Analyse the relationship between the product life cycle and cash flow :: Economics

Analyse the relationship between the product life cycle and interchange fuseThe product life cycle is split into 5 stages* Research and development* Introduction* Growth* Maturity/Saturation* DeclineThe product life cycle is the model that represents a sales patternfor a product over a period of time. It shows the revenue by a productfrom is introduction to its eventual decline. There atomic number 18 four stages tothe product life cycle Introduction, growth, maturity and decline.Research and development is the first stage of the product life cycle.This is where a firm has a look into team look in to possible new ideasand products for a business. This can be genuinely expensive for the firm.No income is made at this stage as there is no revenue coming in tothe firm simply capital being paid out on resources. The cash menstruation atthis stage is very low.Introduction This is the point when the product life cycle begins.This is when the actual product is launched and does not includetesting or research and development. Manufacturers at this stage spenda lot of money in order to create awareness. The cash flow at thisstage would not be very positive. A lot of money has been spent at theintroduction to get the public to notice the product and to ferment themaware. The firm would not expect to make any profit at this stage asthe product has just been launched.Growth If the product succeeds, sales go out grow. Prices could stillbe high but with increased competition prices will drop. The producerstill advertises at a high level to fight off competition. Productstarts to move into profitability. The cash flow starts to gain morerevenue.Maturity Sales growth begins to slow as market saturation isapproached. Sales are kept going by those who are late to adopt newproducts. This stage will last longer than the earlier stages. This iswhere the most revenue is taken in for the longest period of time.This is where the cash flow reaches its peak but also at the po int ofsaturation starts to decrease. To stop the revenue and the productgoing down at the point of saturation maybe the firm could give theproduct a new identity and maybe a new advertising campaign.Decline Eventually the product will become less interesting forpurchasers, and the decline of the product will commence.