Use extended examples to compare and contrast the characteristics of a growing and a mature product market. Critically discuss how different product market phases affect a company’s cost recovery. To fully answer this question, some terminology will have to be defined both as pure definitions and in the context to which they relate to the subject of management. We must first establish the ‘product life cycle’ and what this entails and then how it could affect a business’s cost recovery performance.
One must also then detail what a business’s cost recovery performance involves. Cost recovery is defined as the recovery of the cost of goods sold#, or the recoupment of the purchase price of a capital or qualified asset through depreciation over a prescribed time period#. That is to say, a company will not claim any gross profits until the cost of purchase or manufacturing has been realised from the sale of the product. This is usually realised through the first few sales of the product which should cover.
A product life cycle is slightly more difficult to define. Products can be viewed in the same light as humans in so much as, they have a finite shelf life. It is accepted that there are 4 main stages of a product life cycle, these being; Market introduction, Growth, Maturity and Saturation and the eventual decline. Each stage has its own characteristics and because of this they have their own influence on the cost recovery. If at each stage there is a great expenditure, this will be reflected in the cost recovery performance.
A company will have to sell more to overcome this thresh hold which increases as expenses at the production level increase. These stages are in reference to the marketing of the product but also in terms of product management there are also stages key to this; conception, design, realization and the maintenance of the product. Before, during and after the marketing of the product, product management is important. It is with these we will start. The fist phase, conception, is very simple and mainly inexpensive.
This stage will usually involve market research and will based on that research explore different avenues to suggest improvements to the customer. From this the design of the product can begin. Really at this stage there is only ideas are being bandied about. In this phase the company or team will look to specify and plan the product. The next phase is the design phase and this would be the beginnings of the product form. This is where the product will begin to take shape and thus development of prototypes will lead on from this.
In this stage normally one would look to define the product fully. In the last phase there would only have be a very general feel to the product but in this phase there would be body added to the framework. The product will also be tested developed and analyzed all at this stage and then it will go on to be ‘realized’. This stage of realization is the manufacturing process all the way to the delivery of the finished goods. This stage and the last will be where most of the manufacturing cost will be incurred and it will be here where processes will be looked at for stream lining.
The design and testing of the prototypes will incur design and manufacturing costs and at that stage it is critical that the product stand up to the tests as if not changes would then be incorporated meaning more tests must be run, incurring charges that will not be covered by sales of product. At the realization stage however, because the product has passed all tests and stood up to scrutiny, the costs here will mainly be parts and labour costs. These can cost nevertheless can be recouped as these goods can be packaged and sold.
The final stage of this management cycle will be that of the management and operation of the product. As discussed there are also stages of PLCM. In the first stage, market introduction, the costs are usually high as demand has to be created. This will be done by advertising and marketing schemes. A company will try and create a buzz, and will use particular branding slogans and gimmicks. An example of this can be seen with apple, which remodelled the iPod, and in doing so released the iconic dancing silhouette along with different popular songs at the time.
Apple again has used other techniques to corner a particular market, examples being that of the mobile phone industry. Apple has managed to find an aspect in the market and exploit it brilliantly. They play on the uniqueness of the product, for example, they have taken video calling facility and re-engineered it to be apple specific, calling it ‘Facetime’ to add to the trick. Although Facetime is really just video calling, what Apple have done to make it specific to Apple product, not only just Iphones means that they can at the same time advertise it to be used with other Apple products simultaneously.