Re-Defining the International P.L.C.

'Re-defining the International P.L.C.

- Deception or Diagnosis?'

Z. Dauhn

MSP_7347

November 12, 2003

Abstract

This paper assesses the current status of the PLC, both conceptually and its applications, in the context of changes in the international marketplace, for example the drastic shortening of 'time to market.' The paper considers other approaches to the international PLC, including incremental and evolutionary cycles. There is a special focus on the positioning of global brands in this scenario, together with a number of topical illustrations from brand companies. The Paper concludes by proposing two models in place of the traditional PLC.

Introduction

This paper aims to review the impact of recent developments on the PLC in the international market place, and to assess how far it is still a worthwhile concept; some implications for management in the light of this reassessment are also discussed.

Accelerating Market Entry

The global move towards reducing the 'time to market', and thereby to shorten development cycles, has been caused by the interaction of a set of economic, market, technological and managerial pressures. This accelerated product development can best be understood by citing some of these pressures. Market factors: slow world growth and new industrial competitor nations leading to rapid emulation of competitors' products, globalization of markets, near simultaneous product launches around the world and cost pressures. Technological factors: dramatic shortening of life cycles in electronics, accelerated global diffusion of technology, difficulty of sustaining technological advantage, and the 'shift' to incremental innovation. Managerial and competitive factors: include the pressure to shorten development times, cut costs and improve quality, and recognition that early product introduction enhances production learning curve, premium pricing and design and technology improvements.

Indeed, resisting pressures to bring new products to the market can threaten the very survival of firms, particularly in the light of the rapid shortening of the PLC in such sectors as microprocessors (Agarwal, 1997).

In mobile phones and 'hi-fl', products that were in the market for up to three years can now expect a life of nine months, and industry analysts predict that there will soon be new models coming out every three months. Product and service industries are therefore characterized by products speeding to market, increasingly competitive conditions, brand proliferation, product parity, increasing technology, high market segmentation and shorter life cycles.

The Concept

The traditional PLC concept is simple: A brand is born, grows lustily, attains maturity, and then enters declining years after which it is quietly buried. It has been traditionally used for predicting customer appeal, sales, profit, cash flow and product development at different stages of the cycle. It has also proved useful for product portfolio analysis and setting strategic objectives. According to Thomas (1986) the PLC 'is a versatile framework for organizing contingent hypotheses about appropriate strategic alternatives, and as a means for anticipating the consequences of the served market. It can help in the formulation of market share strategies since it provides a means for viewing trends in primary demand as well as basic competitive patterns. But it cannot provide a means for managing by formula.'

The Role of Design

Tarasewich (1996) argues that the PLC can also influence product design as, 'The entire life cycle of a product is affected by decisions made during product design.'

Product Design Strategy is based on achieving a competitive advantage. It is focused firmly on creating new markets and meeting market needs with designs that are better than competitors. Effective design of products can be the critical factor that determines whether or not a firm succeeds in the market place. This can include the use of higher quality specifications and resourcing of materials. Product design 'takes into account aspects of all activities related to the product and its life cycle, including strategy, supplier involvement, customer involvement, cost, time, manufacturability, management, usability, marketability and serviceability/disassembly.' (Tarasewich, 1996) This approach is advocated in preference to more traditional forms of 'over-the-wall' or concurrent engineering.

Managing Activity Cycles

Recent studies of new products and services introduced in differing industries - disk drives (Doke, 1991); hydraulic excavators; health care and executive education services - have revealed a significant pattern in how the basis of competition within the respective industries was initially 'functionality of the product'. Having identified this, technologists within the industry competed and worked on improving their product's functionality to such an extent that it surpassed the requirements of the customer; the basis of competitive advantage then moved to reliability, which was also then enhanced to a level surpassing customer requirements; and so on, through convenience and price - thus an evolution cycle, as opposed to a life cycle!

Research into products such as the Ford Mustang, introduced in 1964, yet having undergone several changes since, show that there are several curves of introduction, growth, maturity and decline. The Ford Mustang, along with other examples such as the Hercules Aircraft, is represented by a PLC which is the result of waves of production innovation. Design engineering; process engineering; process marketing; production and end-of-life decisions are all key elements of every stage of the PLC - each creating its own wavelike cycle of activity. For example, the activity curve for Design Engineering shows two peaks - one during the introduction of the new product, and the other during the maturity phase of the PLC (Grantham, 1997).

The waves of activity induced by the five decision-making units outlined above, culminate to produce the Five-Element