This national transfer theory of product production assumes that the information transmission between countries is limited, the production function is variable, and the consumption structure of each country is different. It is pointed out that products have different demands for production factors in different stages of their life cycle, and the richness of production factors in different countries determines the production stage and export situation of that country.
The theory of product life cycle makes the theory of comparative advantage and the theory of resource endowment dynamic, which well explains the phenomenon that some countries have changed from exporters to importers of certain products after the war. A typical product life cycle can generally be divided into four stages, namely, lead-in period (or lead-in period), growth period, maturity period and decline period.
(1) Stage 1: Entry (Entry) Stage
Refers to the product from design, production, until put into the market, into the testing stage. When the new product is put on the market, it enters the introduction period. At this time, there are few varieties of products, and customers still don't understand the products. Except for a few customers who pursue novelty, almost no one really buys products. In order to expand the market, manufacturers have to invest a lot of publicity expenses to promote their products. At present, due to the limitation of production technology, the production batch of products is small, the manufacturing cost is high, the advertising cost is high, the product sales price is high, and the sales volume is extremely limited. Enterprises usually can't make profits, but they may lose money.
(2) the second stage: growth period
When the product enters the introduction period and the sales are successful, it enters the growth period. Growth period means that the product has achieved good results through trial sales, and the buyer gradually accepts the product, and the product stands firm in the market and opens up the market. This is the stage of demand growth, and both demand and sales are rising rapidly. Production costs have fallen sharply and profits have increased rapidly. At the same time, competitors will gradually enter the market to participate in the competition, which will increase the supply of similar products, reduce prices, gradually slow down the growth rate of corporate profits, and finally reach the highest point of life cycle profits.
(3) the third stage: maturity
Refers to products that enter mass production and enter the market steadily. After the growth period, with the increase of the number of people buying products, the market demand tends to be saturated. At this time, the products are becoming more and more popular and standardized, with low cost and large output. Sales grew slowly until it turned around and went down. Due to the intensification of competition, manufacturers of similar products have to increase investment in product quality, color, specifications and packaging services. This has increased the cost to some extent.
(4) The fourth stage: recession.
It means that the product has entered the elimination stage. With the development of science and technology and the change of consumption habits, the sales volume and profit of products are declining, and the products are aging in the market and cannot meet the market demand. There are other new products with better performance and lower price on the market, which can meet the needs of consumers. At this time, enterprises with higher costs will stop production one after another because they are unprofitable, and the life cycle of such products will end one after another and eventually withdraw from the market completely.
Product life cycle is a very important concept, which is directly related to the formulation of enterprise product strategy and marketing strategy. If managers want to make their products have a long sales cycle, so as to earn enough profits to compensate for all the efforts made and all the risks suffered when launching products, they must seriously study and apply the product life cycle theory. In addition, product life cycle is also a powerful tool used by marketers to describe products and market operations. However, in the process of making marketing strategy, the product life cycle seems to be a bit insufficient, because the strategy is both the cause and the result of the product life cycle, and the current situation of the product can make people think of the best marketing strategy. In addition, the application of product life cycle is also limited when predicting product performance.
The theory of product life cycle fails to answer: why can a product in some countries still become the world leader in the case of small domestic market or slow development? Why don't industries in many countries lose their competitive advantage as predicted by this theory? Faced with these new problems, Michael Porter put forward a new theoretical paradigm, that is, the theory of national competitive advantage. In his view, whether a country's industry can have international competitiveness depends on its national competitive advantage, which is determined by the interaction of the following six factors: factor conditions, demand conditions, market structure and company strategy, related industries and supporting industries, government and opportunities. Porter's theory fills the gap in the new trade theory. Of course, there is no absolutely good theory that can fully explain all trade phenomena. With the continuous development of international trade practice, trade theory will be improved and developed.
The advantage of product life cycle theory is that product life cycle (PLC) provides a set of applicable marketing planning viewpoints. It divides products into different strategic periods, and marketers can adopt different marketing mix strategies according to the different characteristics of each stage. In addition, the product life cycle only considers two variables, sales volume and time, which is easy to understand.
Its disadvantages are:
(1) It is difficult to confirm the criteria for dividing the starting point and ending point of each stage of product life cycle.
(2) Not all product life cycle curves are standard S-shaped, but there are many special product life cycle curves.
(3) It is impossible to determine whether the product life cycle curve is applicable to a single product project level or a product collection level.
(4) The curve only considers the relationship between sales volume and time, and does not involve other variables that affect sales volume, such as cost and price.
(5) It is easy to cause "marketing myopia", and good products that still have market value will be eliminated from the product line prematurely.
(6) The decline of products does not mean that they cannot be regenerated. If appropriate improvement strategies are adopted, the company may create a new product life cycle.
Significance: (1) Product life cycle theory reveals that any product, like a biological organism, has a process from birth to growth to maturity and then to recession, and constantly innovates and develops new products.
(2) With the help of the product life cycle theory, we can analyze and judge which stage of the product life cycle, speculate on the future development trend of the product, correctly grasp the market life of the product, and adopt corresponding marketing mix strategies according to the characteristics of different stages to enhance the competitiveness of enterprises and improve their economic benefits.
(3) The product life cycle can be extended.