Product Life Cycle

Product Life Cycle (PLC) The idea of the Product Life Cycle was first developed in 1965 by Theodore Levitt in an article entitled “Exploit the Product Life Cycle” published in the Harvard Business Review on 1 November 1965. For a business, having a growing and sustainable revenue stream from product sales is important for the stability and success of its operations. The Product Life Cycle model can be used by consultants and managers to analyse the maturity stage of products and industries. Understanding which stage a product is in provides information about expected future sales growth, and the kinds of strategies that should be implemented.

Product Life Cycle model: The “Product Life Cycle” is the name given to the stages through which a product passes over time. The classic Product Life Cycle has four stages:
1} Market introduction stage. 2} Growth stage. 3} Mature stage. 4} Saturation and decline stage

1 Market introduction stage
At the market introduction stage the size of the market, sales volumes and sales growth are small. A product will also normally be subject to little or no competition. The primary goal in the introduction stage is to establish a market and build consumer demand for the product. There may be substantial research and development costs incurred in getting a product to the market introduction stage, for example, thinking of the product idea, developing the technology, determining the product features and quality level, establishing sufficient manufacturing capacity, preparing the product branding, ensuring trade mark protection, etc. Marketing costs may be high in order to test the market, launch and promote the product, develop a market for the product, and set up distribution channels. The market introduction stage is likely to be a period of low or negative profits. As such, it is important that products are carefully monitored to ensure that sales volumes start to grow. If a product fails to become profitable it may need to be abandoned.

Some of the considerations in the introduction stage include:

Product development: research and development of the basic technology and product concept, determining the product features and quality level.

Pricing: should penetration pricing or a skimming price strategy be used? A skimming price strategy might be appropriate where there are very few competitors.

Distribution: distribution might be quite selective until consumer acceptance of the product can be achieved.

Promotion: marketing efforts are aimed at early adopters, and seek to build product awareness and to educate potential consumers about the product.

Features: -
1. Costs are high 2. Slow sales volumes to start 3. Little or no competition - competitive manufacturers watch for acceptance/segment growth losses 4. Demand has to be created 5. Customers have to be prompted to try the product 6. Makes no money at this stage

2 Growth Stage
If the public gains awareness of a product and consumers come to understand the benefits of the product and accept it then a company can expect a period of rapid sales growth, enter the “Growth Stage”. In the Growth Stage, a company will try to build brand loyalty and increase market share. Profits are driven by increased sales volume (due to growth in market share as well as an increase in the size of the overall market). Profits might also be driven by cost reductions gained from economies of scale, and perhaps more favourable market prices. Competition in the Growth Stage remains low, although new competitors are expected to enter the market. When competitors enter the market a company might be subject to price competition and increase its marketing expenditure.

Some of the considerations in the Growth Stage include:

Product improvement: product quality might be improved, additional features and support services added, and packaging updated.

Pricing: if consumer demand is high the price might be maintained at a high level.

Distribution: distribution channels might be added as consumer demand increases.

Promotion: promotion is aimed at a broader audience. A company might spend a lot of resources on promotion during the Growth Stage to build brand loyalty.

Features: -
1. Costs reduced due to economies of scale 2. Sales volume increases significantly 3. Profitability begins to rise 4. Public awareness increases 5. Competition begins to increase with a few new players in establishing market 6. Increased competition leads to price decreases

3 Maturity Stage
When a product reaches maturity, sales growth slows and sales volume eventually peaks and stabilises. This is the stage during which the market as a whole makes the most profit. A company’s primary objective at this point is to defend market share while maximising profit. In this stage, prices tend to drop due to increased competition. A company’s fixed costs are low because it is has well established production and distribution. Since brand awareness is strong, marketing expenditure might be reduced, although increased marketing expenditure might be needed to retain market share and fight increasing competition. Expenditure on research and development is likely to be restricted to product modification and improvement, and perhaps research into improved production efficiency and product quality.

Some considerations for the mature product market include:

Product differentiation: increased competition in the mature product market means that a company must find ways to differentiate its product from that of competitors. Strong branding is one way to do this.

Pricing: prices may be reduced because of increased competition. Firms in the market should be careful not to start a price war.

Distribution: distribution intensifies and incentives may be offered to encourage preference to be given over competing products.

Promotion: promotion will focus on emphasising product differences and creating/maintaining a strong brand.

Features: -
1. Costs are lowered as a result of production volumes increasing and experience curve effects 2. Sales volume peaks and market saturation is reached 3. Increase in competitors entering the market 4. Prices tend to drop due to the proliferation of competing products 5. Brand differentiation and feature diversification is emphasized to maintain or increase market share 6. Industrial profits go down

4 Saturation and decline stage
A product enters into decline when sales and profits start to fall. The market for that product shrinks which reduces the amount of profit available to the firms in the industry. A decline might occur because the market has become saturated, the product has become obsolete, or customer tastes have changed. A company might try to stimulate growth by changing their pricing strategy, but ultimately the product will have to be re-designed, or replaced. High-cost and low market share firms will be forced to exit the industry.

As sales decline, a company has three strategy options:
· Hold: maintain production and add new features and find new uses for the product. Reduce the cost of manufacturing (e.g. move manufacturing to a low cost jurisdiction). Consider whether there are new markets in which the product might be sold.
· Harvest: continue to offer the product, reduce marketing expenditure, and sell possibly to a loyal niche segment of the market.
· Divest: Discontinue production, and liquidate the remaining inventory or sell the product to another firm.

Some considerations for a declining market include:

Product consolidation: the number of products may be reduced, and surviving products rejuvenated.

Price: prices may be lowered to liquidate inventory, or maintained for continued products.

Distribution: distribution becomes more selective. Channels that are no longer profitable are asked out.

Promotion: Expenditure on promotion is reduced for products subject to the Harvest and Divest strategies.

Features: -
1. Costs become counter-optimal 2. Sales volume decline or stabilize 3. Prices, profitability diminish 4. Profit becomes more a challenge of production/distribution efficiency than increased sales.

It is claimed that every product has a life cycle. It is launched; it grows, and at some point, may die. A fair comment is that - at least in the short term - not all products or services die. Jeans may die, but clothes probably will not. Legal services or medical services may die, but depending on the social and political climate, probably will not. Even though its validity is questionable, it can offer a useful 'model' for managers to keep at the back of their mind. Indeed, if their products are in the introductory or growth phases, or in that of decline, it perhaps should be at the front of their mind; for the predominant features of these phases may be those revolving around such life and death. Between these two extremes, it is salutary for them to have that vision of mortality in front of them. However, the most important aspect of product life-cycles is that, even under normal conditions, to all practical intents and purposes they often do not exist (hence, there needs to be more emphasis on model/reality mappings). In most markets the majority of the major brands have held their position for at least two decades. The dominant product life-cycle, that of the brand leaders which almost monopolize many markets, is therefore one of continuity. In the criticism of the product life cycle, Dhalla & Yuspeh state: ...clearly, the PLC is a dependent variable which is determined by market actions; it is not an independent variable to which companies should adapt their marketing programs. Marketing management itself can alter the shape and duration of a brand's life cycle. Thus, the life cycle may be useful as a description, but not as a predictor; and usually should be firmly under the control of the marketer. The important point is that in many markets the product or brand life cycle is significantly longer than the planning cycle of the organisations involved. Thus, it offers little practical value for most marketers.

Cash Flow and Fund Flow

Cash flow simply means a factual presentation of cash inflows and outflows. This will give a clear picture of cash and cash equivalents movement during a period of time. Cash flow statement shows the actual cash flow of a company. This summaries the data of cash or cash related activities only. On the other side fund flow is broader term which never confine to cash movements only but this will show the sources & application of funds and its movements over a period of time. The major key aspect of fund flow is its working capital presentation. Business operations can easily be analysed through pointing out the movements of working capital. The key decisions of management which affect capital structure can be planned by utilising data presented in fund flow statement through making a comparison of working and fixed capital which will enable progressive growth in prospective environment. Funds flow statements shows that where the funds have been generated & where they have been utilised. Thus a fund means current assets & currents liabilities of company. If current assets are more that current liabilities that working capital of a company will be increased & if current liabilities are more that current Assets it will be decrease. Thus fund flow shows the reason of change in working capital. This is a statement of sources & uses of application of funds. The sources are funds from operation, sale of fixed assets, issue of share capital & debenture, on operating receipts.

Management information system

Definition:

{1} “An 'MIS' is a planned system of the collecting, processing, storing and disseminating data in the form of information needed to carry out the functions of management. In a way it is a documented report of the activities those were planned and executed.”

{2} “ It is a computer system designed to help managers plan and direct business and organizational operations.

{3} “ MIS refers broadly to a computer-based system that provides managers with the tools for organizing, evaluating and efficiently running their departments.

When information systems are designed to provide information needed for effective decision making by managers, they are called management information systems. MIS is a formal system for providing management with accurate and timely information necessary for decision making. The system provides information on the past, present and project future and on relevant events inside and outside the organization. It may be defined as a planned and integrated system for gathering relevant data, converting it in to right information and supplying the same to the concerned executives. The main purpose of MIS is to provide the right information to the right people at the right time. The Concept of management information systems originated in the 1960s and become the byword of almost all attempts to relate computer technology and systems to data processing in business. During the early 1960s, it became evident that the computer was being applied to the solution of business problem in a piecemeal fashion, focusing almost entirely on the computerization of clerical and record – keeping tasks. The concepts of management information system were developed to counteract such in efficient development and in effective use of the computer.

The MIS concept is vital to efficient and effective computer use in business of two major reasons:

[1] It serves as a systems framework for organizing business computer applications. Business applications of computers should be viewed as interrelated and integrated computer – based information systems and not as independent data processing job.

[2] In emphasizes the management orientation of electronics information processing in business. The primary goal of computer based information systems should be the processing of data generated by business operations.

An MIS provides the following advantages.

1. It Facilitates planning: MIS improves the quality of plants by providing relevant information for sound decision – making. Due to increase in the size and complexity of organizations, managers have lost personal contact with the scene of operations.

2. In Minimizes information overload: MIS change the larger amount of data in to summarized form and there by avoids the confusion which may arise when managers are flooded with detailed facts.

3. MIS Encourages Decentralization: Decentralization of authority is possibly when there is a system for monitoring operations at lower levels. MIS is successfully used for measuring performance and making necessary change in the organizational plans and procedures.

4. It brings Co ordination: MIS facilities integration of specialized activities by keeping each department aware of the problem and requirements of other departments. It connects all decision centers in the organisation.

5. It makes control easier: MIS serves as a link between managerial planning and control. It improves the ability of management to evaluate and improve performance. The used computers has increased the data processing and storage capabilities and reduced the cost.

6. MIS assembles, process, stores, Retrieves, evaluates and disseminates the information.

Types of Information Management Systems

Document management system (DMS)
The DMS is focused primarily on the storage and retrieval of self-contained electronic data resources in the document form. Generally, The DMS is designed to help the organizations to manage the creation and flow of documents through the provision of a centralized repository. The workflow of the DMS encapsulates business rules and metadata.

Content management system (CMS)
The CMS assist in the creation, distribution, publishing, and management of the enterprise information. These systems are generally applicable on the online content which is dynamically managed as a website on the internet or intranet. The CMS system can also be called as ‘web content management’ (WCM).

Library management system (LMS)
Library management systems facilitate the library technical functions and services that include tracking of the library assets, managing CDs and books inventory and lending, supporting the daily administrative activities of the library and the record keeping.

Records management system (RMS)
The RMS are the recordkeeping systems which capture, maintain and provide access to the records including paper as well as electronic documents, efficiently and timely.

Digital imaging system (DIS)
The DIS assists in automation of the creation of electronic versions of the paper documents such as PDFs or Tiffs. So created Electronic documents are used as an input to the records management systems.

Learning management system (LMS)
Learning management systems are generally used to automate the e-learning process which includes the administrative process like registering students, managing training resources, creating courseware, recording results etc.

Geographic information system (GIS)
The GIS are special purpose, computer-based systems that facilitate the capture, storage, retrieval, display and analysis of the spatial data.

Intrapreneurship

What is Intrapreneurship?

Intrapreneurship is the practice of entrepreneurship by employees within an organization.

Difference between an entrepreneur and an intrapreneur:

An entrepreneur takes substantial risk in being the owner and operator of a business with expectations of financial profit and other rewards that the business may generate. On the contrary, an intrapreneur is an individual employed by an organization for remuneration, which is based on the financial success of the unit he is responsible for. Intrapreneurs share the same traits as entrepreneurs such as conviction, zeal and insight. As the intrapreneur continues to expresses his ideas vigorously, it will reveal the gap between the philosophy of the organization and the employee. If the organization supports him in pursuing his ideas, he succeeds. If not, he is likely to leave the organization and set up his own business.

Example of intrapreneurship: A classic case of intrapreneurs is that of the founders of Adobe, John Warnock and Charles Geschke. They both were employees of Xerox. As employees of Xerox, they were frustrated because their new product ideas were not encouraged. They quit Xerox in the early 1980s to begin their own business. Currently, Adobe has an annual turnover of over $3 billion.

Features of Intrapreneurship: Entrepreneurship involves innovation, the ability to take risk and creativity. An entrepreneur will be able to look at things in novel ways. He will have the capacity to take calculated risk and to accept failure as a learning point. An intrapreneur thinks like an entrepreneur looking out for opportunities, which profit the organization. Intrapreneurship is a novel way of making organizations more profitable where imaginative employees entertain entrepreneurial thoughts. It is in the interest of an organization to encourage intrapreneurs. Intrapreneurship is a significant method for companies to reinvent themselves and improve performance. In a recent study, researchers compared the elements related to entrepreneurial and intrapreneurial activity. The study found that among the 32,000 subjects who participated in it, five percent were engaged in the initial stages of a business start-up, either on their own or within an organization. The study also found that human capital such as education and experience is connected more with entrepreneurship than with intrapreneurship. Another observation was that intrapreneurial startups were inclined to concentrate more on business-to-business products while entrepreneurial startups were inclined towards consumer sales. Another important factor that led to the choice between entrepreneurship and intrapreneurship was age. The study found that people who launched their own companies were in their 30s and 40s. People from older and younger age groups were risk averse or felt they have no opportunities, which makes them the ideal candidates if an organization is on the look out for employees with new ideas that can be pursued.

Entrepreneurship appeals to people who possess natural traits that find start ups arousing their interest. Intrapreneurs appear to be those who generally would not like to get entangled in start ups but are tempted to do so for a number of reasons. Managers would do well to take employees who do not appear entrepreneurial but can turn out to be good intrapreneurial choices.

Organisation

What is An Organisation???

When a group of people work together to achieve specific target, the context in which they work is referred to as an Organisation. Organisations can be small, involving only a few people in one location or they can involve thousands of people scattered through out the world. They can be very simple in structure, or they can be extremely complex. What separates organizations from other activities is that organizations usually operate within a defined structure and have a socialization process that is determined by the people who control them. Organizations can also be defined in terms of the products and services they offer to consumers. For example, corporations such as Ford Motors and the American Ex-press Corporation provide us with both products and services. General Motors builds and sells cars while American Express provides us with credit cards and financial ad-vice. Each is an organization but they are vastly different in what they do. Another way to define an organization is by the particular roles individuals playing them. This type of definition implies that understanding what an organization is depends on knowing how and where individuals fit into the organization.

Definition of Organisation:

An organization is a social arrangement which pursues collective goals, which controls its own performance, and which has a boundary separating it from its environment. The word itself is derived from the Greek word Organon meaning tool. It’s a “Social unit of people systematically arranged and managed to meet a need or to pursue collective goals on a continuing basis.” All organizations have a management structure that determines relationships between functions and positions, and subdivides and delegates roles, responsibilities, and authority to carry out defined tasks. Organizations are open systems in that they affect and are affected by the environment beyond their boundaries.

An organization is defined by the elements that are part of it, its communication, its autonomy and its rules of action compared to outside events. In sociology "organization" is understood as planned, coordinated and purposeful action of human beings to construct or compile a common tangible or intangible product. Sociology distinguishes the term organization into planned formal and unplanned informal (i.e. spontaneously formed) organizations. By coordinated and planned cooperation of the elements, the organization is able to solve tasks that lie beyond the abilities of the single elements. The price paid by the elements is the limitation of the degrees of freedom of the elements. Advantages of organizations are enhancement, addition and extension. Disadvantages can be inertness and loss of interaction.

Role of organisation:

Most of us don’t realize the importance that organizations play in our lives, but they continually affect us, as you will see. Although there are many people who work alone, most of us work with others. We are usually conceived in the most basic of all organizations — the family. Our birth usually takes place in another organizational environment — the hospital. We are certainly affected throughout our lives by a large organizational structure called “government” that passes laws to keep us organized and collects taxes to pay for services. And, during our lifetimes, a majority of us spend our time studying, working, and playing in organizations. For example, most of our formal learning takes place in an educational organization, such as the University of Kolkata; we may work for organizations like Microsoft, KPMG, Proctor and Gamble Corporation, or the US Bank; and we play in organizations such as the YMCA, the tennis club, or the local softball league. Obviously, it is impossible to list all of the ways in which organizations affect us. It is important, however, for you to realize that organizations play a dominant role in our lives. If we were to ask, what single activity fills most people’s time more than anything else? The answer besides sleep for most is the dreaded four-letter word: WORK.

Organizational context, an idea:

The organizational context refers to the scope of an entity, such as

} parent organization (organization owning one or more entities)

} enterprise (an entire organization)

} division or department (a sub-organization within the overall organization)

} work unit (a sub-sub-organization)

} Work role (one person’s job or part of a job).