5.04: The Product Life Cycle

Labor

Specialized workers are usually more efficient, because they are better and faster at their tasks, and produce higher quality products and services.

Purchasing

The economies of scale can be improved by finding lower prices on equipment and materials needed to produce the product or provide the service.

Economies of scale

are ways that a company can lower the cost per unit by selling more units overall.

Diseconomies of scale

are when costs per unit increase as a company sells more units.

market

is a system that allows people or companies to buy and sell products and services.

Buying in bulk

is buying materials in large quantities. This can help a company increase its economies of scale, because many products are less expensive per unit when you buy more of them at a time.

bringing a product to market

is used often in business to mean making a product or service available for sale or exchange in a market.

Market saturation

is when the amount of a product in the market has reached the point where demand and sales are no longer increasing, and this is not likely to change unless the market changes in some way.

The introduction stage is when the product is first being introduced to the market.

1

During the growth stage, customers are growing more aware of the product and its benefits. Demand increases, and sales increase.

2

At the maturity stage, the product reaches its highest point of demand and sales. The market is getting closer to saturation, so the number of potential new customers is limited, and competition increases.

3

During the saturation and decline stage, sales stop increasing, so profitability is lowered. As long as there is still demand, competition remains strong, so the main way to achieve profitability is by becoming more efficient, instead of selling more units.

4

Organization

A company can be made more efficient, so it saves money and time, by improving the organization of the company and its production, sales, or other processes.

Which of these examples are likely to increase the company's economies of scale? (Select three answers.)

Angelo buys colored paper in bulk at a lower price per sheet for his company's flyers. Imani's company is growing quickly, so she pays a specialist to do her legal paperwork more quickly and efficiently than she could do it herself. Sophie hires a good manager for her nail salon to help employees stay focused, happy, and productive.

_______________ is when most potential customers for a product already have something that satisfies that need or want. (Select the best answer.)

Market saturation