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P3-Product Life Cycle (PLC)

ACCA P3考试:Product Life Cycle (PLC)
1. The Model
Product lifespans vary by type of product. Perishable goods (e.g. fruit and vegetables) have a short lifespan. Durables (e.g. cars) have a longer lifespan. Although lifespans vary, product life cycles have common elements and follow similar stages.
2. The details
StagesFeaturesExamples of Possible
Strategies
DevelopmentHigh cost outlay (e.g. in
research)European airline manufacturer
investing $600 million in new plant in US (Airbus in Alabama).
IntroductionInitial product launch,
Customers unfamiliar with product,
Low profitabilityRapid skimming (high level promotion and high price),
Slow penetration (low price)
GrowthSales volumes increase,
Competitors enter market,
Falling unit costs (economies of scale, learning effect, etc)Add value/Improve quality,
Expand distribution,
Reduce price,
Build brand loyalty
MaturityStable demand for product,
Increased market competitionModify market/product mix,
Find "spin-off" products to build
on goodwill of brand
DeclineHaving reached saturation point demand falls,
Decline in number of competitorsDivest,
Focus on niche market,
Minimise promotion

1. Benefits
The PLC model helps focus managers and planners on:
The stage of the life cycle a product has reached;
The remaining life of a product—the length of time the product will continue to contribute to profits; and
The urgency to develop new products or improve products.
2. Weaknesses
Only indicates where the product/market is now rather than where it will be.
The theory cannot be used for forecasting due to uncertain stage duration.
Life cycle patterns vary.
No allowance for products that fail during development or introduction.
No allowance for products that seem to be mature forever.

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