Product life cycle
A product life cycle consist of 5 stages through which a product passes that is *introduction
*growth*maturity*decline. the figure
shown previously represent sales
and profit associated with
each stage and some practical
example of
products are also shown
on it.
1. Introduction
At this stage, sales begin and profit goes from –ve to +ve. In this stage ,the demand is low
.because the costumer don’t
know much about the product. The organization has to invest heavily in advertisement to make the product familiar to the costumers. the volume sales are low,and
if proper care is not taken,
there is chances
to product failure.
The product next enters a stage at rapid growth. Early in this stage (due to acceptability of the product by the costumer) there is drastic jump in sales and profit rise. It is because of limited or
no competition.
During this
stage the mandate
for operation is somehow
to keep
up
with
demand; efficiency is
less of concern.
During this stage, sales level off and profit begins to decline. New competition create to cut costs
and ultimately on unit profit margin. Now operation must stress
on
efficiency,
although
marketing can ease the pressure
by intensifying to differentiate the
product.
At last the existing product enters to a declining stage and becomes obsolete. Either demand despisers
or a better less expensive
product.
Life cycle suggest when to eliminate the existing product and introduce a new one. This life
cycle varies greatly from product to product. For example it took 15 years for “Xerox” to
introduce electrostatic copy m/c .in contrast and computer and microchip industry, products become
obsolete in months.
Production function
(a) Functions of industrial enterprise
(b) Functions of process
(a)Functions
of industrial enterprise
The core area of the diagram represents the organization’s policy
making group. In a hierarchic
triangle, this group would occupy the apex. The overlapping portions of the circle denote the co- operation needed from the
two groups in order to establish overall policy. The
slope of each function
and its relationship to
the production process
are
briefly discussed in the following.
A fundamental
function of much production system is to produce a physical output.
Manufacturing
includes the operations and direct support services for making the
product operation management is concerned with production scheduling, performance standards, method improvement, quality
control, plant layout and material handling. A plant service section handles
shipping receiving, storing
and transporting
raw material parts and tools. The plant engineering
group is usually responsible for in-plant construction, maintenance, design
of
tools and
equipment and other problems of mechanical, hydraulic or
electrical
nature.
The recruitment and training
of the personnel needed to operate the production system are the traditional responsibilities of the personnel function. Along
with it, this department takes care
health, safety, wage administration of the employees. Labour
relation and employee
services and benefits are increasingly important.
Many organizations give major emphasis on product development because the ultimate profit of any organization depends primarily
on the nature/quality of product. The product must
be customized. A separate section
is responsible for this
task.
Many ideas of product development comes through the marketing function. Selling is the primary interest of marketing. Sales forecasts and estimate of the nature of future demands is also performed by this department. Contact with customers provide feedback about the quality
expected from
the firm and opinion
on how well the products meet quality standard.
Internal
financing includes reviewing the
budgets
for
operating sections,
evaluating of proposed investments for production facilities and preparing balance sheet. Besides these the other responsibilities
is to see how well the
firm is scoring in the business competition
game.
In this business game analogy
the accounting functions are collection of cost data for materials direct labour and overhead. Special reports are
prepared regarding scarp, parts and finished goods inventories, pattern of labour hours and similar data applicable
to production activities.
In a narrow sense, purchasing is limited
to accounting materials from outside sources. But while
carrying out this activity, it requires to investigate the reliability
of vendors, type of
materials needed, co-ordinating material purchase volume with the requirement as per schedule,
discovering new material and process. The purchasing function serves the other functional areas,
overlap sometimes with inventory control, material inspection, shipping and receiving, sub-
contracting and internal transportation.
(b)Functions of production process
Types of production system:
The
production system of a company mainly uses facilities, equipment’s and operating
methods (called the production system) to produce goods that satisfy
customers’ demand. The above requirements of a production system depend on the type of product that the company offers and the strategy that it employs to serve its customers. The classification of production
system is explained in the table.
Job shop
production
§ Job shop is appropriate for manufactures of small batches of many different products,
each of which is custom designed and requires its own unique set of processing
steps or routing through production process.
§ The production system in which different types of product follow different sequences through different shops. Ex. Furniture manufacturing company, restaurant, prototype industry.
§ Much time is spent waiting for
access to
equipment. Some equipment
overloaded.
§ A process technology suitable for a variety of custom designed products in
some volume.
§ This production system adopts
process
layout as
by this
production system we manufacture more variety of products
at low product volume.
Batch production
§ A process technology suitable for variety of
products in varying volumes.
§ Here limited product variety which is fixed for one batch of product. Ex. Bakery shop,
medicine shop.
§ Within the wide range of products in the facility, several are demanded repeatedly and in large volume.
§ This type
of
production
system
should
be
preferred when there
is
wide
variety of products in
wide variety of volumes.
Assembly line
(mass) Production
§ A process technology suitable for a narrow range of standardized products in high volumes.
§ The successive units
of
output
undergo
the
same sequence
of
operation
using
specialized equipment usually positioned
along a production line.
§ The product variety is fixed here. Ex. Assembly of television sets, assembly of auto,
assembly of computer
keyboard, cold
drinks factory etc.
Continuous
production
§ A process technology suitable
for
producing a continuous flow of products.
§ The
product is highly standardized.
§ Material and products are produced in continuous, endless flows, rather than in batches
or discrete units.
§ Continuous flow technology affords high volume, around-the clock operation with
capital intensive, specialized
automation.
Dimensions of Product
Strategies:
• Product-Positioning.
• Product-Repositioning.
• Product-Overlap.
• Product Scope.
• Product-Design.
• Product Elimination.
• New Product.
• Diversification.
• Value-Marketing.
1. Analyze product
attributes that are salient to
Customers.
2. Examine the distribution of these attributes among different
segments.
3. Determine the
optimal position for the product in regard to each attribute, taking
into consideration
the position occupied by existing brands.
4. Choose an overall position for the product (based on overall match between product attributes
and their distribution in the population and
the position of existing brands)
Product Positioning Strategy
• Definition: Placing a brand in that part of the market where it will have a favorable
reception compared with
competing brands.
• For Ex The marketers of “Liril” soap wants the people to think “Liril” when they think soap.
The marketers of “Colgate” want the consumers to think “Colgate” when they think toothpaste etc.
• Objective
– To position the product in the market so that it stands
apart from competing
brands. (b) To position the
product so that it tells customers
what you stand for, what you are, and how you would like customers
to evaluate you. In the case of positioning multiple
brands:
• (a) To seek growth by offering varied products in differing segments of
the market.
• (b) To avoid competitive threats to
a single brand
• Requirements: Use of marketing mix variables, especially design and communication
efforts.
– Successful management of a single brand requires positioning the brand in the market so that it can stand competition from the toughest rival and maintaining its unique position by creating the aura of
a distinctive product.
– Successful management of multiple brands requires careful
positioning in the
market so that multiple brands do not compete with nor
cannibalize each other. Thus
it is important to be careful in segmenting
the market and to position an
individual product as uniquely suited to a particular segment through design and
promotion.
– Expected Results:
– Short term success
– Meet as much as
possible the needs of specific
segments of the market
– Limit sudden changes
in sales.
– Make customers faithful to
the
brands.
Product Re-positioning Strategy
• Definition: Reviewing the current positioning of the product and its marketing mix and seeking
a new position
for it that seems more appropriate.
• Objectives: (a) To increase the life of the product. (b) To correct an original positioning mistake.
• Requirements:
– If this
strategy is directed toward existing customers, repositioning is sought
through promotion of more varied uses
of the product.
– If the business unit wants to reach new users,
this strategy requires that the product be
presented with a different twist to the people
who have
not
been favorably inclined toward it. In doing so, care should be taken to see that, in the process of enticing new
customers, current
ones are not alienated.
– If this strategy aims at presenting new uses of the product, it requires searching for latent uses of the product, if any. Although all products may
not have latent uses, there are products
that
may
be used for purposes not originally intended.
• Expected Results:
– Among existing customers:
increase in sales growth
and profitability.
– Among new users: enlargement of the overall market, thus putting the product on a growth route, and increased
profitability.
– New product uses: increased sales,
market share, and
profitability.
Product Overlap
Strategy
• Definition:
Competing
against
one’s own brand
through introduction
of
competing
products, use of private
labeling, and
selling to original-equipment manufacturers.
• Objectives:
Product overlap strategies can include selling similar goods in different
markets, regions
or international
countries. For example,
a company may sell widgets
and cogs; both offer extremely similar consumer benefits.
However, the company may sell
widgets in the United
States
and cogs in Canada.
•
– (a) To
attract more customers to the product and thereby increase the overall
market.
– (b) To work at
full capacity and
spread
overhead.
– (c) To sell to competitors;
to realize economies of scale and cost
reduction.
• Requirements:
– (a) Each competing
product must have its own marketing organization to compete
in the market.
– (b) Private
brands
should not become profit drains.
– (c) Each brand should find its special niche in the market. If that doesn’t happen,
it will create
confusion
among customers and
sales
will be hurt.
– (d) In the long run, one of the brands may be withdrawn, yielding its position to
the other brand
• Expected Results:
– Increased market
share.
– Increased growth.
• Definition: The product-scope strategy deals with the perspectives of the product mix of
a company. The product-scope strategy
is determined by
taking into account the overall mission of the business unit. The company may adopt a single-product strategy, a multiple-product
strategy,
or a system-of-products strategy.
• Objectives:
– Single product: to increase economies
of scale
by
developing specialization.
– Multiple products: to cover
the risk of potential
obsolescence of the single product by adding additional products.
– System of products: to increase the dependence of the customer on the company’s
products as well as
to prevent competitors from
moving into the market.
• Requirements:
– (a) Single product:
company must stay
up-to-date on the product and
even
become the technology leader
to avoid
obsolescence.
– (b) Multiple products: products must complement one another in a portfolio of
products.
– (c) System of products: company must have a close understanding of customer
needs and uses of the products.
• Expected Results: Increased growth, market share, and profits with all three strategies.
With system-of-products strategy, the company
achieves monopolistic control over the market, which may lead to some problems
with the Justice Department, and enlarges the concept of its product/market
opportunities.
Product Design Strategy
• Definition: The product-design strategy deals with the degree of standardization of a product. The company has a choice among
the
following strategic options: standard product, customized product,
and standard product with
modifications.
• Objectives:
– Standard product: to increase economies
of scale of the company.
– Customized product: to compete against mass producers of standardized products
through product-design
flexibility.
– Standard product with modifications:
to combine the benefits of the two previous strategies.
– Requirements:
– Close analysis of
product/market perspectives
and environmental
– Changes, especially technological changes.
• Expected Results:
– Increase in growth, market
share, and profits. In addition, the
– third strategy allows the
company to keep close contacts with the market and
– Gain experience in developing new standard
products.
Product Elimination Strategy
• Definition: Cuts in the composition of a company’s business unit product portfolio by pruning
the
number
of
products
within a line
or
by totally
divesting a division or business.
• Objectives:
– To eliminate undesirable products because their contribution to fixed cost and
profit is too
low,
– Eliminate Products that its future performance looks grim, or because they do not
fit in the business’s
overall strategy.
– The product elimination strategy aims
at shaping the best possible mix of
products and balancing the
total business.
– Requirements:
– No special resources
are
required to eliminate a product or a
division.
– However, because
it is impossible to reverse the decision once the elimination
• Requirements:
– No special resources
are
required to eliminate a product or a
division.
– An in-depth analysis must be done to
determine
• (a) the causes of current problems;
• (b) The possible
alternatives, other than elimination,
that
may solve problems
(e.g., Are any improvements in the marketing mix possible?);
• (c) The repercussions that elimination may have on remaining
products or units.
• Expected Results:
– In the short run, cost
savings
from production runs, reduced
– inventories,
and in some cases
an improved return on investment
can be
– Expected.
In the long run, the sales of the remaining products may increase
because more efforts are
now concentrated on them.
New Product
Strategy
• Definition: A set of operations that introduces (a) within the business, a product new to
its
previous line
of products; (b) on the
market, a product that provides
a new type of satisfaction. Three alternatives emerge from the
above:
product
improvement/modification,
product imitation, and product innovation.
• Objectives: To meet
new needs and
to
sustain
competitive
pressures on existing
products. In the first case, the new-product strategy is an offensive one; in the second
case,
it is a defensive one.
• Requirements: A new-product strategy is difficult to implement
if a “new product development system” does not exist within a company. Five components of this system should be assessed:
– Corporate aspirations toward
new products,
– Organizational
openness to creativity.
• Requirements: A new-product strategy is difficult
to implement if a “new product development system” does not exist within a company. Five components of this system should be assessed:
– Environmental
favor toward creativity
– Screening method
for
new ideas, and Evaluation process
• Expected Results: Increased market
share and profitability.
– are now concentrated on them.
Diversification Strategy
• Definition:
Developing unfamiliar
products and markets
through:
– Concentric diversification (products introduced are related to existing ones in
terms of marketing or
technology),
– Horizontal diversification (new products are unrelated to existing ones but are
sold to the same customers)
– Conglomerate diversification (products are entirely new).
• Objectives: Diversification strategies
respond to the desire
for:
– Growth when current
products/markets have
reached maturity,
– Stability by spreading the risks of fluctuations
in earnings,
– Security when the company may fear backward integration from one of its major
customers,
– Credibility to
have more weight
in capital markets.
• Requirements: In order to reduce the risks
inherent in a diversification
strategy, a business
unit should:
– Diversify its activities
only
if current product/market opportunities are limited.
– Have good
knowledge of the area in which it diversifies.
– Provide the products
introduced with adequate support.
– Forecast the effects
of diversification on existing lines of products.
– Expected Results:
– Increase in sales.
– Greater profitability and flexibility
• Definition: The value-marketing strategy concerns delivering on promises made for the product or
service. These
promises involve
product quality, customer
service, and
meeting time commitments.
• Objectives: Value-marketing strategies
are
directed toward seeking total customer satisfaction. It means striving for excellence to meet customer
expectations.
• Requirements:
– (a) Examine customer value perspectives.
– (b) Design programs to
meet customer quality, service, and
time requirements.
– (c) Train employees and distributors
to deliver
on promises.
– Expected Results: This strategy enhances customer satisfaction, which leads to
customer loyalty, and, hence, to higher market share. This strategy makes the firm
less vulnerable to price wars,
permitting the firm
to charge higher
prices and,
thus, earn higher profits.
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