Looking for international product life cycle theory with example? This essay focuses on the definition, characteristics, and importance of international product life cycle using the examples of two influential brands: Apple and Microsoft.
Apple and Microsoft are the major computer companies in the world. Apple has dominated the industry by making hardware devices and software programs. Microsoft has dominated the software sector. This case study looks at the two companies in reference to international product life cycle theory. The theory describes how a product or service evolves from the initial stage to the decline stage.
The model is also used to explain the development of marketing programs used by companies in the international markets. The theory encompasses various elements such as product life cycle, economies of scale, and business models (Hill 2007). Therefore the development of the products produced by two companies can be assessed using the theory.
International Product Life Cycle Theory: the Basics
International product lifecycle theory was developed after the failure of the earlier trade models such as Hecksher-Ohlin’s model of international trade. International product life cycle theory was developed by Raymond Vernon.
The theory was used to explain the developments and patterns of international trade (Hill 2007). The theories in the field of international trade could not clearly explain the relationship between capital utilization and labor in the development of products and the shape of trade in international markets (Ball 2008).
In the year 1960 the theory was first applied in America. The country was believed to be the most innovative market that produced most products for other countries in the world. According to the theory, America as the market innovator could develop products and export them to other countries.
After repetitive production, the country would focus on imports. Moreover, as the product moves through the life cycle, the producing country tends to focus on foreign direct investment (Appleyard & Steven 2006).
Further Developments of International Product Life Cycle Theory
In addition to early developments, international product life cycle theory has undergone a lot of changes. More developments have been made to improve its efficiency. One of the key changes to the theory was the inclusion of differences between countries. The concept of country differences indicates that various countries are able to trade if they have different innovative approaches, climate, and geographical features (Ball 2008).
The concept of similarity between countries has also been used to enhance the development of the theory. In this case, a product that is produced in one country can perform well in another country with similar features. For example, if a computer is developed in America by Apple, the best place it can sell is Canada since the two countries tend to share similar features (Hill 2007).
Development of the theory has also embraced the concepts of dependence, independence, and interdependence. Dependence refers to a situation where one country relies on another. For example, most developing countries depend on the developed nations for the supply of computer software. Independence refers to a state where one country can produce and buy its own goods (Appleyard & Steven 2006).
International Product Life Cycle: Example from Computer Industry
International product life cycle theory can be applied to the computer industry. Based on stages in the product life cycle, it is evident that computers were first introduced by American companies such as Apple and Microsoft. At the introduction stage the computers were targeted for American markets. Apple and Microsoft produced related products in the same industry.
At the introduction phase in the year 1975, Microsoft produced computer software and programs for American consumers. The same case is applied to Apple, which produced computers that were targeted for American markets.
Growth is the second stage where the product is produced in other regions as the demand of the product increases. Currently, Microsoft creates most of the computer software from other regions such as Canada and England (Charles 2011).
In maturity stage Apple has diversified its product lines to meet the changing needs of the consumers in the global market. For example, the company’s initiative to focus on the production of phones and electronic devices such as cameras is a competitive strategy aimed at improving the performance of the products in international markets.
Maturity stage is characterized by increased competition in the market. However, the company that relies on economies of scale can withstand the competition in the market. With regards to economies of scale, Microsoft tends to master the game. The company produces a variety of software programs at low cost.
The company has also diversified the production of software not only for computers, but also for other applications. On the other hand, Apple applies economies of scale in the production of particular devices such as iPods and phones (Charles 2011).
In the decline stage the product is forced to enter the markets in developing countries (Ball 2008). The two companies tend to apply the requirements of the stage.
For example Microsoft is currently working with other software companies in developing countries to produce software programs that can meet the needs of the consumers. Apple has been very slow in its quest to enter the developing markets. However, the company has developed effective distribution channels that will ensure its success in developing countries (Charles 2011).
Reference List
Appleyard, D & Steven LC 2006, International economics, McGraw-Hill, New York.
Ball, DA 2008, International business, McGraw-Hill, New York.
Charles, A 2011, ‘Microsoft falls behind Apple for first time in 20 years technology’, The Guardian, p. 19.
Hill, C 2007, International business: Competing In the global marketplace, McGraw-Hill, New York.