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The international product life cycle is a theoretical model describing how an industry evolves over time and across national borders. This theory also charts the development of a company’s marketing program when competing on both domestic and foreign fronts. International product life cycle concepts combine economic principles, such as market development and economies of scale, with product life cycle marketing and other standard business models.
The four primary elements of the international product life cycle theory are: the structure of the demand for the product, manufacturing, international competition and marketing strategy, and the marketing strategy of the company that invented or innovated the product. These elements are categorized depending on the product’s stage in the traditional product life cycle. Introduction, growth, maturity, and decline are the stages of the basic product life cycle.
During the introduction stage, the product is new and not completely understood by most consumers. Customers that do understand the product may be willing to pay a higher price for a cutting-edge good or service. Production is dependent on skilled laborers producing in short runs with rapidly changing manufacturing methods. The innovator markets mostly domestically, occasionally branching out to sell the product to consumers in other developed countries.
International competition is usually nonexistent during the introduction stage of the international product life cycle, but during the growth stage competitors in developed markets begin to copy the product and sell domestically. These competitors may also branch out and begin exporting, often starting with the county that initially innovated the product. The growth stage is also marked by an emerging product standard based on mass production. Price wars often begin as the innovator breaks into an increasing amount of developed countries, introducing the product to new and untapped markets.
At some point, the product enters the maturity stage of the international product life cycle and even the global marketplace becomes saturated, meaning that almost everyone who would buy the product has bought it, either from the innovating company or one of its competitors. Businesses compete for the remaining consumers through lowered prices and advanced product features. Production is stable, with a focus on cost-cutting manufacturing methods, so that lowered prices may be passed on to value-conscious consumers.
Product innovators must guard both foreign and domestic markets from international competition, while finally breaking into riskier developing markets in search of new customers. When the product reaches the decline stage, the innovators may move production into these developing countries in an effort to boost sales and keep costs low. During decline, the product may become obsolete in most developed countries, or the price is driven so low that the market becomes close to 100% saturated.
The international product life cycle for the pharmaceuticals industry is one of the toughest and most unique.
In this industry, it is so difficult to get a product on the market with years of clinical trials and agency approval processes. An added catch on the international stage is that each country generally has to approve the product, making international growth difficult.
Those lucky enough to get past those hurdles are faced with extremely tough competition. Competitors are always looking to come up with the next miracle drug that may make yours obsolete.