INTERNATIONAL BUSINESSF FOR MANAGEMENT PPT 1.pptx

international business management for MBA

1. PRODUCT LIFE CYCLE THEORY

2. The product life cycle theory was forwarded by Raymond Vernon in 1960s. According to the product life theory of trade,the production location for many products moves from one country to another depending upon the stages in product’s life cycle. It was based on the observation that most of 20 th century a large proportion of world’s new products has been developed by US firms are sold in US markets first. ( eg. Mass produced automobiles, telivisions , cameras, etc ). Vernon argued that wealth and size of US Market gave US firms a strong incentive to develop new products. INTRODUCTION TO PRODUCT LIFECYCLE THEORY

3. STAGES - PRODUCT LIFE CYCLE

4. 1 . INNOVATION / INTRODUCTION STAGE: Innovation in response to observed need. Exporting by the innovative country. Evolving product characteristics. Example: The bulb was invented in USA by Thomas Alva Edison in November 1879 after 3000 test designs the bulb was invented and received the patents rights 4 Jan 1879. This was the innovation stage of bulb.

5. 2.GROWTH STAGE : Increase in exports by the innovating country More competition Increased capital intensity Some foreign production (outsourcing) Example : After innovation of bulb the production was started by Edison Electric illuminating company of New York in 1880. So the demand was huge in the market.

6. 3. MATURITY STAGE: Decline in exports from the innovating country More product standardization More capital intensity Production start-ups in emerging economies. Exports decreases from the innovating country as foreign production displaces it. Example :After capturing the whole market in USA the Edison electric illuminating company has exported their product in the regions where the bulb is not yet launched.

7. 4. DECLINE STAGE: Concentration of production in emerging economies Innovating country becoming net importer Import stage: The country in which the innovation first emerged and exported from , becomes the importer. Example : after capturing the global market of the bulb the edison electric company merged with Thomas Houston electric company and formed GENERAL ELECTRIC and start the production in developing countries like china in 1908 .