Business life cycle characteristics and strategies

Consider for instance consumer preference for CDs over vinyl records, or the disappearance of launderettes in town centres as a result of the introduction of affordable washing machines.

Business life cycle characteristics and strategies

Facebook LinkedIn Flipboard 1 62 SHARES During the growth of a small business, a company will go through the stages of the business life cycle and encounter different challenges that require different financing sources.

The decline can either be slow, such as in the case of postage stamps, or rapid, as has been the case with VHS tapes.

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Nowadays successful products such as frozen foods and HDTVs lingered for many years before entering a stage of more rapid growth. Some companies or even industries find new uses for declining products, thus extending their life cycle. Cash flow improves and profits are at their peak. It may be a small entrepreneurial company or a proven company which used research and development funds and expertise to develop something new.

Business life cycle examples

We will now go into these four PLC stages in detail to identify characteristics of the stages and product life cycle strategies for each. This point is called the take-off point. This is especially the case for new-to-the-world products , which are truly innovative by nature. Since competitors start to mark down prices, increase their advertising and sales promotions and increase their product development budgets to find better versions of the product, a drop in profit occurs. The key issue in this stage is market rivalry. In this phase, sales are decreasing at an accelerating rate. When a product or service hits this stage, many entrepreneurs reintroduce it with a new feature or create a new benefit.

This is when your brilliant idea is merely just a thought and will require a round of testing in its initial stage. At this stage, the product is new and untested, which implicates that potential customers may be unwilling or reluctant to purchase it.

7 stages of business life cycle pdf

During this stage, there is a tendency for companies to capture customers from their competitors by undercutting each other on prices and increasing promotional efforts. Also, promotion spending is quite high to inform consumers of the new product and get them to try it. A second reason for rather low profitability at the introduction stage is that the company is unlikely to be making full use of its production capacity. At the same time, some advertising must be shifted from building product awareness to building product conviction and purchase. Based on this understanding, marketing implications can be derived. Although competition may be light, the introductory stage usually features frequent product modifications, limited distribution, and heavy promotion. This can be attributed to the lead time which is required for marketing efforts to take effect. Prices remain where they are or decrease to penetrate the market. By spending a lot of money on product improvements promotion and distribution, the firm can reach a dominant position. Published on: Invalid date. If the changes are accepted by customers, it can lead to a product moving out of the decline stage and back into the introduction stage.

Silicon Valley computer chip manufacturers. The maturity stage does usually last longer than the previous stages, but also poses the strongest challenges to the marketing: the firm will try to prevent the sales to decline, while maintaining profitability.

business life cycle diagram
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