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Product Lifecycle Of The Mp3 Player Discusses: Nolan/Norton Technology Cost, Product Life Cycle, And Stages Of Production.

1141 words - 5 pages

Overall ClassificationAnytime a company develops a new product or service, it needs to be aware that the product and/or service will not last forever. This is important to recognize in the early stages of development so that a firm can maximize their profits during the product's life cycle. Albeit, no company can accurately predict the duration of a product or service, any product/service progresses through four distinct phases. Each phase is associated with different costs, profits and risks. Collectively, these phases are known as the Product Life Cycle (PLC) and are classified into: Introduction, Growth, Maturation, and Decline.The introduction phase is the first phase for all new businesses, products, and services. Any new idea, new business or service cannot escape this phase. Sales are generally extremely low and slow to takeoff. Marketing costs are required to create customer awareness, interest, and introducing the product/service into various distribution channels are is quite high. Profits tend to be negative or low because of the low volume of sales. Lastly, competitors are very few in number since the firm introducing the product/service is typically an innovator.Businesses, products, and services in the growth stage experience a significant increase in sales. The increase in sales is due to viral marketing, an increase in the number of competitors who now have their own version of the product/service, and promotion of the product. Costs are declining on a per unit basis because the scale economies are in production. Profits rise significantly because of the increase in sales and the decrease in unit cost. However, competition increases and firms rely on product differentiation to gain competitive advantage. The MP3 player is currently in this life stage.Sales continue to grow during the early part of maturity but at a much slower pace and eventually peak. The maturity phase is classically the longest phase in the PLC and most marketing decisions are made during this phase. Costs continue to rise because of market saturation and intense competition. Profits will begin to ebb because of the combination of slowing sales and increasing costs.The decline of a product/service is inevitable and although it can be delayed, eventually all products/services will begin to deteriorate. Sales plummet and costs continue to rise as large sums of money may still be spent on promotion aimed at price concessions or continuing to attract a specific market segment. Profits are decline and marginal competitors flee the market, leaving only those competitors who are entrenched in the market and have significant market shares.Stages of ProductionEvery product/service is subjected to the Law of Diminishing Returns; it is an inescapable fate. The Law of Diminishing Returns states that at some point, equal increases in variable inputs will result in smaller and smaller increases in output. The Law of Diminishing returns typically sets in at the growth stage...

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