INTERNATIONAL TRADE COURSEWORK

International trade coursework

International trade coursework

Introduction

The product life cycle is one of the oldest concepts in analyzing and solving business problems. It has a great heuristic power and includes nearly all corporate functions (Dicken, P, 2007, 73-87)

The systematic division of sales development into the four phases — introduction, growth, maturity, and degeneration — seems to be logical and corresponds to managerial experience. Empirical proof for such a pattern has been given in a whole series of studies for many different branches and product categories (Dicken, P, 2007, 73-87). The nature of product life cycles for industrial goods businesses. Thus, the PLC is not a product of just theoretical considerations but justifies its popularity with the widely-accepted empirical evidence. (Dicken, P, 2007, 73-87)

Explantion

In the 50's and 60's

However, despite considerable research during the 50's 1960s and 1970s a list of problems remained unsolved up to now. Among them are the definition of metrics to detect phase transitions, the choice of the right level of aggregation (product class, product form, brand level), and the empirical generalization of the PLC concept (e.g., Porter, M, 1990, 83-98). One of these questions, the search for the right metrics, has been recently addressed by (Porter, M, 1990, 83-98). The authors also note that the empirical generalization of the PLC is still unsatisfactory.

Empirical generalizations are the bedrock of an enlarged theory building (Bass and Leone). The existence of PLCs is not in question. Too much evidence has been given not only at more aggregated levels like product classes but also for single products. Nevertheless, the empirical generalization is still criticized. Among the critics we identify two central issues. The first one is the traditional view of the PLC which can be found in basic textbooks. With reference to diffusion theory the PLC describes an ideal form which is symmetrical and bell-shaped. Indeed, this classical picture was corroborated in a lot of studies but other PLC patterns were found to be realistic, as well ( Cox; Easingwood; de and Rink). The imagination of an always bell-shaped sales development is too restrictive and does not correspond to the empirical diversity. (Porter, M, 1990, 83-98)

The second point refers to the quality of generalizing the PLC concept. (Porter, M, 1990, 83-98) proposes a catalogue of five criteria to assess the quality of empirical generalizations. Among them we find two to be doubtful as regards the PLC: usefulness for practitioners and link with theory. Even though the PLC has been tested under a wide range of conditions, we know relatively few to generalize about the length of the phases, the development of growth rates within the phases, the length of the PLC in itself and especially the forces which moderate these variables. What kind of influence has the product's degree of newness on the PLC? Does it make a difference if a radical innovation, a me-too product or a generic alternative is offered? And what are the effects of the entry order on the PLC? (Porter, M, 1990, 83-98)

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