vikram chawla
Vikram Chawla
Stage 1 - Local Innovation: Stage 1, represents a regular and highly familiar product life cycle in operation within its original market. Innovations are most likely to occur in highly developed countries because consumers in such countries are affluent and have relatively unlimited want. From the supply side, firms in advanced nations have both the technological know-how and abundant capital to develop new products.
Stage 2 - Overseas Innovation: As soon as the new product is well developed, its original market well cultivated, and local demands adequately supplied, the innovating firm will look to overseas markets in order to expand its sales and profit. Thus, this stage is known as a “Pioneering” or “International Introduction” stage. The technological gap is first noticed in other advanced nations because of their similar needs and high-income levels.
Competition in this stage comes from usually US Firms, since firms in other countries may not have much knowledge about innovation. Production cost tends to be decreasing at this stage because by this time the innovating firm will normally have improved the production process. Supported by overseas sales, aggregate production costs tend to decline further because of increased economies of scales. A low introductory price is not necessary because of the technological breakthrough; a low price is not desirable because of heavy and costly marketing effort needed to educate consumers in other countries about the new products.
Stage 3 - Maturity: Growing demand in advanced nations provide a movement for firms there to commit themselves to starting local production, often with the help of their government’s protective measures to preserve infant industries. Thus, these firms can survive and succeed in spite of relative inefficiency.
Development in competition does not mean that the initiating country’s export level will immediately suffer. The innovating firm’s sales and export volumes are kept stable because LDCs are now beginning to generate a need for the product. Introduction of the product in LDCs help offset any reduction in export sales to advanced countries.
Stage 4 - Worldwide imitation: This stage means tough times for the innovating nation because of its continuous decline in exports. There is no more new demand anywhere to cultivate. The decline will certainly affect the US innovating firm’s economies of scale, and its production cost thus begin to rise again. Consequently, firms in other advanced nations use their lower prices to gain more consumer acceptance abroad at the expenses of the US firm. As the product becomes more and more widely aware, imitation picks up at a faster pace. Towards the end of this stage, US export declines to nothing and any US production still remaining is basically for local consumption.
Stage 5 - Reversal: The major characteristics of this stage are product standardization and comparative disadvantage. The innovating country’s comparative advantage has disappeared and what is left is comparative disadvantage. This disadvantage is brought about because the product is no more capital-intensive or technology-intensive but instead has become labor-intensive for LDCs. LDCs now can establish sufficient productive facilities to satisfy their own domestic needs as well as to produce for biggest market in the world. For e.g. the black and white televisions are now no more manufactured in USA as many Asian firms can produce them much less expensively than any US firms.
Stage 2 - Overseas Innovation: As soon as the new product is well developed, its original market well cultivated, and local demands adequately supplied, the innovating firm will look to overseas markets in order to expand its sales and profit. Thus, this stage is known as a “Pioneering” or “International Introduction” stage. The technological gap is first noticed in other advanced nations because of their similar needs and high-income levels.
Competition in this stage comes from usually US Firms, since firms in other countries may not have much knowledge about innovation. Production cost tends to be decreasing at this stage because by this time the innovating firm will normally have improved the production process. Supported by overseas sales, aggregate production costs tend to decline further because of increased economies of scales. A low introductory price is not necessary because of the technological breakthrough; a low price is not desirable because of heavy and costly marketing effort needed to educate consumers in other countries about the new products.
Stage 3 - Maturity: Growing demand in advanced nations provide a movement for firms there to commit themselves to starting local production, often with the help of their government’s protective measures to preserve infant industries. Thus, these firms can survive and succeed in spite of relative inefficiency.
Development in competition does not mean that the initiating country’s export level will immediately suffer. The innovating firm’s sales and export volumes are kept stable because LDCs are now beginning to generate a need for the product. Introduction of the product in LDCs help offset any reduction in export sales to advanced countries.
Stage 4 - Worldwide imitation: This stage means tough times for the innovating nation because of its continuous decline in exports. There is no more new demand anywhere to cultivate. The decline will certainly affect the US innovating firm’s economies of scale, and its production cost thus begin to rise again. Consequently, firms in other advanced nations use their lower prices to gain more consumer acceptance abroad at the expenses of the US firm. As the product becomes more and more widely aware, imitation picks up at a faster pace. Towards the end of this stage, US export declines to nothing and any US production still remaining is basically for local consumption.
Stage 5 - Reversal: The major characteristics of this stage are product standardization and comparative disadvantage. The innovating country’s comparative advantage has disappeared and what is left is comparative disadvantage. This disadvantage is brought about because the product is no more capital-intensive or technology-intensive but instead has become labor-intensive for LDCs. LDCs now can establish sufficient productive facilities to satisfy their own domestic needs as well as to produce for biggest market in the world. For e.g. the black and white televisions are now no more manufactured in USA as many Asian firms can produce them much less expensively than any US firms.
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