PRODUCT LIFE CYCLE

Question 1

DEFINE life cycle’ ?

Answer 1

A life cycle’ is the period from birth or creation of an item to the end of its life. . * Products, companies and industries all have life cycles.

Classical life cycle for a product/industry goes through 4 stages or phases:

1Intro (Launched)
2Growth
3Maturity
4 Decline

Question 2

DEFINATION OF LIFE CYCLE COSTING?

Answer 2

Life cycle costing accumulates total cost of product from its inception to closure in order to assess product wise performance.

Question 3

Use of life cycle costing?

Answer 3

Life cycle costing can be important in new product launches as a company will, of course want to make a profit from the new product and the technique considers the total costs that must be recovered

Question 4

BENEFITS OF LIFE CYCLE COSTING?

Answer 4

1 Potential profitability of products can be **assessed before its major development
2 Non-profit-making products can be abandoned **at early stage before costs are committed
3 Techniques can be used to reduce costs over the life of the product.
4 Pricing strategy can be determined before the product enters production
5 **Attention can be focused **to get the product to market as quickly as possible
(The longer company can operate without competitors the more revenue can be earned)
6 By monitoring actual performance against plans, lessons can be learnt for future products
7 **Also useful for assessing strategic position **and the nature of competition in a market

Question 5

Time to market entry

Entrepreneurial companies

Answer 5

Entrepreneurial companies might look for entering a new market during introduction.

Question 6

Time to market entry
Cautious companies

Answer 6

More cautious companies might delay their entry into the market until the growth phase

Question 7

Time to market entry
DURING MATURITY PHASE?

Answer 7

Companies are unlikely to enter a market during maturity phase (unless they see growth opportunities in a particular part of the market)

Question 8

Time to market exit DURING DECLINE PHASE?

Answer 8

• A company might need to make strategic decision-about leaving a market when product is in its decline phase. It should be possible to make profits in a declining market, but better growth opportunities might exist in other markets

Question 9

• Cycle of competition?6

Answer 9

1 It is** another concept **for understanding the behaviour of competitors in a market

2 When a company achieves some success in market, competitors ** might try to do somethingeven better in order to gain a competitive advantage.
3 A new initiative by one company will result in a counter-measure **from another company
4 A typical cycle of competition affects prices and quality.
A A rival company might start to sell its product at a lower price to take its market share
B Another rival company might improve the quality at same price as yours
C First company might respond to them by improving its quality and reducing price

5 In maturity or decline phase
**
A It becomes more difficult to lower prices without reducing quality
B Competitors might try to gain a bigger share by selling at a lower price with low quality
C It leads to a spiral of falling prices and falling quality and the life cycles comes to an end
6-Concept of the Cycle of competition is useful for strategic analysis, because **it can help to explain strategies of companies in a market, and to assess future initiatives of competitors