Use Extended Examples to Compare and Contrast the Characteristics of a Growing and a Mature Product Market. Discuss How Different Product Market Phases Affect a Company’s Cost Recovery

Use extended examples to compare and contrast the characteristics of a growing and a mature product market. Discuss how different product market phases affect a company’s cost recovery. In order to answer this question I will try to give a brief explanation of such business concepts as product life cycle and its stages which are development and research, introduction, growth, maturity, saturation and decline. Also I will discuss how some of these phases can affect company’s cost recovery. Each company nowadays is finding ways to make a product by which their customers will be satisfied and happy.

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Each product has its life cycle and it progresses through the sequence of stages. This sequence is known as product life cycle (M. Surridge, A. Gillespie, 2004). First stage is the development and research, during this stage main idea is to test and develop product (M. Surridge, A. Gillespie, 2004). For chemical industries this stage of product life cycle is usually one of the most important and difficult stages, because in this phase their product is tested many times in order to be able to put this product on the sale. Sometimes such products can’t get beyond this phase.

The second stage is introduction where the product is introduced to the market and put on sale (M. Surridge, A. Gillespie, 2004). In this stage vast majority of companies are unlikely to cover initial cost of this product, because the distribution and promotion costs are likely to be too high. In this stage the aim of firm is to increase brand loyalty and try to increase demand of the customers. The third stage is growth. If product has reached this phase it means that public awareness has increased and sales started to rise significantly (M. Surridge, A. Gillespie, 2004).

Distributors will accept this product much easier because they will be confident in of sales. Also in this stage company starting to earn profit and covering the initial cost of this product. Lastly in this stage firm usually have two choice of pricing (Netmba, 2009). First one is to increase but if only this product has a high demand. Second one is to decrease price in order to increase market share or get additional customers. The fourth stage is maturity. This phase is the most profitable because sales are continuing to grow and advertising expenditures are reduced because of the brand awareness.

Also on some point of this stage companies are trying to modify the product in order to make it different from the competitors who may have introduced the similar product. During this stage the main goal is to extent the market share which is obtained on the previous stage of product life cycle. (Netmba, 2009) The fifth stage of product life cycle is saturation where sales are starting to decrease due to changes in customers taste or change in the fashion, it is depends on product which is produced.

This is the phase where company should undertake some extension strategies which may extend the existence of the product on the market (projectalevel, 2009). The last is decline. If product has reached this points that means that the company failed to use appropriate extension strategy and sales started to fall continuously. This problem may be obtained by different reasons, for example company has not sustained in the competitive market, customers have changed their taste of product is not fashionable anymore. Bizhelp24, 2009) In order to make it clearer I will show the graph which describes the product life cycle through all six stages: {draw:frame} (http://www. fao. org/docrep/V4450E/V4450E03. gif) Comparing two stages of product life cycle which are growth stage and maturity stage it is clear that in both stages costs of production, promotion is reduced (Wikipedia, 2009). However in the maturity stage these costs are reduced more because in this phase product is well established on the market and there is no need in significant publicity. Sales are different in this stage.

In the growth sales are always increasing while in the maturity they are starting to stabilize and one day it reaches its peak (Wikipedia, 2009). Also the start of the maturity stage is caused by competitors who are introduced competitive product while your product sales were growing. Therefore firms are thinking about pricing strategy more careful on the maturity stage in order to avoid jumping their product to the sales decline stage. While in the growing stage companies do not pay much attention to the pricing. In addition in both stages firms are trying to make an improvement to the product in aim to attract more customers.

As I understand the term of the cost recovery, it is a decrease of a price rate that firms pays from the capital for the purchasing of an asset over the period time. There is a big change in the cost recovery during the product life cycle period, and I will try to explain how it is changed from one phase to other. In the introduction and development phase it is impossible to get the cost recovery because this product has not entered the market yet. On the next stage which is introduction companies may find it difficult to gain cost recovery, because the product is new and it has just entered the market.

The next stage is growth if a company achieved to enter this stage they have a big opportunity to get cost recovery because of the economy of scale. Economy of scale may include: buying a materials through long term contracts, getting the bank loan on the less interest and others (Wikipedia, 2009). On the next stage which is maturity the economy of scale also play significant role to get a cost recovery. However in this stage company become well established on the market which can help company to pay less for the promotion and improving product awareness is no more in such need as it was previously.

In the last two stages which are saturation and declining it is unlikely that company can get cost recovery, because in this phases company will try to make their product to grow again and will spend a lot of money again. According to my research the knowledge of the product life cycle is very important to each company which wants to make its product perfect for the market and can prevent it from the declining. Cost recovery is also important because it may give you a big advantage in your competitive market. Bibliography: “Product Life cycle management”, Retrieved 03. 03. 2009, 2009, from http://en. wikipedia. rg/wiki/Product_life_cycle_management “Product Life Cycle”, retrieved 03. 03. 2009, 2009, from http://www. netmba. com/marketing/product/lifecycle/ “The Product Life Cycle”, Retrieved 03. 03. 2009, 2009, from http://www. bizhelp24. com/small-business-portal/guarantee-your-sales-growth-8. html “Product Life Cycle”, retrieved 03. 03. 2009, 2009, from http://www. projectalevel. co. uk/business/lifecycle. htm “Product Life Cycle graph” , retrieved 03. 03. 2009,2009 from http://www. fao. org/docrep/V4450E/V4450E03. gif M. Surridge, A. Gillespie (2004). Business Studies, Hodder Arnold

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