The Business Life Cycle - Mr. White's Pagemr-white.weebly.com/uploads/2/3/1/9/23195662/life.pdf ·...
Transcript of The Business Life Cycle - Mr. White's Pagemr-white.weebly.com/uploads/2/3/1/9/23195662/life.pdf ·...
Time
Sales $
Establish Growth Maturity Post- Maturity
Steady State
Renewal Plateau
Decline - cessation
High set up costs for fixtures, fittings and stock.
Obtaining funding / loans from financial institutions due to risk
Slow sales growth due to lack of exposure to the market.
Trouble attracting the right staff
Choosing competitive product.
Finding the right legal structure.
Size and location of premises.
Marketing strategies / promo costs
Sourcing finance to grow business
Establishing systems to control production costs
Rapid growth
Increased customer awareness
Diversified product range
Better management of production.
Cost savings – Economies of Scale
Distribution and marketing est.
Obtainable finance
More employees – Leads to specialisation
Maintaining quality as output grows.
Develop systems to evaluate performance.
Managing cash flow in expanding biz.
Improving efficiency as biz grows (economies of scale).
Rapid growth levels off.
New competition may enter market.
Biz reaches max size in premises.
Management may become stuck or satisfied with current state.
May work on reducing production costs to maintain profits.
Staying responsive to consumer demands. Staying competitive.
Identifying opportunity for innovation in products and services.
Sustaining motivation of management and staff.
Rationalising biz operation and reducing costs.
Steady State: maintain sales, remains profitable, no changes to strategy.
Renewal: Takes off, expands again. New products, takeover / merger, new markets.
Decline and Final Closure: loses competitive advantage, products obsolete, profits decline.
Understanding the changing tastes and needs of consumers. Developing new products.
Shifting into new or related markets where growth opportunities exist.
Orienting management and staff towards change, new methods, new structures and procedures.
Time
Sales $
Establish Growth Maturity Post- Mat
Steady State
Renewal Plateau
Decline - cessation
Voluntary Cessation: A biz closes at any time during the life cycle. The decision is made by the business owner.
Involuntary Cessation: Business owners are forced to close due to circumstances beyond control.
Owner does not want to take on new challenge or phase.
Owner receives offer to sell.
Death of the owner
Retirement of the owner.
Owner not satisfied with investment.
A lack of business management skills.
Excessive borrowing. Bankruptcy
Failure to seek or use prof advice.
Being out-done by competitors or not responding to change. Not enough consumer demand.
Unfavourable economic conditions.
Death or illness of key individual
Is a declaration that a business, or person, is unable to pay his or her debts.
Can be voluntary or involuntary.
Involuntary bankruptcy occurs when a creditor applies to a court for a Bankruptcy order. The court appoint a representative to collect money owed. Business and personal assets of owner may be sold to pay debts to creditors. This is called realisation.
Product Life Cycle (PLC):The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).
Each product may have a different life cycle
PLC determines revenue earned
Contributes to strategic marketing planning
May help the firm to identify when a product needs support, redesign, reinvigorating, withdrawal, etc.
May help in new product development planning
May help in forecasting and managing cash flow
Time
ProductDevelop-
ment
Introduction
Profits
Sales
Growth Maturity Decline
Losses/Investments ($)
Sales andProfits ($)
Product Life Cycle
Sales
Costs
Profits
Marketing Objectives
Product
Price
Low sales
High cost per customer
Negative
Create product awareness and trial
Offer a basic product
Use cost-plus
Distribution Build selective distribution
Advertising Build product awareness among early adopters and dealers
Introduction Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Rapidly rising sales
Average cost per customer
Rising profits
Maximize market share
Offer product extensions, service, warranty
Price to penetrate market
Distribution Build intensive distribution
Advertising Build awareness and interest in the mass market
Growth Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Peak sales
Low cost per customer
High profits
Maximize profit while defendingmarket share
Diversify brand and models
Price to match or best competitors
Distribution Build more intensive distribution
Advertising Stress brand differences and benefits
Maturity Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Declining sales
Low cost per customer
Declining profits
Reduce expenditure and milk the brand
Phase out weak items
Cut price
Distribution Go selective: phase out unprofitable outlets
Advertising Reduce to level needed to retain hard-core loyal customers
Decline Stage of the PLC
Stage 1: Market Introduction Pepsi bottles the new flavored product and places
it on the market for consumers.
Pepsi also spends a lot of money advertising the new flavor creating awareness.
Stage 2: Market Growth Customers like the flavor and begin to make
routine purchases.
Coke introduces their competing flavor.
Stage 3: Market MaturityMore competitors enter the market taking
some of Pepsi’s profits.
Stage 4: Sales DeclineCustomers have moved on to the next new
flavor.
Some loyal fans stay behind.