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Chapter 6: modern firm based theories - The product life cycle theory p187…
Chapter 6: modern firm based theories - The product life cycle theory p187-189
What is it?
These are theories that incorporate factors such as; quality, technology, brand names, customer loyalty into explanations of trade flows
Describes the evolution of marketing strategies as a product matures
Consists of 3 stages
the new product stage
Firm develops new product in response to perceived need in DOMESTIC market
The domestic market provides quick market feedback as the product will be launched in an advanced economy
The firm is unsure there is a profitable market for the new product
To which Marketers monitor the market response to the product
output is limited to Domestic market & export sales are also limited
Maturing stage
Consumers see the added value and demand rises
A firms response is to increase output = economies of scale
A firm may increase production facilities
Foreign market expansion
1 more item...
It's argued that this is the point where firm globailse in response to foreign market demand
standardised product stage
Production becomes more of a commodity making firms to look for cheaper production alternatives: globalisation
Once globalised, the products begin to be imported to firms domestic market
However, marketing, innovation etc stays in domestic market where the human capital is high
International product life cycle traces the roles of innovation, market expansion etc of global rivals
