Product Life Cycle Theory¶
The Product Life Cycle Theory was developed by Raymond Vernon, a professor at Harvard Business School, in the 1960s. This theory, rooted in marketing, outlines that a product goes through three main stages during its life cycle:
- New Product
- Maturing Product
- Standardized Product
Overview¶
Vernon's theory posits that the production of a new product initially takes place entirely in the home country where it was innovated. This premise was particularly relevant in explaining the manufacturing prowess of the United States during the 1960s, a period when US manufacturing dominated many global industries in the aftermath of World War II.
Stages of the Product Life Cycle¶
1. New Product¶
- In this initial stage, a product is introduced to the market. Innovation and development are key, with production typically located in the country of origin to closely monitor market response and manage the high costs associated with R&D.
2. Maturing Product¶
- As the product gains acceptance and market share, production processes become more streamlined, and the focus shifts towards enhancing efficiency and expanding market reach. This phase marks the transition towards more competitive pricing and broader distribution channels.
3. Standardized Product¶
- In the final stage, the product becomes fully standardized, with an emphasis on cost minimization. Production often shifts to low-cost countries to leverage cheaper labor and materials, reflecting a global approach to manufacturing.
The graph illustrates the three stages of product development according to Raymond Vernon's Product Life Cycle Theory:
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New Product: This stage is marked by innovation, high costs, and production typically occurring in the country of origin. It represents the initial introduction of the product to the market.
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Maturing Product: In this phase, production processes are streamlined for efficiency, and there's a focus on expanding market reach. The product gains acceptance and a broader distribution.
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Standardized Product: The final stage is characterized by standardization, cost minimization, and a shift in production to low-cost countries. This reflects the product's global production and distribution strategy.
The graph provides a visual representation of the product's journey from innovation to becoming a globally standardized commodity.
Application: The Personal Computer (PC)¶
The PC serves as a classic example of Vernon's Product Life Cycle Theory. Introduced as a new product in the 1970s, the PC evolved through the 1980s and 1990s into a mature product. Today, it exemplifies a standardized product, with the majority of its manufacturing now taking place in low-cost countries across Asia and Mexico.
Conclusion¶
Raymond Vernon's Product Life Cycle Theory provides a valuable framework for understanding the evolution of products from innovation to global standardization. It highlights the dynamic nature of product development and the strategic shifts in production and marketing that occur as a product moves through its life cycle.
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