24692909-International-Product-Life-Cycle

24692909-International-Product-Life-Cycle - INTERNATIONAL...

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Unformatted text preview: INTERNATIONAL PRODUCT LIFE CYCLE The life cycle begins when a developed country, having a new product to satisfy consumer needs, wants to exploit its technological breakthrough by selling abroad. Other advanced nations soon start up their own production facilities, and before long LDCs do the same. Efficiency/ comparative advantage shifts from developed countries to developing nations. Finally, advanced nations, no longer cost-effective, import products from their former customers. The moral of this process could be that an advanced nation becomes a victim of its own creation. There are five distinct stages (Stage 0 through Stage 4) in the IPLC. It can be shown on a graph by three life-cycle curves for the same innovation: one for the initiating country (eg. The United States), one for other advanced nations, and one for LDCs. For each curve, net export results when the curve is above the horizontal line; if under the horizontal line, net import results for that particular country. As the innovation moves through time, directions of all three curves change. Stage 0—Local Innovation Stage 0, depicted as time 0 on the left of the vertical importing/exporting axis, represents a regular and highly familiar product life cycle in operation within its original market. Innovations are most likely to occur in highly developed countries because consumers in such countries are affluent and have rela-tively unlimited wants. From the supply side, firms in advanced nations have both the technological know-how and abundant capital to develop new products....
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This note was uploaded on 12/21/2011 for the course ECON 101 taught by Professor Xyz during the Spring '11 term at University of Delhi.

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24692909-International-Product-Life-Cycle - INTERNATIONAL...

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