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Unformatted text preview: Topic # 5: Product Life Cycle Analysis (PLC) Product life cycle Note difference: Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures; whereas product life cycle management (PLM) has more to do with managing descriptions and properties of a product through its development and useful life, mainly from a business/engineering point of view. To say that a product has a life cycle is to assert four things: (1) that products have a limited life, (2) product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller, (3) profits rise and fall at different stages of product life cycle, and (3) products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stage. Life cycle analysis studies the phases of life, the repeated patterns that occur during life, and the causes and effects of incidences, aiming at something that can be recognized and learned from the earlier life cycles of the items under study. In everyday language, life cycle analysis is often associated with environmental discussion and green values. Uusi-Rauva et al. (1994) define life cycle as the period of a product in the market . This interpretation emphasizes the marketing point of view and revenue planning, but excludes the impacts of product creation and disposal for life cycle profitability. Life cycle analysis should consider the period between birth and decease. The period that starts with the initial product specification and ends with the withdrawal of the product from the marketplace. A product life cycle is characterized by certain defined stages, including research, development, introduction, maturity, decline and abandonment. Burstein (1988) points out that life cycle costing becomes more and more crucial when the technology changes rapidly and the product life cycles become shorter. In addition, he enhances the concept by the customer view of the consuming life cycle. The idea presented in Figures bellow applies especially to durable goods, such as cars. The different stages in a product life cycle are: 1. Market introduction stage The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution. 1. costs are high 2. slow sales volumes to start 3. little or no competition - competitive manufacturers watch for acceptance/segment growth losses 4. demand has to be created 5. customers have to be prompted to try the product 6. makes no money at this stage 2. Growth stage Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over....
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This note was uploaded on 03/09/2010 for the course ECONOMICS CA taught by Professor Stocchetti during the Spring '10 term at UniversitÃ Ca' Foscari.
- Spring '10