Product Life Cycle Examples

The standard product life cycle depiction is idealized vision and is not always observed in practice. Here we will examine several examples and tie the industry back to change in the environment and the strategic options for the firm.

Example 1: United States Coal Production (in the decline phase since about 2000)

Charts 1 and 2 respectively show United States coal production (in millions of short tons) and in millions of short per capita. These charts show long run production from 1850 through 2017. Data is not available for all years. Examining two charts, especially the per capita chart, allow us to disentangle product revenue or unit growth numbers from population growth. Both charts present a similar pattern. Coal production exhibited growth from 1850 through the end of the 20th century. The 21st century shows a decline in United States coal production. Simple liner regression models were constructed to identify trends. These models are not forecasting models. Separate model for 1850 – 1950 and the 1951 – 1999 periods indicate significant growth in United States coal production. The per capita model for 1850 – 1950 does not show significant growth. Both of the models for the 2000 – 2017 time period show a significant decline show in the United States coal production. Short ton production of coal if declined by 17.224 million tons per year.

The data used here may be found in Coal data

Major takeaway points: United States coal production, both in the aggregate and per capita experienced a century long introduction and growth phase. The 21st century witnesses the onset of the product moving into the decline phase.

Example 2: Air Transport (long-term growth phase)

The next four charts illustrate the air transport industry. Charts 3 and 4 show global air freight (as measured in millions of ton – kilometers hauled) and global air freight per capita (global) from the early 1970s through 2017. Simple liner regression models show significant and continuous increases in air freight volume across time. Indeed, air freight has typically increased by 4,671 million ton – kilometers per year.

Charts 5 and 6 show air passengers (globally) during the same time period. Both simple liner regression models are statistically significant. Global air passengers are increasing by 6 million passengers per year. This is not a matter of population growth alone as the air passenger per capita model is also statistically significant.

Major takeaway points: Air transport is currently in a long term growth phase: i.e., both air freight and air passenger segments are in the growth phase of the product life cycle. Little evidence outside of these tables indicates that the trend will abate with entry into the maturity phase. Specific international routes are extremely valuable from a revenue perspective and will be sought out by carriers and protected by national interests. For example, total annual revenue on JFK (New York) – Heathrow (London) currently reside at about $1 billion per year.

Example 3: Tomato Ketchup (North America) – recent entry into possible decline)

The next two charts (7 and 8) show tomato ketchup in kilograms and in kilogram per capita for North America from 2010 – 2021 (2018 through 2021 are forecasts). The two simple linear regression models converge in that they show a significant year over year decline in tomato ketchup kilograms sold. The kilogram model shows that the typical annual decline is in the order 95.4 million kilograms. The trade press attributes the decline to a change in consumer preferences toward artisanal and/or organic sauces and away mass produced sauces (reference).

Major takeaway points:' The tomato ketchup industry appears to have recently entered the decline phase of the product life cycle. It would seem that the decline may be long-lived. Recent trade press articles attribute the decline mass-produced food products as driving the stock prices of Kraft/Heinz and of General Mills.

Example 4: United States Car Sales (excluding light trucks) (in the decline phase since the mid-1980s)

Charts 9 and 10 show Unites States car sales and car sales per capita from 1963 through 2017. The general trend for both measures of market size is one of a slow decline. However, separate models for pre-1986 and post-1985 show that: (1) car sales were flat before 1986; and (2) car sales showed a statistically significant decline after 1985. Indeed, the model for cars (in units) show a year over year annual decline of 113,308 cars. From 1986 (11.4 million) through 2017 (6.3 million), the number of cars sold in the United States declined by more than 44%.

Major takeaway points: Due to changing consumer preferences, the market for cars in the United States appears to have entered the decline phase of the PLC, a phase that apparently began during the mid-1980s. American automotive manufacturers has shifted resources and production from cars to light trucks and SUVs.

Example 5: Cottage Cheese (long-term decline the mid-1970s)

Chart 11 and 12 show United States cottage cheese consumption (in millions of pounds and in pounds per capita) from 1970 through 2016. The origin of cottage cheese may be traced back to ancient Mesopotamia circa 3,000 B.C. Both charts show a significant decline in the market for cottage cheese: per capita consumption has fallen from 5.1 pounds per capita in 1970 to 2.2 pounds per capita in 2016, a decline of 57%. The annual expected decline across the relevant time period is 0.71 pounds per year.

Major takeaway points: Changing consumer preferences resulted in a the slow and steady decline in demand for cottage cheese in the United States. Other sources indicate that cottage cheese (a salty product) has been displaced by increased demand yogurt (often times mixed with sugar), suggesting a balancing of demand for dairy products.

https://www.npr.org/sections/thesalt/2015/07/16/423207704/the-fall-of-a-dairy-darling-how-cottage-cheese-got-eclipsed-by-yogurt

Example 6: Global Smartphone Shipments (currently entering maturity phase)

Chart 13 shows global smartphone shipments between 2009 and 2017. The chart illustrates a “classic” PLC shape with identifiable introductory, growth, and maturity phases. The simple linear regression model is statistically significant and shows a year over year increase in shipments of 186 million units. Obviously, this model is not appropriate for forecasting a non-linear trend observed in the chart.

Major takeaway points: In 2017, global smartphone shipments were 1.465 billion units, or one shipment for every *** person on the plant. This is highly suggestive of market saturation and hence entry into the maturity phase. The lack of strong smartphone sales growth is reflected in Apple and other supplier stock price declines (as of February 2019) and to sentiments concerning the “sting of plateauing smartphones.” Apple and Samsung have increased their prices, but this pricing strategy may actually accelerate the plateau effect.

https://www.theverge.com/2019/1/3/18166399/iphone-android-apple-samsung-smartphone-sales-peak