Product Life-Cycle
The concept known as the product life cycle uses the age of a product category as a basis from which to address three major issues. First, the curve helps predict future sales growth, and also customer and competitor behaviour. Second, it helps prescribe appropriate marketing and other strategies. Finally, the curve helps allocate resources among categories. As with the experience curve, Hamel and Prahalad consider it a reasonable concept that can have toxic consequences if used uncritically. They comment that concepts like "mature" and "declining" are largely definitional, and that Japanese companies have had a different attitude to the concept. While many Western executives will label an industry mature when sales growth starts stagnating, this may simply mean that sales growth has slowed in their current geographic area for existing products sold through existing channels. Hamel and Prahalad illustrate the different Japanese thinking by quoting a Yamaha executive on his definition of a mature industry: "Only if we can not take any market share from anybody in the world and still make money".
As a consequence of the traditional Western viewpoint, a company may be foreclosed from a broad stream of future opportunities. The authors mention the television industry as an example, where some companies considered the colour TV to be the last and final invention of the industry. In contrast, a company like Sony has continued making products in a wide range of industries that in the traditional thinking of the product life cycle would be considered to be in decline. Since the company still finds itself in the television industry, it is presently well positioned to meet future demand for flat screen TV-sets.
An additional criticism of the product life cycle is also relevant to the experience curve, and concerns the focus of the strategies on a domestic setting. This will be discussed in greater detail with relation to the growth-share matrix, but the product life cycle is evidently of little use to a company that has failed to define its market. Bruce Henderson emphasises the principle that a company must expand the market in which it can maintain an advantage over any and all competitors that might be selling to its competitors. The life of a product category may thus be prolonged if a company is willing and able to expand its market and make changes to its product, pricing and distribution channels. In other words, while the product life cycle may be predictable in shape, uncritical application of the curve may become a self-fulfilling prophecy. In the same way as the experience curve, the product life cycle concept should therefore be used with great care and only as a supplement to other models.