Life Cycle Model

Everything has its own life cycle whether it is a product, service, industry or market segment. We can understand this concept in product lifecycle dimension.  Some products have longer life cycle, some have shorter and some have stable life cycle (basic needs).



Development:

  • In this stage firm or organization have completed its research and started development of product which actually not exists in the market right now.
  • Its demand will be nil as people or customers are not familiar with the product and also product is not available in the market
  • Production and improvement cost will be very high.

Introduction:

  • In this stage of product life cycle, product is introduced in the market and firm try to make customers familiar with firm’s product.
  • Intensity of Competition is very low.
  • Demand is also very low and speed of increase in demand will also be slow.
  • Major customers are of higher income.
  • Product is manufactured using non standard technology.
  • Product has inconsistent quality.
  • At this stage there will be usually High production, improvement, advertisement and marketing cost.
  • Firm’s main objective will be to make product unique.
  • There will be short production run to produce small quantity.
  • There will be a high risk that whether product will be successful in the market or not.

Growth:

  • In this stage speed of increase in demand will be high as compared to introduction stage.
  • Demand will be high as compared to introduction stage.
  • Many new entrants will be entered in the market.
  • Intensity of competition will be high at this stage.
  • More efficient but not standard technology will be used here to manufacture products.
  • In addition to higher income buyers, many other buyers will be ready to purchase products.
  • Product will be improved quality wise and design wise.
  • Product development and improvement cost will be low here due to mass production and marketing or advertisement cost will be medium.
  • Firm’s main objective will be the management of customers demand.
  • Mass production will be here.

Maturity:

  • Demand will be stable and growth rate will fall.
  • Only few large market players’ played well in growth stage will be here.
  • Existing Firms brand name will be strong and risk of new entrants will be low.
  • Standard technology will be used by firms to manufacture products.
  • Long production run with overcapacity of plants.
  • Main objective will be to increase efficiency.
  • Products will be of standard quality and design.
  • Production cost will be too low but marketing cost will be high to maintain market share. 

Decline:

  • Demand will be started to reduce.
  • Prices will be reduced to maintain demand or market share and hence price war will be started between existing competitors.
  • Technology may become obsolete to manufacture products.
  • Long production runs to reduce cost per unit.
  • Production and improvement cost will be low; also marketing cost will be low.
  • Main objective will be to maintain brand loyalty.

Strategic capabilities, resources and competences:

  • Strategic capability is the availability of resources and competences an organization needs if it want to survive and expand.
  • Strategic capability is the availability of resources and competences necessary for the successfully implementation of a strategy.

Strategic capabilities:

There are two categories of strategic capabilities

1)    Threshold capabilities:

  • Threshold capabilities are the combination of threshold resources and threshold competencies.
  • These capabilities are necessary to exist in the market and compete with other firms
  • Such capabilities are usually common in most of competitors or rivals in the industry.
  • Such capabilities usually not result competitive edge for firm or organization over others.

2)    Capabilities for competitive advantage

  • These capabilities include unique resources and core competencies.
  • Such capabilities are usually hard to imitate.
  • These capabilities are valued by customers.
  • Such capabilities usually lead to competitive edge for firm or organization over others.

Resources:

Resources may be tangible (physical resources like plant, machinery, cash and labour) or intangible (knowledge, strong brand name and reputation).

Followings are some examples of resources

  • Man
  • Machine
  • Money
  • Management
  • Materials
  • Markets

Competencies:

  • Competencies include skills, processes, activities and methods which are used by the organization to utilize its resources.
  • These competencies create features in the products and services which are usually valued by customers.