Lifecycle and Competition

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Lifecycle and Competition

Lifecycle

Lifecycle

  1. At the Intro stage   = Few Competitors

  2. At the Growth stage = Fight for market share is strong

  3. At the Maturity stage = The weakest competitors die /Price-cutting for volume then emphasis on low costs

  4. At the Decline stage = The exit of some competitors

Lifecycle Model & Costing implications

Lifecycle Diagram

At each phase, the sales and costs spent will be different, both in terms of volume and price

Stage Cost Type
Development R&D and set-up
Introduction Marketing and Advertising
Growth Costs to increase capacity; Learning effect and Economies of Scale; Working capital increases
Maturity Marketing and product enhancement
Decline Restructuring costs
  • The product lifecycle will help:

    1. Decide when to enter / leave market

    2. New products - see costs and sales over all its life

    3. Existing products - assess where it is in the lifecycle and what the future prospects are

  • Cycle of Competition

    This again tries to help understand competitors behaviour
    “New initiative - copied and bettered by competition expected”

    Effect

    • In a growing market - prices fall and quality improves

    • In the maturity phase - lower prices only at expense of quality (so lower quality)

    • In the decline phase - lower prices to the point of no profitability

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