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Angela Emma Rudd BMA
Business Studies The Product Life Cycle Notes
The product life cycle traces the sales of a product over its life. The typical path
for a product can be divided into five stages.
1. Research and Development
During this stage the basic idea is developed and tested. This can be
expensive for a firm and no revenue is being generated. The length of the
research and development process will vary depending on the product.
Some products never get beyond the development stage.
This is when the product or service is put on sale, but at this stage income
from sales is unlikely to cover initial launch costs. In the launch phase
distribution and promotion costs will be high.
When the product becomes known, and hopefully accepted by customers,
sales should grow. At this stage it should be slightly easier to get
distributors to stock products, as they will be more confident of sales. The
firm should begin to make profits at this stage, as revenues begin to
4. Maturity and Saturation
At this point in a products life, sales begin to slow. The product is likely to
have been in the market for some time and competitors may well have
launch similar products.
Eventually, the sales of any product will begin to fall. The firm may find it
more difficult to get the product distributed and may be forced to cut the
price to maintain sales.
Extending the Life Cycle
A firm may try to prevent sales going into decline by using extension strategies.
These might include the following:
Increase the use of the product
Encourage the use of the product on more occasions
Reduce the price
Adapt the product
Introduce promotional offers
Change the image of the product
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Angela Emma Rudd BMA
Product Launch and Capacity Utilisation
Capacity of a firm refers to the maximum amount it can produce at a
moment in time. This depends on the numbers and skills of its employees
and its capital equipment and technology.
Capacity utilisation refers to the amount that a firm is producing
compared to the amount it could produce.…read more