The Benefits Of The International Product Life Cycle Theory

Summarize a minimum of 3 benefits a company might obtain from the globalization of markets.

All sizes and types of companies can take advantage of the globalization of markets with the following potential benefits such as 1) reduced marketing cost by distributing and promoting the standard products or services globally with standardized approach (e.g. Coca-Cola and McDonald’s companies, 2) bigger market opportunities to increase revenues with access to broader coverage in the global marketplace, 3) enable more stable income with diversify markets globally for better granularity to compensate the impact of certain seasonal goods or services from only one domestic market, 4) lower risk from inconsistent or unexpected short product life cycle

It states that a company will begin produce and export its products and later undertake foreign direct investment (FDI) or transfer it to the location with best conditions for production based on its life cycle. The theory is held that every product has a specific three stages of cycle. Stage 1 is the new product introduction phase that the product is produced in the most developed regions normally at headquarter of the company which has better capability of technology, and qualified labors to design and produce the new product, as well as closer to a home market to accept innovative product concept easier. Stage 2 is the maturing product phase that the production volume increases when both domestic and export markets begin accepting the products. The additional production capacity may begin in markets abroad. Stage 3 is the standardized product phase that developed region loses its comparative advantage on fully standardized commodity product when more competitors produce at lower costs and export from less developed regions. Companies may produce at other lower cost production facilities abroad and even reduce local production with more import to serve domestic market. This will enter into declining phase before end of

The four key approaches to corporate strategy is described as following. 1) A growth strategy is defined to increase the size and intention of a corporate’s operation by expanding through external partnership in joint ventures, mergers and acquisitions, strategic alliances which may provide faster turn around solution meeting the objective. It can be also designed through internal efforts to develope organic growth via expanding new business units with new technology on new products development or new different operation models in driving new distribution of sales, market penetration and expansion. 2) A retrenchment strategy is designed to downsize a corporate’s business scale and scope due to the change of companies’ direction, market or political environment. It may require major restructuring on cutting down labor forces, production facilities, phase out the old or declining business units, reducing liabilities or diverting overhead cost to focus on other new business interests. 3) A stability strategy is designed to protect against any change to meet the companies’ objectives and the shareholders interest. Examples, it may be limited by licenses, quotas or regulations on selling cigarette, liquor, textile, etc. It may be also related to interim strategy to stable the business from excess capacity of supply like steel or mining