International-Business-Dr-R-Chandran-E-book

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International Business- Dr. R. Chandran
In the first stage of the product life cycle a minimum percentage of the total
production may be exported. Labors intensive items are not standardized in
the initial stage. Rapid change in the production process may not take place.
Obviously, production with standardization will be a Herculean task. At the
same time, since cost of production is not known to the customer, there is a
possibility of adding comfortable margins. For example, entertainment
electronic items innovated by Sony made a windfall gain right from the
beginning. Dell is enjoying the same kind of benefits for its laptops. The
major challenge in this stage is to educate and enhance the skill levels of
labors force until the standardization is achieved. Once the labors force is
trained and competitive, the organization can perform well.
2. Growth stage
Growth stage has few salient features:
1. It increases in export to many countries by which the company generates
huge revenue.
2. More competitive forces crop up from a country by innovation, country of
entry and any other third country.
3. The organization becomes high capital intensive.
4. The innovator resorts to foreign production units in order to bring down
the cost and come closer to customer.
Since the customers are aware of the products and the demand is likely to
grow substantially, setting up manufacturing units become inevitable. While
Sony products have huge demand in South East Asia and Middle East, the
company started manufacturing products in Malaysia. Hewlett Packard
started setting up units in South East Asia due to rapid growth in sales in the
whole region. The innovating company will increase its quantum of exports
and is prepared to incur small loss in the export markets where the
manufacturing subsidiary unit will commence its operations.
3. Maturity stage
This stage has following features:
1. There is a gradual fall in quantum of exports from innovating country.
2. Standardization and quality aspects are pre-requisites.
3. Sophisticated machineries are used, hence is huge.
4. Price war is inevitable due to many players.
5. Production facilities are available in many developing countries at a
low labors cost.
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