BCG Matrix and the Product Life Cycle

1394 Words May 21st, 2014 6 Pages
Introduction:
The BCG Matrix and the Product Life Cycle are two important tools that relate to different aspects of a product’s performance:
• The BCG looks at market share and market growth and how they impact on cash usage and generation.
• The PLC looks at sales/revenues over time and levels of profitability.

Boston Consulting Group (BCG) Matrix
Businesses must keep their product offerings relevant and profitable to stay in operation. The Boston Consulting Group developed a tool, called the BCG matrix, for categorizing a firm’s products in relation to the overall product life cycle. Product life cycle is based on the observation that products develop, similar to animals, through distinct phases of maturity that differ in amount
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Introduction Stage – This stage of the cycle could be the most expensive for a company launching a new product. The size of the market for the product is small, which means sales are low, although they will be increasing. On the other hand, the cost of things like research and development, consumer testing, and the marketing needed to launch the product can be very high, especially if it’s a competitive sector.
Growth Stage – The growth stage is typically characterized by a strong growth in sales and profits, and because the company can start to benefit from economies of scale in production, the profit margins, as well as the overall amount of profit, will increase. This makes it possible for businesses to invest more money in the promotional activity to maximize the potential of this growth stage.
Maturity Stage – During the maturity stage, the product is established and the aim for the manufacturer is now to maintain the market share they have built up. This is probably the most competitive time for most products and businesses need to invest wisely in any marketing they undertake. They also need to consider any product modifications or improvements to the production process which might give them a competitive advantage.
Decline Stage –

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