Traditionally, products go through a four-stage cycle. As a product goes through the phases, the priorities for performance objectives change.
Required:
Outline and comment on the phases of a product life cycle. (10 marks)
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- Introduction stage. The product or service offers something new to customers. There are unlikely to be any competing products, but heavy advertising costs may be incurred to raise customer awareness. Design changes may be required as customer needs become better understood. A business needs to establish an operational capability that allows it to be flexible and capable of adapting and changing.
- Growth stage. The volume of demand for the product increases, and there are likely to be more competitors in the market. Product features may become important between different suppliers. The main objective for the operations function could be to keep up with the growing demand. Speed of response to customer orders and reliability of supply could also be significant. Quality standards will have to be maintained or improved in response to the growing competition, and cost and price are likely to be much more significant.
- Market maturity. Demand levels off. Some early competitors are likely to have left the market, which might now be shared by a small number of organisations. Product design will be largely standardised, although organisations might try to develop new varieties of the product to extend its life cycle. Organisations in the market are likely to compete on price and/or on value for money (product differentiation). To remain competitive, it will be important to achieve low costs through productivity improvements, while still providing reliability of supply.
- Decline stage. Total demand declines and competitors will start to withdraw from the market. There will nevertheless be excess capacity in the industry, and the remaining organisations will compete on price. Cost targets will remain the key operational objective. The company may also decide to stop making and selling the product, and to focus its energies instead on another developing/growing product.