The product life cycle: Stage 2: Growth
STAGE 2: GROWTH
If sales begin to grow after a product is introduced, there is an incentive for competitors to break the monopoly position. They can often do this by making slight product changes, thereby overcoming the protection conferred through patents. At the same time, demand is likely to be growing substanii- tially in foreign markets, particularly in other industrial countries. In fact, demand may be sufficient to justify the capital expenditure to produce in some foreign markets in order to reduce or eliminate transport charges and tariffs.
Either the innovator or the new entrant may begin producing abroad, 'but the output at this stage is likely to stay almost entirely in the foreign country with the new manufacturing unit. Let us say, for example, that U.S. production had a monopoly that has been broken by Japanese output. The Japanese output will be sold mainly in Japan because: (1) there is growth in the Japanese market; (2) unique product variations are being introduced for Japanese consumers; and (3) Japanese costs may still be high owing to production start-up problems.
Because sales are growing rapidly in many markets, there are greater
incentives at this level for the development of process technology. However,
product technology may not yet bp WPII HpyplnppH because of the number of
product variations introduced by different competitors who are trying to take a leadership position by gaining market share.. Thus the production process
may still be characterized as labor-intensive during this stage, but it is becom-
ing less so. The original producing country will increase its exports in this
stage but face the loss of certain key export markets for which local produc-
tion has commenced.
If sales begin to grow after a product is introduced, there is an incentive for competitors to break the monopoly position. They can often do this by making slight product changes, thereby overcoming the protection conferred through patents. At the same time, demand is likely to be growing substanii- tially in foreign markets, particularly in other industrial countries. In fact, demand may be sufficient to justify the capital expenditure to produce in some foreign markets in order to reduce or eliminate transport charges and tariffs.
Either the innovator or the new entrant may begin producing abroad, 'but the output at this stage is likely to stay almost entirely in the foreign country with the new manufacturing unit. Let us say, for example, that U.S. production had a monopoly that has been broken by Japanese output. The Japanese output will be sold mainly in Japan because: (1) there is growth in the Japanese market; (2) unique product variations are being introduced for Japanese consumers; and (3) Japanese costs may still be high owing to production start-up problems.
Because sales are growing rapidly in many markets, there are greater
incentives at this level for the development of process technology. However,
product technology may not yet bp WPII HpyplnppH because of the number of
product variations introduced by different competitors who are trying to take a leadership position by gaining market share.. Thus the production process
may still be characterized as labor-intensive during this stage, but it is becom-
ing less so. The original producing country will increase its exports in this
stage but face the loss of certain key export markets for which local produc-
tion has commenced.
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