Life Cycle Costing Benefit

Question 1

Life cycle costing benefit

Answer 1

Here are the smart notes:

Life Cycle Costing Benefits

1. Assess potential profitability before major development.
2. Abandon non-profitable products early.
3. Reduce costs over the product’s life.
4. Determine pricing strategy before production.
5. Focus on reducing research and development time.
6. Monitor actual performance to improve future products.

Relevance to Strategic Management

1. Consider cash flows and profitability over the entire life cycle.
2. Assess the product’s position in its life cycle.
3. Evaluate future prospects for profits and cash returns.

Timing Market Entry and Exit

1. Entrepreneurial companies: Enter during the introductory phase.
2. Cautious companies: Enter during the growth phase.
3. Companies unlikely to enter during maturity phase unless:
   
   • Growth opportunities exist.
   • Entry costs are low.
4. Strategic decision to leave the market during the decline phase.

Life Cycle Analysis for Competition Analysis

1. Assess strategic position and competition in the market.
2. Number of competitors influenced by the product’s life cycle phase.