Abstract:
Multinational companies who are operating globally are going to face the plethora of various life cycles at different stages simultaneously. All the life cycles under the company would be working under the framework of the global life cycle. The product lifecycle is comprised of four stages through which the companies and their products go through. Globalization has complicated the product life cycles. One product developed in the advanced economy would enter another economy at an early stage. The company and its management need to be considerate of the product life cycles and the several stages in a different market to make the best decision for their international product positioning.
Introduction:
Every business is dependent on its product or service regarding its demand, quality, quantity, consumption, costs, profits, emotional attachment and loyalty to the market and all of its other attributes throughout the life of the product. With the globalization of business and increased access to all the opportunities in the world, businesses have become increasingly complex. A product with a mature home market is introduced in a foreign market and is perceived as completely new there. While these complexities have raised the challenges for the management to effectively use the attributes of its product in the international market, it has also provided it with a whole lot of opportunities. It is imperative for a business not to consider it as important.
Product Life Cycle:
Product Life Cycle is the cycle of the product through which it goes from its introduction in the market to its withdrawal or demise. The stages of the product’s lifecycle always remain the same. However, the time one product takes to go through one stage to another depends on several factors. The stages of the product lifecycle are;
Introduction:
The introduction stage starts when the product is introduced in the market. The stage of introduction consists of heavy marketing costs, activities of promotions and putting the product in a limited number of outlets via the limited number of distribution channels. The sales start slowly in this stage. The product is aiming for awareness more than revenue or profits in this stage (Bos, Economidou, & Sanders, 2013).
The organization in the introduction stage has to have enough distribution outlets to cope with the demand. The IBM ThinkPad was a big success when it was introduced in the market; however, the demand was so high that it could not produce enough of the product. It calls for effective planning and cooperation among the suppliers, wholesalers, manufacturers, and distributors. Similarly, the Rice Krispies cereal of Kellogg was also unable to keep up the demand, and it formally apologized for the matot for their lack of. Furthermore, the product pricing strategy during this period is usually the penetration pricing or the skimming pricing strategy. The use of an initial low price for the introduction is the penetration strategy for pricing, while the initial high price is the skimming pricing strategy (Park, Hong, Abe, & Goto, 2018).
Growth:
The growth stage is the second stage of the product lifecycle. This stage starts when the market is already aware of the product, and the sales at this stage take off with better speed. The companies get attracted, and profit begins to spur faster with the market share getting better and stabilized. If the introductory stage has been successful in reaching out to customers and increasing demand and the company was not effectively producing as per the demand, then they can lose their share of the market to the competitors. Like when Nintendo’s Wii was not able to fulfill the customer demand, many opted for the Microsoft Xbox.
Maturity:
The growth stage leads the product to the maturity stage. The sales at this stage grow at slower rates and then at some point in time they stabilize. The products usually in this stage get differentiated. Price wars happen in this stage, and sales promotion is more general with a few numbers of the existing competitors in this stage. Quake Oats and the Ivory dish wash is the product in the maturity stage as they are in the market for over a century now (Yelkur & Herbig, 1996).
Decline:
The last stage of the product lifecycle is declining sales drop in this stage of the product lifecycle. The reason can be changed consumer preference or the irrelevance of the product to the market. The price wars continue, and cost controls and several product withdrawals become a normal strategy. Cost control or withdrawal is usually the way out for companies in this stage (The Economic Times, 2018).
Analysis and understanding of the product lifecycle give the management the benefit of knowing the health of the product at a given time and to strategize accordingly for the product. It shows how the product is positioned in the market and what actions should be taken to make it better positioned.
The International Product Life Cycle Theory:
The International Product Life Cycle Theory is the theory which was forwarded by Raymond Vernon in 1960. The scholar explained the cycle of the products that they went through while they are exposed to the international market. The product cycle shows how the product is introduced, matured and then declined as the result of internationalization. The cycle shows three stages of the product life (Ayal, 1981).
New Product introduction:
The first stage is the new product introduction. A company in the developed country would innovate a new product and introduce it to the market. The market share initially would be small, and the revenue would be slow. The scholar deduced that it would be developed in the developed country as these would have the highest disposable income to consume it. The low sales would be offset by selling the product similarly with some changes to it to make it more salable. The increase in the sales would cause the company to export it to the developed nations for increasing its growth. It is a simple internationalization step as the developed nations would also have a similar consumption pattern.
Product Maturing:
The product after establishing its hold in the developed countries is reconsidered for opening its production plants locally to meet the demand fully. The labor costs and unit costs are reduced with the local production of the product. The product development at this time can still occur and further enhance the revenues. The demand is constantly on the rising in this stage in the developed countries. The local competition would increase as well, which would cause the company to reach out to less developed countries where the demand has only started just to grow.
Product Standardization:
The next stage is the exporting of innovative products to the developing country. The high competition in the developed countries market would saturate the market which means that the product is less competitive, threatening the company to lose its share. The company can add new features in the product to make it more competitive or it can also focus on cost reduction. For cost reduction, the company can look over other less developed countries to shift their production there and have reduced the cost of production. The nations with lower average incomes would be preferred.
However, after some time, the local workforce is exposed to the technology, and it starts making its models increasing the competition there as well. At the same time, the home developed countries show declined sales demand, which eventually dies with the introduction of a new alternative product in the market. The multinational company is now focused on leaving the manufacturing in low-income countries and is focused on new product development. The foreign competitors capture the lost market share, and the individuals who still want the product can import it from the lower income countries own versions.
International Product Life Cycle and Marketing:
While a manager is sitting in his office wonders if he is doing the best he can to sell his technical product in the international market, the directors are at the same working on all sorts of marketing programs and QR Codes. So, should the manager be working on changing his marketing to stay with the market or he can stick with what works today and keep on doing that to maintain sales? The companies selling their products are different points of the product life cycle affects the way they approach the market. When the companies are going to be entering into the other countries market, it is necessary to look at the product lifecycle stage in that market as well. Like, Apple iPads reached their maturity stage in the US quite immediately. However, in Bangladesh, the product was still considered as the product for the innovator. The company has purposefully kept its focus on the early adopters and the innovators (Fukuda, Bernard, Gurumoorthy, & Bouras, 2014).
Back to the manager, and it is evident that he needs to identify how its product fits in the product lifecycle and then it can be leveraged to support him make profits in the international market.
Innovators:
The marketing challenge for any product is not to innovate the product, but to educate the market. The new innovative product from an international perspective is mostly forgotten with this aspect. The focus is more on amplifying the message and not on what the message is and how it would be communicated. The company should try to get publicity and conduct speaking engagements. The thought leaders of the industry can be recruited to introduce the product in the new market. These thought leaders can be convinced of using and reviewing the product for free or for the lowered price to get their testimonial. The beginning is not focused on where the business will come from; it is the stage in which one focuses on any business that comes (Stark, 2015).
Early Adopters:
After introducing the product, the next stage of the life cycle targets the early adopters. The market can take a chance of experiencing the new idea or technology. Identifying any clusters of the industry internationally would be wise. These are the clusters which have suppliers, workforce, and producers at one place. For instance, the Software cluster in India is situated in Bangalore, while in the US in Silicon Valley, in Tel Aviv in Israel and Vancouver in Canada. The focus on industry cluster can save much time and effort as the target is directly on the potential market. This stage looks for the market, which would be willing to buy the product; the product is going to gain a competitive advantage after some time against the slow adopting competition.
Early Majority:
One would know that they have hit this target market when they do not have to explain their product to the market. The industry people know about the product and have even considered changing their consumption pattern to adopt it. This stage looks for large spending in the marketing and promotions of the product. The workforce is trained, and sales staff is used for international sales. It is the stage which is usually seen with the entrance of new market entrants and if there are potentially large market leaders of vertical industries also start taking an interest in it. The company can look for strategic partnerships during this time to cope with the competition. Entering into new markets with joint ventures is also one of the strategies to keep growing.
Late Majority:
Until this stage, the market has already started to saturate. The industry would have already introduced a new alternative to the product. However, the product can remain competitive in the late majority market for even decades. This stage is more depending on the supplier, customer relationship rather than on marketing efforts. The customer service level is geared up in this stage — the price pressure forces for better productivity and efficiency. The company can look into international markets at this time to better compensate with the situation. However, it can only introduce it in the markets where it should still be in an earlier stage.
Laggards:
It is the stage in which the extremely loyal customers are the only ones who still appraise the product and are continuing to pay for the product or service. At this stage, new product development can be considered, and even new acquisition or merger ventures can benefit as well (Destigter, 2013).
Examples:
The product lifecycle of products can vary in time, subject to their difference. Also, not all products go through all the stages, and the duration of stage varies as well. While some products and experience market share growth, some can never experience it are withdrawn early from the market. Similarly, other products stay longer at one stage the companions. Like PepsiCo in 1992 introduced Clear Pepsi, that went straight from the introduction to decline. Diet Coke, on the contrary, entered into the growth stage just after its introduction in the 1980s and then has remained at the mature stage of its cycle until now. Technological products often have smaller life cycles, while durable goods and gems have long life cycles. As mentioned, the strategies for their promotion, pricing, distribution, and their product development varies as per the demand, their product type, etc.
International Trade, Product Life Cycle & World Economies:
Ever since specialization and trade have been linked with the wealth of the nations, competitiveness, and trade of the international market is considered as the main driver for the development of the countries. The trade has long been the subject of academic and policy interest. Governments have long been trying to win the League of Nations by focusing on strategic trade. Specializing in the right products has long been conceptualized as aiding in the country to move ahead. However, these right products can be different for a developed country as compared to a developing country. It is evident from the fact that when the OECD countries were depressed in the 2000s and 1990s, the Newly Industrialized Nations were facing a period of low growth but better than the OECD’s. China integrated itself at this time in the international market. The development can be traced to the global pattern of specialization and his composition of exports during the life cycle of the product in various stages. The figure in Appendix shows how OECD countries capitalized on the competitive advantage of the less mature and young products while the emerging economies closed this gap, however the newly industrialized countries stayed more in the mature markets with specialized products.
The recent advancement in the studies in this respect can be traced back to the stylized life-cycle model presented by Vernon which showed the shift of the comparative advantages and the evolution of the trade patterns in the world over time. It is said that developing countries are going to be increasingly producing the products which would be in the later life cycle stages showing that advanced economies are needed to run to stay competitive — the flow of the new product innovations in the need to maintain the income differentials in the global world.
The model of Vernon has assumed the abundance of the cheap labor in the south as the source of the competitive advantage which is later established in copying the products matured from the North. It shows that the populous developing countries enter the global trade competition, and this cause the advanced economies to face a shift in their competitive advantages towards the products which are still in the early stage of their product lifecycle (Audretsch, Sanders, & Zhang, 2017).
Product Life Cycle in Global Markets:
The marketing decision managers should understand the products and their life cycles to manage the competitive advantage across their domestic, global and international markets. It is true that even though the management well knows the stages of the product lifecycle, it is usually not well used to their advantage. They usually do not have the needed knowledge of the product life cycle and lack of how to identify their product position in it. The company does not know the importance of their strategic position in the marketing strategy and do not understand how the life cycle of the brand, the market, and the customers affects their position in the marketplace. It is known that the strategy of a company is determined by the life cycle stage of its market or industry to which it has reached. The first stage as mentioned earlier has less market concentration with more start-ups, deregulated new firms and industries spun off from the others. The second stage is where the leading companies usually start to emerge (Doole & Lowe, 2005).
The first stage has a concentration of the biggest companies of around 20 percent, while the second stage has over 30-45 percent of the concentration of the companies. The third stage of the product lifecycle is centered around companies focusing on extending their core business and reducing the secondary operations or exchanging with the other assets of the other companies which are closer to their core activity. Industry leaders have a market concentration of about 70 % of the market. Companies can enjoy as much as the 90% of the market; however, there are very few companies who reach this threshold. The fourth stage shows the corporate titans. In this stage, companies merge and make collaboration for further growth or for keeping their shares intact against any new alternative product. General Motors has over 25% of the world car market; however, it does that only by making alliances with the smaller companies around the world (Doole & Lowe, 2005).
The managers responsible for positioning the product in the global market need to know how the product lifecycle, customer lifecycle, and market life cycle are influencing their strategy. It has been shown by Wilson and Gilligan that the markets with more change have more focus on the market and customer lifecycle and not on the product lifecycle as the determinants of the growth and development is more dependent on the nature of the market. Thus this shows that the market is more of a combination of both the product and the market life cycle. It shows that the managers are needed to approach the product positioning by considering the market and the product life cycles to strategize their product better. The scholars have shown that the companies operating in, the more quickly changing industries should be more concerned over the market life cycle as the market is constantly changing. Furthermore, this would also mean that the company would be willing to leave and withdraw their product when the growth of the market is slowed down (Doole & Lowe, 2005).
Multinational companies who are operating globally are going to face a plethora of various life cycles at different stages simultaneously. All the life cycles under the company would be working under the framework of the global life cycle. From the US perspective, the competitive life cycle is consisting of four phases.
The US Company manufactures in the home market and gains a strong competitive position. The company then exports and competes in the international market. The next phase is when the US starts producing the products overseas and gains the position of an international competitor. The next stage is when the other foreign producers become competitive in the world market, implying it is aggressively competing for the US multinational. The next phase is when the foreign competitors move in the US and start giving competition in the US as well (Doole & Lowe, 2005).
The lowering of the barriers in the international trade has offered opportunities to the companies profiting the exports. The businesses are needed to analyze the exportability of the products and tools for predicting the products which were likely to be threatened by the competition by imports. A new approach has been established in the international trade which shows the most promising addition in managerial literature regarding the product lifecycle. The model shows that products usually go through the trade cycle. In this trade cycle, the US is shown as exporter which then loses the export markets and becomes an importer (Wells, 1968).
For the launching of the product internationally, the quality of the launch is dependent on the high service quality of the product, the on-time shipment, quality of the sales force and support, and the appropriate availability of the product, and the quality and amount of the promotion. The timing of the launch and the decision for the marketing mix are also important for the product launch internationally. The product diffusion means the speed of the adoption of the new product.
The launching of the new product in the global arena leads to product diffusion, which shows how much market share of the product is going to be gained. The product diffusion is also dependent on the country market factors and product factors. The cultural similarity and the economic similarity are the country factors which are important for the product diffusion. The product factors like the relative advantage, the universal selling point, the compatibility with the needs of the adopters, the triabiltiy of the product, and the observability of the product are important factors which show how product factors impact the product diffusion (Schramm-Klein, Hanna, & Wagner, 2011).
Concluding, the international markets have blossomed with the entrance of the businesses from all over the world. The increasing trade and its importance in the economic and financial prosperity of the countries have shown that decisions as per the product positioning in the global market are to be considered with special efforts and understanding. All business exchange products or services; these products or services can only be made successful by looking at their product life cycles around the different markets.
References:
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Ayal, I. (1981). International Product Life Cycle: A Reassessment And Product Policy Implications. The Journal of Marketing, 45(4), 91-96.
Bos, J. W., Economidou, C., & Sanders, M. (2013). Innovation over the industry life-cycle: Evidence from EU Manufacturing. Journal of Economic Behavior & Organization, 86(2013), 78-91.
Destigter, B. (2013, March 10). Leveraging Your Product’s Life Cycle in International Markets.
Doole, I., & Lowe, R. (2005). Strategic Marketing Decisions in Global Markets. Cengage Learning.
Fukuda, S., Bernard, A., Gurumoorthy, B., & Bouras, A. (2014). Product Lifecycle Management for a Global Market (11 ed.). Springer.
Park, Y., Hong, P. C., Abe, T., & Goto, S. (2018). Product Lifecycle Management for Global Market: Case studies of Japanese firms.
Schramm-Klein, Hanna, & Wagner, a. G. (2011). Extending the Product Life Cycle within an International Marketing Strategy – Relaunching the German AUDI A4 as the Spanish SEAT Exeo. Fallstudien zum Internationalen Management, 1(2011), 512-531.
Stark, J. (2015). Product Lifecycle Management: 21st Century Paradigm for Product Realisation (3 ed.). Springer.
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Wells, L. T. (1968). A Product Life Cycle for International Trade? Journal of Marketing, 32(3), 1-6.
Yelkur, R., & Herbig, P. (1996). Global markets and the new product development process. Journal of Product & Brand Management, 5(6), 38-47.
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