of stages is called product life cycle and is associated with changes in the marketing situation. A product life cycle model helps to analyzing product and industry marketing stages. The several stages of cycle are characterized by the revenue generated by the product. 1. Introduction stage: At the time of introduction, sales will be low because the customers are not much aware of the new product. It is the practice of some firms to inform beforehand the lauch of the product, but such announcement will inform the competitors and remove the element of surprise. Advertising costs will be very high in introduction stage. Main goal is to establish a market. 2. Growth: This is a time when the product has gained the initial acceptance of the market and hence experience rapid growth which will result in an increase in sales. This is a stage where customers will become aware of the product and begin asking for it, of course sales will increase and retailers are encouraged to stock the item.. The marketing team expands the product distribution at this stage. If a competitor enters the market during later part of the growth stage; price competition occur and also increase the advertising and promotional expenses. Here the goal is consumer is to create a consumer preference for the product. 3. Maturity: It is the most profitable stage; because during this stage there will be strong level of brand awareness which will bring down advertising costs. In other words customers will buy the product with little or even no advertising. Competition will also decrease. The competing product may be very similar at this point increasing the difficulty of differentiating the product. Here the primary goal is increase the market share and extent the product life cycle. 4. Decline: In this stage sales begin to decline as the market become saturated, the customers taste changes; the product become technologically obsolete. If the product have a good brand loyalty the profitability may be maintained long. Q What are the primary reasons for countries seek protection to promote industrialization? Industrialization is the overall change in circumstances accompanying a society's movement by population and resources from farm production to manufacturing production and associated services. (Definition of industrialization, 2009). In the global scenario of business, Countries seek protection to promote industrialization because 1. The growth of economy will be faster than agriculture if we go for industrialization. 2. Economic condition of the industries will get diversified by the arrival of the new international products and services and thus brings the economic reforms. 3. Manufacturing production will bring more prize in the market place than the primary products can bring. Q. Define and explain different types of tariffs [duties]: Almost all countries in the world engage in the export and import of goods and services. In order to have a control on such imports and exports, the most common method is to apply tariffs on them. Government charge duty or tariff when a good crosses the country. Tariff plays a role of government’s revenue too. Export tariff: tariff collected by the export country. Transit tariff: tariff collected by the countries through which goods have been passed. Import tariff: tariff collected by the import country: Import tariff raise the price of a imported goods, thereby value of the domestic product will get a relative price advantage. In industrialized countries import tariff is not important. Specific duty: tariff on a per unit basis. Ad valorem duty: tariff charged based on the value of the item. Compound duty: if it asses a both a specific duty and ad valorem duty on a same product. Effective tariff: raw materials frequently enter industrialized country free of cost but when it becomes finished goods then it is taxable. Q There are two ways companies can invest in a foreign country. They can either acquire an interest in an existing operation or construct new facilities. In a short essay, describe the advantages and disadvantages of each alternative The choice of market entry mode in a foreign country is crucial for all companies who have got a plan for starting international operations as it demands resource commitment. The initial choice may not be replaced with the other in the future course of action as it costs a lot of time and money. Both qualitative and quantitative measures are to be taken in to consideration while making a choice. Also this choice may be dependant to many of the internal and external factors like government policies and regulations, cost considerations etc in the foreign country. The most common choices are 1) Acquiring interest in existing operations by joint venture initiatives (Either by equity Mode or contract mode of operations) 2) Wholly foreign owned operations by constructing new facilities from the scratch. Joint venture mode of operation Advantages: The market share of the host company can be an advantage and it will be easy for penetrating into the market. Not having a local partner will be even tragic in case of some product and service sectors. The effect of Instabilities of the government and the position of unfamiliarity of the business environment will be less. The transfer of new technologies, capital investment, and global exposure etc will be an added advantage for the host country being a developing country. Disadvantages: Cost of establishment will be higher and profit will be less. Cross cultural management which is difficult in practice will be a key determinant of Productivity. Sole venture mode of operation: Advantages: Cost of establishment will be less, as they can duplicate what all things they have done in other overseas markets. Complete responsibility remains within the company itself and thus enables better managerial control. Disadvantages: Company may have to build its market from the scratch. Company can’t expect an immediate gain in bottom-line, also it may take a quite long time for breakeven. Q. In a short essay describe the general motives for collaborative arrangements. In recent years by the development of industrialization, advancement in communication facilities and by means of sophisticated technologies has increased the volume of trade across the continents. The level of globalization and free trade has grown dramatically in the last two decades resulting in high levels of competition the market place. Technology has also made it possible to engage in easier international trade. In order to compete in a global market place, many organizations now form international collaborative arrangements. This will enable them to have an edge over other companies and also to develop technical capabilities. Motives for collaborative arrangement: 1. Spread and reduce cost- if a single company takes part in the operations, it has to meet all the burdens alone. If that company collaborates with another firm it will be minimized. Both of them share the risk also. To produce or sell, abroad company must incur certain fixed cost. Here this fixed cost is incurred by both the countries. 2. Specialize in competencies- each company has a unique combination of competencies. A company may seek to improve its performance by improving on those activities that best fit its competencies. It can be done by the help of other firms to supply it with services, products, or support activities for which it has lesser competency. 3. Avoid or counter competition- when the markets are not large enough to hold many competitors that time firm will undergoes collaborative arrangement. 4. Secure vertical and horizontal links. 5. Gain knowledge. Q Discuss the various steps management must take to establish a successful export strategy According to “businesslink”, United Kingdom’s government website for business advice, there are ten key steps to successful exporting. They are 1. Research your market 2. Implement an export strategy 3. Construct an export plan 4. Choose your sales presence 5. Promote your product 6. Get the Customs side right 7. Get paid on time 8. Choose your distribution methods 9. Transport goods effectively 10. After-sales policy (10 key steps to successful exporting, n.d). Q. What is foreign currency translation exposure? and how can it affect an MNE? Translation exposure results in cases where an organization maintains or operates subsidiaries in international markets. It can also happen if the firm owns assets in such international markets. This is because when preparing the financial statements of the parent company, it has to incorporate all the operational details and the assets of the subsidiaries into its annual and related reports. The problem that needs to be solved is that the valuation of all assets in a foreign market will be done in the currency of that country. It will be necessart ti convert the values into the currency of the home country and subsequently combined as a whole. This problem will be compounded by possible fluctuations in the exchange rate between these two countries. It can be beneficial or can create losses depending on the fluctuation. Since this exposure to risks and exchange rates is reflected in the accounting statements of the company, it is referred to as accounting exposure. (Business definition for: foreign currency translation, 2009). Foreign currency translation exposure affects the MNE in the following way. When an enterprise involves trades in many countries, of course the transaction involves the fall of value of one currency with respect to another. The fall in value or devaluation affect the countries future sales, cost and remittances. Q. What are the key elements of an exposure management strategy? To protect assets adequately against risks from translation, transaction, and economic exposure of exchange – rate fluctuations, management must Define and measure exposure A reporting system should be in place that will help the company to monitor the exposure of fluctuating exchange rates. Adopt a policy assigning responsibility for minimizing – or hedging – exposure. Formulate a strategy for hedging exposure. (Radebaugh, Daniels., & Sullivan, p. 643). Q. What are the major forces leading to convergence in international accounting standard and practices? Accounting standards and practices are varying around the world. This is the one of the Main problem that MNE would face. There are some forces that leading to convergence in international standards and accounting practices. The influence of these forces varies in different country. For example investors are influenced in the UK and UN but creditors especially banks in Germany and Switzerland. Taxation has a big role on accounting standard and practices in Japan and France. But in US it is not important. Cultural issues are different in different countries and a strong influence on developing accounting standards and practices. Some of the other forces are former colonial influence and foreign investment. The major development in accounting world wide is now the issue of convergence, which implies that through negotiations between the FASB and IASB. Convergence is the process of bringing different national generally accepted accounting principles into line with international accounting standards issued by the IASB. (Radebaugh, Daniels., & Sullivan). References Business definition for: foreign currency translation. (2009). All Business: A D & B Company. Retrieved February 12, 2009, from http://www.allbusiness.com/glossaries/foreign-currency-translation/4950844-1.html Definition of industrialization. (2009). About.com: Economics. Retrieved February 12, 2009, from http://economics.about.com/cs/economicsglossary/g/industry.htm Radebaugh, Daniels., & Sullivan. International Business Environments and Operations. 11th Edition, 643. 10 key steps to successful exporting. (n.d.). Business Link. Retrieved February 12, 2009, from http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&site=106&itemId=1073792501 Read More