Product life cycle theory is a marketing theory in which products or brands progress through a sequence of stages that includes introduction, growth, maturity, and decline. During product introduction, the market becomes familiar with the product and sales proceed through a slow growth. Following the introduction, as the consumers become more aware of the product and the marketing channels for the product development, sales grow rapidly. At some point in time, sales begin to slow as the market becomes saturated with the product, this is the maturity stage. In the maturity stage, sales are still increasing but at a lesser rate.
At some point in time sales will decrease as the product falls out of favor or substitute products are introduced into the market. This is referred to as the decline stage. Product life cycle theory was extended to the international business field because international business factors were found to affect the stages of the life cycle. The life cycle stages of introduction, growth, maturity, and decline were related to production location, market location, competitive factors, and production technology. During the introduction stages products were still being innovated and the production usually took place in the home country.
Marketing of the product also took place in the home country with some exports. The competition was limited due to the time delay of product followers and sales were based on the unique characteristics of the product. Moreover, the product was still continuing to evolve and define its characteristics based on consumer feedback. This lead to short production runs with steeper learning curves requiring more skilled labor. All these factors led to mostly home country resources being devoted to the introduction stage.
As a product moves into its growth stage, lowering unit costs and increasing channels of distribution become essential. Production locations start to move into counties with certain location advantages that lower production costs. Market locations expand to include international markets as international marketing channels develop.
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