Page 10 - Portfolio Analysis
P. 10
FIGURE 4
PRODUCT LIFE CYCLE
Sales and profits
Maturity
Growth
Decline
Introduction
Sales
Profit
Time
Normally a company would have a mix of products/businesses with
representation in each of the stages of the life cycle. Thus the concept of a
PLC is a further aid to understanding product/business strategies.
However, this will only be the case if we can clearly place a
product/business in a particular stage and can also determine the duration
of the cycle. Moreover, the strategic use of the PLC often hinges on
forecasting changes in the growth rate and in particular in establishing the
end of the growth and maturity stages.
When studying both the experience curve and the product life cycle much
reference was made to market share. It is important that we understand
what is meant by the term and indeed how market share is measured.
