Product Life cycle in International Marketing

Product development and adaptation are moreover not static concepts. They are dynamic because the global market itself is evolving over time. Due to this continuous evolution, products tend to become obsolete with the passage of time. Market for a product becomes saturated over a time horizon and unless new product designs and substantially improved versions are developed, sales and profitability will go down. For example, when black and white TV market was almost saturated, advent of color TV revived the market. Similarly, introduction of Hi-Fi products has created demand for broadcasting receivers and record players.

Conceptually, a product may be conceived of to pass through a typical life cycle – Market development, Market growth, Market maturity and Market decline. The four stages are shown.

During the market development stage, the product is new in the market and depending on its acceptability to the potential buyers the sales volume records a rise. In the succeeding stage of market growth, the market acceptability is attained and sales picks up rapidly. In the third stage of market maturity, the product tends to approach the saturation level and the rate of growth of sales slackens down. In the final stage of market decline, consumers lose interest in the product and sales decline precariously.

It is not that all products will necessarily pass through this cycle. Staple items are classic examples which do not conform to this theory, But many semi-durable and durable consumers items and almost fashion items tend to pass through this cycle of stages.

Product life cycle theory has got two more ramifications. First, a company which has come out with a new product be sure of enjoying the market success and the monopoly situation only for a short while. As the product becomes acceptable, other competitors will join, sometimes with improved designs or lower prices. For example, sometime ago, the Gillette Company of Boston, (USA), introduced the world’s first ball point pen with erasable ink. As the market for the innovative product continues to grow rapidly another major US pen manufacturer has entered it. Scripto Inc., Atlanta, has come out with a second generation erasable ink pen is low priced and disposable. Scripto’s new erasable all point has no replaceable ink cartridge like its higher priced predecessor. The user simply throws the inexpensive pen away when it is out of ink. Otherwise the technology used in both is essentially the same. Therefore, while the second stage of market development may extend over a sufficiently long period for the industry as a whole, the first innovating company will have to share the market with an increasing number of competitors. The second ramification is related to international marketing.

It must be noted that a given product market technology matrix has a much shorter half life in international trade compared to domestic markets. Hindustan Lever’s Ossein investment turned obsolete after 10 year. Their cumulative investment in extraction and upgrading of Sal as confectionery fats are now faced with attrition due to steep international prices of cocoa butter. In fact, as much as third of Hindustan Lever’s 1987 turnover was from products and markets which were under 3 years of age. Almost half of their 1980 export business does not exist today.

International product life cycle has important implications for a company’s product planning. At the outset, it shows the product lines where, because of the pressure of international competition, the established manufacturers no longer can hold the fort. For example, Japan once the largest exporter of cotton textiles is now importing large quantities of it. The USA once used to export large number of bicycles. Now, it is one of the largest importers. The stage in which the product is placed is, therefore, indicative of the extent of competition that might be expected. The product cycle will also show whether the market is expanding or declining and, therefore, may help in determining the time frame or export production. Further pricing policy as an end element of the marketing mix should also be determined taking into account the product’s life cycle. Finally, product life cycle plays an important part in developing new end uses through research and development. Jute industry in India provides an interesting example. Jute has now entered the fourth stage of the life cycle, namely, the ‘decline’ stage. The only way to decelerate the process of decline is to innovate new products and new end uses.