Page 8 - Portfolio Analysis

Growth In this stage demand for the product develops as new customers try the product and early adopters repeat their purchases. This increased demand and profitability will attract new entrants into the market as market share may be increased at relatively low cost. Advertising and distribution will increase as attempts are made to build market share through product differentiation and market segmentation. However, there is often an industry shake-out which signals the end of the rapid growth stage. Maturity In this stage the rate of growth diminishes and market share relationships stabilize. The product is well established with distribution patterns set and little incentive to change. However, the market is approaching saturation point. Competition is based on maintaining market share rather than increasing it. Sales are based almost exclusively on replacement demand with advertising aimed at both retaining customer loyalty and attracting competitors’ customers. Decline This stage is characterised by a general fall in overall market sales. Some firms will withdraw from the market. Others will withdraw from less profitable market segments. There is also likely to be a tendency by some firms to reduce price to try to maintain or increase their market share. In these circumstances those firms with extensive accumulated experience may be able to generate profits even whilst price cutting. A further feature of the decline stage is that some firms will, rather than replace these products, revamp them in an attempt to extend their life. (see Figure 4) FIGURE 4