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.