Product Life Cycle in Car Industry
PRODUCT LIFE CYCLE IN CAR INDUSTRY 6
ProductLife Cycle in Car Industry
ProductLife Cycle in Car Industry
Bardakçi(2014) acknowledges that products of all categories go through aparticular lifespan referred to as the product life cycle. Theproduct life can relate to products linked to specific brands as wellas those that comprises unnamed products. According to Hachuła andSchmeidel (2016), product life cycle is affected by many factors suchas brands, technology, and competition which makes products to gothrough five stages of development including development phase,introduction stage, growth phase, and the decline stage. As such,these five stages of product life cycle will be analyzed in detail toreveal how they influence the auto industry.
Thefirst stage of the product life cycle is the incubation stage alsocalled product development stage which is characterized by zero salesbecause the firm is usually in preparation to introduce the newproduct. Therefore, at this stage, the car manufacturer designs,develop, brands and then tests the intended car model beforeintroducing it to the market. The incubation step of the car consumesa lot of capital due to high advertisement costs. At this stage, themanagers can plan alternative marketing and distribution strategiesof the intended car model to address the challenges that the new carmodel is likely to face when introduced to the market.
Theintroduction stage follows product incubation phase, and it ischaracterized by low sales because the customers lack sufficientinformation concerning the new product. Zhang et.al (2015) point outthat some companies usually announce their products beforeintroducing the product to the market, but it is quite clear thatsuch actions can alert the competitors who react by releasing similarproducts in surprise. The introduction phase of the product lifecycle is also characterized by high advertisement costs because thecar manufacturers take measures to increase customer awareness of thebrand model in an effort to target the early adopters of the carbrand model. As a result of the low sale volume and higheradvertisement costs, the car manufacturers suffer from negativeprofits during the introduction stage of their new brand model intothe market. This happens because car manufacturing companies striveto build primary demand and establish a market for the new modelthrough new car model awareness techniques to develop the market.Consequently, the quality level of the new model car is establishedand intellectual property like trademarks and patents obtained.Additionally, low penetration pricing technique is utilized by thecar manufacturers to rapidly build share market in an effort ofrecovering product incubation costs. Moreover, the car companies useselective distribution approach for the new model car until when thecustomers start showing signs of product acceptance an indicationthat the new product is not distributed to a wide geographical areato save on the distribution costs. As such, the auto works bypromoting the product offering to reveal the features making theproduct stand out from the rest in the market. For example, the carmay tout car`s fuel efficiency, speed plus the car’s voicerecognition software thereby selling the product to the wealthierconsumers in the market. When the vehicle industry first introducedthe hybrid cars in the market, some of the marketing strategiesrevealed at their introductory phase was showcasing the car’s fuelefficiency.
Bardakçi(2014) asserts that the growth stage is the third stage of theproduct life cycle characterized by the firm`s actions of buildingthe brand presence to increase the market share. As such, during thegrowth stage, the quality level of the car brand and model ismaintained but additional features and some support services maybeadded. However, the pricing strategy is maintained at this stagebecause the car manufacturing companies enjoy the increasing demandfor the new models that comes with no competition. As a result,promotion of the new model car and brand is aimed at a broaderaudience making the new product to be distributed at a widergeographical such as the international market area to increase thesales and profits.
Thematurity stage follows the growth stage, and it is a time when thestrong growth in sales of the products decreases because of emergingcompetitors who strives to manufacture similar products (Zhang et.al,2015). Therefore, the primary aim of the car manufacturers includesdefending market share while maximizing profits. The maturity stageof the product life cycle in the car industry is then followedclosely by the decline stage that features downward drift in profitsand sales. According to Hachuła and Schmeidel (2016), the downwarddrift in profits at the decline stage of product life cycles happensbecause of the drop in sales due to shifts in consumer preference,technological advances, and increased foreign and domesticcompetition. This results in profit erosion, increased price-cutting,and overcapacity. Nonetheless, decline stage happens slowly in thecar manufacturing industry because cars take quite a long time to becompletely worn out which makes the sales to petrify at a slow rate.
Productlife cycle in car industry can be summarized according to thefollowing graph which shows the sales and profit margins against timefrom the time when the new model car is introduced to the market upto the time that it declines.
Introduction Growth Maturity Decline
Inconclusion, cars go through five stages of the product life cycleincluding the development phase, introduction stage, growth phase,maturity phase and then decline stage. The development stage ischaracterized by zero sales, the introduction stage features negativeprofits, and the growth phase witnesses increased sales and profits.The maturity stage features stagnant growth in sales while thedecline phase shows reduced sales and profits.
Bardakçi,H. (2014). Analysis of the Product Life Cycle and the Detection ofAzerbaijani Consumers Position in the Product Life Cycle.InternationalRefereed Journal of Marketing and Market Researches,01(2),174-174. http://dx.doi.org/10.17369/uhpad.201429253
Hachuła,P., & Schmeidel, E. (2016). The Model of Demand and Inventory ina Decline Phase of The Product Life Cycle. FoliaOeconomica Stetinensia,16(1),208-221. doi:10.1515/foli-2016-0013
Zhang,X., Han, X., Liu, X., Liu, R., & Leng, J. (2015). The pricing ofproduct and value-added service under information asymmetry: aproduct life cycle perspective. InternationalJournal Of Production Research,53(1),25-40. doi:10.1080/00207543.2014.922707
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