Page 40 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes Phase II: Applications Launch

This phase is the creative period of product experimentation. This lasts till the time a standard
design has been worked out and rapid growth of the market begins. This occurred with Ford's
Model T design. During this phase, failure rate of firms in the industry continues to be high, but
successful firms grow. Corporate R & D becomes important to maintain incremental model
improvements. For example, by 1923 only eight major American firms had remained in the
automobile industry, capturing 99 per cent of the market.

Phase III: Applications Growth

1. During this phase there is a rapid growth in the penetration of technology into markets.
2. After some time, however, the innovation rate slows down and the market peaks; no new
markets are created.
Phase IV: Mature Technology

1. In this phase, process innovations are dominant.
2. Very few firms survive, of the original lot.
3. Competition is primarily on price and segmented market lines.

4. Production is specialized and efficient.
5. Economies of scale and marketing dominance continue to whittle down competitors, to
the final few.

Example: By 1965, only General Motors, Ford, Chrysler, and American Motors had
survived in the American automobile industry.

A mature industry can continue indefinitely. Competitors with more abundant resources, cheaper
labour or subsidized capital can obtain a competitive advantage. When market saturation is
taking place, it is important to continue technological innovation to extend the product life and
delay market saturation. Innovation succeeds in:

1. Creating succeeding generation products with significantly improved performance,
2. Creating multiple applications,
3. Lowering of price to facilitate ownership of multiple copies of the product for convenience.

Phase V

Finally, competing or substituting technologies overrun the mature technology and the last
phase is reached. At this stage, the industry has run out of significant innovation. Changes in
demography, replacement and foreign markets now primarily determine the market size.

2.3.3 Product Lifecycle and Technology Lifecycle

The length and pattern of the Product Lifecycle can vary significantly. There is no reason to
believe that all products inevitably pass through all four stages, e.g., fad items, consumer
resistance, and introduction of superior new product. Though the Product Lifecycle diagram has
been designed for product categories, it has limited use to management, as it may not reflect the
life of their 'Product Form', or 'Brand'.

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