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» Economics » Management economics » Topics begins with P » Product life cycle

Page modified: Tuesday, July 12, 2011 22:08:11

The term product life cycle is a concept from the life cycle management (English life cycle management) of the management economics and a key word for the entire life cycle a comprehensive economic viewpoint. To two ranges is referred:

  1. Life cycle within the product politics of marketing
  2. Life cycle of a thing, particularly a building

Product life cycle

Within the product politics marketing the individual phases of the Marktteilnahme of an offer are grouped, as a function of static or dynamic measured variables. The cycle can be illustrated by differentiated, at least two-dimensional views of model and represents an advancement of the location theory.

Life cycle models

Within the management economics to the representation as in fact standard and synonym for the term product life cycle was established the two-dimensional four field Portfolio with relative dimensions of the Boston Consulting Group (BCG matrix). Besides the nine-field matrix is used of McKinsey (McKinsey matrix) as somewhat the more exact model. Rather rarely, but the view of product life cycle of Arthur D is in individual cases interesting. Little (ADL model) with 16 to 20 fields. The basic model in two-dimensional visualization with simple absolute dimensions after conversion and time finds further for a multiplicity of single views use.

The planning of a product life cycle is task of the strategic management of enterprises. Depending upon strength a product life cycle has four to seven phases - not all are always reached. Planning and observation models are in the economic science recognized, nevertheless are not generally accepted empirically provable generally them. With the help of the different representations rather practically the connection between the product life cycle and the cost experience curve is to be clarified as well as to proceeds or the market attractiveness and the competition advantages in different phases of the Marktteilnahme.

While the fundamental phase model arranges the product life cycle according to "conversion" and "timing", frequent used stencils of the Boston Consult Group use and from McKinsey a coordinate system with dynamic parameters. The nine field Portfolio is simply only a more differentiated variant of the managing four-field version and been based likewise on the philosophy of the product life cycle.

Before a product at the market can be introduced, it must be developed and examined for its market fitness, this is done via the product innovation process in such a way specified and is part of the product politics in marketing.

Product life cycle basic model

The individual phases postal code in the literature are broken down differently finely.

  • Introduction phase
  • Growth phase
  • Ripe phase
  • Saturation phase
  • Decrease phase
  • if necessary also still of a wake phase one speaks.
  1. With beginning of the introduction phase the enterprise made attentive already by advertisement and Public relation on the new product. Thus the conversions rise gradually. In this investment phase due to the high graduation costs neither profits are obtained, nor covered first cost. The structure of image develops due to the statements of market communication and not due to recommendations. In this phase it decides whether the market accepts the product at all. It is terminated, if the BREAK Even is reached, the proceeds curve thus the total costs breaks through.
  2. With beginning of the growth phase profits are obtained for the first time, although the expenditures for graduation and communication are continuously high. The phase is characterized by fast growth and advertisement accelerates this growth at the market, the price and condition politics increases in meaning. Also the competitors become attentive to the product ("Free Rider problem"). The growth phase ends, if the sales curve of a progressive changes on a degressive upward gradient.
  3. The ripe phase is usually the longest market phase. Here are many well-known products, which are for many years on the market. This phase is the profitabelste, since the sales curve is here highest. But gradually the profits decrease/go back, since the competition is very strong. However the enterprises have still a high market share. They can these by a suitable preservation marketing and by product variations receive and increase.
  4. With a high probability sometime then the saturation phase occurs. The product has no more market growth. By different modifications one can try now, more customer win. An example of it is Coca-Cola - of stagnation the speech cannot be there.
  5. The next phase is the decrease phase
  6. (Degeneration): The market shrinks and the recession in sales cannot not be intercepted also by purposeful marketing-Massnahmen. The product loses at market share and has a negative growth, which sink profits and which should Portfolio is settled, it is, it exists group relations with other products (Economies OF Scope). If one does not act correctly and fast here, the product possibly comes into the last phase: The product brings no more incomes, stocks for spare parts, to support etc. binds however capital. The Portfolio was not settled fast enough, unnecessary costs develops. If the fall phase appears, also the Relaunch (Rekonsolidierungsphase) of a product can be considered. The product is substantially modified and again positioned. Objective of this measure is that the product goes through a further life cycle. As example the conversion of the gulf I to the gulf II can be called.
  7. The wake phase covers all activities resulting after attitude of production in connection with the product such as guaranteeings, spare part supply, cancelling and disposal of old products as well as the the investment of operational funds. Usually the disbursements exceed the deposits in this phase, so that a correction of total product success takes place downward.

Product life cycle of the Boston Consulting Group

For the further application possiblenesses see the major item BCG matrix.

The Boston Consulting Group (BCG) is one of the oldest and most successful management consultations of the world. When into the 1970er years ever more enterprises in completely different business fields became active, they developed a concept, which is used until today as basis for business investment decisions. The BCG Portfolio in such a way specified are the basis among other things the three as independently accepted variables product life cycle, experience curve and competitive situation. This Portfolio can be evaluated also without view of life cycle, it be based however on the cyclic view, because the four phases mentioned of the product life cycles of normal way follow one another.

  1. Poor Dogs: The Poor Dogs is (with introduction or at the end of its product life cycle) the problem products, the poor dogs of the management. In the diagram of the basic model as decrease phase characterized. They have (only/only) a small market growth, sometimes even a market decrease and a small market share. Additionally even the danger of the establishment of the Verlustbringers develops, therefore the Portfolio should be settled. The standard strategy plans here innovation or elimination.
  2. Question Marks: The Question Marks, the question marks, also new generation products mentioned, is the newcomers under the products. In the diagram of the basic model as growth phase characterized. They have a certain Wachstumspotenzial, however only small market shares. The management stands before the question whether it is to invest or give the product up.
  3. Star: Star are the absolute asterisks of the enterprise. In the diagram of the basic model marked by ripe ones. They have not only a high market share, but also a high market growth. They are in a strongly growing segment and should remain as long as possible "star". They must invest therefore over to along-close up. They become cash Cows then later. Otherwise you lose market shares and become the Question Mark.
  4. Cash Cows: The cash Cows, too German milking cows, have the largest market share, however a small market growth. In the diagram of the basic model marked by saturation. They are front runners in the cash-flow and are without further investments to become "milked". The standard strategy reads position holds and yields taxes away.

For the 80's with investment decisions and in the strategy development, not only for view of the product life cycle according to data of the authors the Portfoliomatrix actually uses approx. 75 per cent of all larger enterprises. Today there is practically no diversified enterprise more, which does not work with the Portfoliokonzept.

  • Criticism at the BCG Portfolio

The view of the market growth rate, which in the model of the BCG as given factor is regarded, is questionable. Actually an enterprise can positively affect market growth by suitable marketing-Massnahmen.

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