Explain the concept of product life cycle

Principles and Practice of Management notes and Revision questions and answers

The concept of the product cycle has been developed from studies of life cycles of individual products. These studies suggest that any product ahs a life cycle and will pass through a number of distinct stages which are as follows:

• Product Introduction: Production costs are high, partly as a result of development costs; price is also high; competitors are few, if any, but sales and profits are low at this stage.
• Growth: Sales rise rapidly; prices ease; unit costs decline and profits are at their peak.
• Maturity: Sales continue to rise, but less rapidly; competition is fierce and prices ease further; profits begin to level off.
• Saturation: Sales stagnate; prices become very competitive and profits begin to shrink; mass market begins to evaporate.
• Decline: Sales take a permanent down turn; profits low or non-existent; product is eventually withdrawn.

Principles and Practice of Management notes and Revision



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