PART 1: THE PRODUCT LIFE – CYCLE THEORY1.1 Definition: What is product life - cycle theory:Life cycle of products is the length of time from when aproduct is introduced to consumers in t
THE PRODUCT LIFE – CYCLE THEORY
Definition: What is product life - cycle theory
A product begins with an idea, and within the confines of modern business, it isn't likely to go further until it undergoes research and development (R&D) and is found to be feasible and potentially profitable At that point, the product is produced,marketed, and rolled out.
Four stages of product life cycle
The product life cycle is a crucial concept in marketing, delineating the journey of a product from its inception to its eventual decline in the market Understanding the distinct stages of the product life cycle enables companies to formulate effective strategies for each phase, maximizing opportunities for success and mitigating risks In this report, we delve into the four key stages of the product life cycle: introduction, growth, maturity, and decline Through an exploration of each stage, we aim to elucidate the unique challenges and opportunities that companies encounter as they navigate the dynamic landscape of product development and marketing
Figure 1 1: 4 stages of product life – cycle theory.
Introduction Stage: The introduction phase is the first time customers are introduced to the new product A company must generally include a substantial investment in advertising and a marketing campaign focused on making consumers aware of the product and its benefits, especially if it is broadly unknown what the item will do
Growth Stage: If the product is successful, it then moves to the growth stage This is characterized by growing demand, an increase in production, and expansion in its availability The amount of time spent in the introduction phase before a company's product experiences strong growth will vary from between industries and products.
Maturity Stage: The maturity stage of the product life cycle is the most profitable stage, the time when the costs of producing and marketing decline With the market saturated with the product, competition now higher than at other stages, and profit margins starting to shrink, some analysts refer to the maturity stage as when sales volume is "maxed out".
Decline Stage: As the product takes on increased competition as other companies emulate its success, the product may lose market share and begin its decline Product sales begin to drop due to market saturation and alternative products, and the company may choose to not pursue additional marketing efforts as customers may already have determined whether they are loyal to the company's products or not (KOPP, 2024)
Advantages and limitation of the product life cycles
In the dynamic realm of business, where change is the only constant, strategic planning emerges as a fundamental tool for navigating uncertainty and capitalizing on opportunities Central to effective strategic planning is the understanding and utilization of the product life cycle—a conceptual framework that delineates the evolutionary trajectory of a product from its inception to its eventual decline in the market By comprehensively analyzing the implications of the product life cycle, businesses can craft robust strategies for investment, product development, resource allocation, and marketing, thus gaining a competitive edge in the marketplace
On the one hand, strategic planning constitutes a cornerstone of business operations, providing a roadmap for future growth and sustainability The product life cycle serves as a guiding principle in this endeavor, offering valuable insights into the stage of development of a product and the corresponding strategies required to optimize its performance For instance, during the growth stage, businesses may anticipate increased demand and accordingly ramp up promotional efforts and investment to capitalize on burgeoning opportunities By aligning strategic plans with the dynamics of the product life cycle,companies can effectively allocate resources, minimize risks, and maximize returns Furthermore, the product life cycle facilitates sales forecasting—a critical component of strategic planning.Drawing from past experiences and market trends, businesses can anticipate the trajectory of a product and project its sales over the course of its life cycle This foresight enables companies to make informed decisions regarding production levels, inventory management, and revenue projections, thereby enhancing operational efficiency and profitability Moreover, the product life cycle offers invaluable lessons from previous iterations, empowering businesses to refine their processes and avoid common pitfalls By analyzing past cycles of similar products, companies can glean insights into consumer preferences, market dynamics, and competitive landscapes, enabling them to formulate more effective strategies and mitigate potential risks This iterative approach to learning fosters continuous improvement and innovation, driving sustained success in an ever-evolving marketplace In addition, the product life cycle serves as a strategic tool for maintaining competitive advantage and market relevance Through diligent analysis of sales data and competitor strategies, businesses can discern the stage of their rivals' products and devise counterstrategies to preserve their market position Whether by intensifying advertising efforts, launching new product variants, or enhancing customer experiences, companies can leverage their understanding of the product life cycle to proactively adapt to changing market conditions and outmaneuver competitors.Furthermore, the product life cycle informs strategic decisions regarding product end-of-life management As products inevitably reach the decline stage, administrators must assess the viability of continued investment in marketing and production By recognizing the signs of market saturation and diminishing returns, businesses can strategically phase out declining products and redirect resources toward the development of new offerings, thus ensuring long-term sustainability and profitability (Team, 2022)
On the other hand, there are several restrictions and complications associated with using the product life cycle in strategic planning and decision-making The effectiveness of product life cycle analysis is severely hampered by a number of factors, including delays and volatility in sales data, variability among different products and services, regional market conditions, the influence of other marketing aspects, and the possibility of erroneous data This essay delves into these constraints and factors, illuminating the subtleties that companies need to manage to make well-informed choices and optimize their competitive edge in the industry The inherent delays and volatility in sales data present one of the main obstacles in product life cycle analysis Sales data is a major source of information for analysis and forecasting in product cycles, although it can be delayed, fluctuate seasonally, or become less available The true trajectory of the product life cycle may be distorted by delays in data analysis, seasonal promotions, and returns resulting from production errors, all of which can cause such fluctuation and lead to erroneous projections As a result, companies need to be careful when analyzing sales data and watch out for any distortions that could affect how decisions are made Furthermore, it's critical to understand that not all goods and services will fall under the purview of the product life cycle Traditional product life cycle models are challenged by brands or services that are always changing, such as computer software and mobile networks.These products challenge traditional ideas of product longevity and stability by undergoing ongoing upgrades and modifications rather than defined stages of introduction, growth, maturity, and decline In these situations, the brand itself becomes the enduring entity, while individual goods could come and go in response to changing consumer needs and developments in technology Moreover, the examination of the product life cycle gains additional complexity due to the influence of regional market conditions The trajectory of products can be greatly impacted by differences in consumer tastes, cultural norms,economic considerations, and competitive landscapes between different locations A product that is popular in one market may not be as well-liked in another, which can cause disparities in sales results and make it more difficult to extract valuable lessons from past product life cycles Because of this, companies that operate in a variety of markets need to modify their strategy to take into consideration local market dynamics and account for regional subtleties Furthermore, the impact of other components of the marketing mix adds to the complexity of product life cycle analysis The product itself is crucial, but other elements like distribution methods, pricing policies, and marketing campaigns also have a big impact on how customers behave and how well products work A comprehensive approach to analysis that takes into account the interaction of several marketing variables is necessary since changes in these components have the potential to change the course of the product life cycle Inadequate consideration of these variables could lead to distorted perceptions of the product life cycle and misguided strategic choices (Team, 2022)
Example of product life – cycle theory
Wire-to-Wire Mobile Inc (W2W) is poised to launch its latest smartphone model, the T-phone, into the competitive market landscape Leveraging the four-stage product life cycle methodology, W2W aims to meticulously track the journey of the T-phone from inception to obsolescence, thereby gauging its success and market impact In this essay, we delve into the unfolding narrative of the T-phone's product life cycle, examining its trajectory through the stages of introduction, growth, maturity, and decline.
Introduction: With the grand unveiling of the T-phone, W2W ignites a wave of anticipation and excitement among consumers. Building upon the success of previous iterations, the T-phone garners immediate attention and generates brisk sales from its launch Consumers eagerly embrace the latest features and advancements offered by the T-phone, propelling it into the limelight of the smartphone market.
Growth: As the T-phone gains traction in the market,competition intensifies, with rival manufacturers scrambling to match its innovative features and functionalities While some competitors falter and fade into obscurity, others persist, leveraging frequent upgrades, redesigns, and aggressive marketing campaigns to sustain their presence Concurrently, W2W faces the challenge of defending its market position against emerging competitors seeking to capitalize on the success of the T-phone Competitors closely scrutinize its latest features and performance metrics, strategizing to develop their own devices that promise to outshine the T-phone model.
Maturity: Despite initial acclaim and robust sales figures, the T-phone eventually reaches a plateau in its product life cycle. The initial excitement wanes, and sales begin to taper off as consumers increasingly explore alternative options in the saturated smartphone market While loyal customers continue to patronize the T-phone, the allure of novelty and innovation prompts many to consider competing offerings that promise fresher features and enhanced user experiences W2W grapples with the challenge of maintaining relevance amidst shifting consumer preferences and mounting competition.
Decline: Ultimately, the T-phone succumbs to the inexorable march of technological progress, ushering in the decline phase of its product life cycle As competitors leapfrog ahead with the introduction of newer, more advanced smartphone models boasting cutting-edge technologies, the T-phone gradually fades into obsolescence Consumer interest wanes, and sales dwindle as the market shifts its focus towards the latest innovations and trends Recognizing the signs of impending decline, W2W faces the strategic imperative of sunsetting the T-phone and redirecting resources towards the development of next- generation products that can capture the evolving needs and preferences of consumers.
In conclusion, the journey of Wire-to-Wire Mobile Inc.'s T- phone smartphone epitomizes the dynamic trajectory of products within the contemporary marketplace Through the lens of the product life cycle, we witness the ebb and flow of consumer demand, the relentless march of technological advancement, and the imperative of strategic adaptation in the face of evolving market dynamics As W2W navigates the complexities of the product life cycle, it underscores the critical importance of agility, innovation, and foresight in maintaining competitiveness and driving sustained success in the fast-paced world of consumer electronics (Gibbons, 2023)
NEW TRADE THEORY
Definition: What is new trade theory?
The new trade theory of international commerce is an accumulation of economic models that focuses mainly on returns to scale, first-mover advantage, and network effects on international trade and globalization For example, Paul Krugman's new trade theory is based on his ideas on analyzing trade patterns based on the location of trade activity, for which he was awarded the Nobel Prize in Economics in 2008 Network effects and economies of scale have the potential to be so potent that they might overthrow the more well recognized idea of comparative advantage As a result, certain industries may not see significant differences in opportunity costs between the two nations at any one time A country may benefit from specialization if it focuses on a certain sector due to economies of scale and other network benefits The new trade theory contributes to our understanding of the expansion of globalization It indicates that less developed, underdeveloped nations may struggle to establish multiple industries because they lack the economies of scale enjoyed by the industrialized world It is mostly the outcome of scale efficiencies among mature companiesBand not ofBany inherent comparative advantage
New trade theory (NTT) suggests that a critical factor in determining international patterns of trade are the very substantial economies of scale and network effects that can occur in key industries.
Economies of Scale: NTT recognizes that larger production volumes can lead to cost advantages When companies produce more, they can spread fixed costs (such as research and development) over a larger output This results in lower average costs per unit Economies of scale encourage trade by allowing firms to specialize and produce efficiently, even if they face competition from other countries.
Network Effects: These effects occur when the value of a product or service increases as more people use it For instance, social media platforms become more valuable as more users join In trade, network effects can lead to concentrated production in specific regions or countries Once a location becomes a hub for a particular industry, it attracts more firms and suppliers, reinforcing its dominance.
First-Mover Advantage: NTT emphasizes that being the first to establish a company in a particular trade can provide significant advantages The pioneer gains a foothold, builds relationships, and becomes dominant This monopolistic advantage can hinder latecomers from entering the market,especially if they lack economies of scale (Medin, 2013)(Ahmed, 2024) (Pettinger, 2017)
Advantages and limitations of new trade theory
Central to the new trade theory framework is the recognition of economies of scale, whereby larger production volumes lead to lower average costs per unit This principle incentivizes firms to expand their operations beyond national borders, seeking to exploit global markets and capitalize on cost efficiencies. Consequently, new trade theory promotes the globalization of production, as companies seek to leverage international resources, labor markets, and technologies to enhance their competitiveness and profitability on a global scale By tapping into diverse markets and resources, firms can optimize their production processes, drive innovation, and gain a competitive edge in the global marketplace.
New trade theory underscores the pivotal role of government intervention in fostering industrialization and economic development With proper government support, nations can strategically allocate resources, implement industrial policies, and provide incentives to promote the growth of key industries.
By nurturing domestic industries and fostering a conducive business environment, governments can catalyze industrialization, create employment opportunities, and stimulate economic growth Through targeted investments in infrastructure, education, and research and development, governments can lay the foundation for sustained industrial expansion, positioning nations to compete effectively in the global arena.
New trade theory emphasizes the benefits of extensive trade between countries with similar characteristics, such as technological capabilities, factor endowments, or production patterns By engaging in trade with like-minded partners, nations can capitalize on comparative advantages, specialize in niche industries, and enhance overall economic efficiency Extensive trade fosters mutual exchange of goods, services, and knowledge, driving innovation, productivity gains, and economic diversification Through strategic trade partnerships, countries can leverage synergies, mitigate risks, and unlock new opportunities for growth and development.
As industries mature and economies grow, new trade theory suggests that local industries will gradually become competitive without continuous government intervention Over time, the benefits of economies of scale, technological advancements, and market dynamics enable local industries to achieve self- sufficiency and competitiveness in the global marketplace With increased efficiency and productivity, firms can reduce reliance on government subsidies and incentives, paving the way for a more market-driven economy characterized by innovation, entrepreneurship, and dynamic competition.
Government subsidies play a crucial role in bolstering the competitiveness of local companies in the global arena By providing financial support, tax incentives, or trade protections,governments can level the playing field for domestic firms,enabling them to compete more effectively with international counterparts Subsidies help to offset cost disadvantages,facilitate technology transfer, and promote investment in strategic industries critical for long-term economic growth.Moreover, government support can stimulate innovation,enhance productivity, and build domestic capabilities,positioning local companies to thrive in competitive international markets.
New trade theory acknowledges the concept of first-mover advantage, wherein early entrants to the global trade arena can establish themselves as dominant players in their respective sectors By pioneering new markets, securing key resources, and building brand recognition, early entrants can capture significant market share and establish barriers to entry for potential competitors Moreover, early movers may benefit from network effects, learning curves, and economies of scope, further solidifying their position as leaders in the industry Through strategic positioning and proactive engagement, early entrants can capitalize on emerging opportunities, driving innovation and shaping the trajectory of global trade dynamics (Ahmed, 2024)
One of the primary drawbacks of new trade theory is its propensity to exacerbate monopolistic tendencies within industries By facilitating economies of scale, new trade theory enables firms to expand their operations and dominate markets, potentially leading to monopolistic or oligopolistic market structures Early entrants to the trade enjoy a significant advantage, as they can establish themselves as dominant players and create formidable barriers to entry for new competitors Consequently, consumers may face limited choices, higher prices, and reduced innovation as monopolistic firms exploit their market power to maximize profits at the expense of fair competition and consumer welfare.
In the context of new trade theory, early entrants to the trade wield considerable influence and can erect formidable barriers to entry, further stifling competition and innovation Established firms may leverage their market position, brand recognition, and economies of scale to entrench their dominance and deter potential challengers from entering the market As a result, aspiring entrepreneurs and smaller companies encounter significant obstacles in accessing markets, obtaining resources, and competing on a level playing field The proliferation of entry barriers undermines the principles of fair competition and hampers the dynamism and resilience of the economy.
While government support can play a pivotal role in fostering industrial development and trade growth, it may also give rise to unintended consequences that undermine economic efficiency and market dynamics Government intervention, driven by a lack of information or flawed policy decisions, can distort market mechanisms, create inefficiencies, and perpetuate rent-seeking behavior among favored industries or firms Moreover, government subsidies and incentives may inadvertently foster the emergence of large, powerful business conglomerates that enjoy preferential treatment and protection from competition, stifling innovation, and hindering overall economic performance. New trade theory's emphasis on economies of scale and early-mover advantages may exacerbate disparities between developed and developing countries, posing significant challenges for the latter in competing on the global stage Poorer countries often lack the resources, infrastructure, and institutional capacity to achieve economies of scale comparable to their more developed counterparts As a result, they may struggle to attract investment, develop competitive industries, and integrate into global value chains, perpetuating their dependence on primary commodities and hindering their path to economic development and prosperity.
In some cases, the prevalence of established and powerful corporations can lead to excessively rigid entry barriers that impede the growth and competitiveness of smaller companies. Monopoly power wielded by dominant firms may result in the manipulation of market conditions, the exclusion of potential competitors, and the stifling of innovation and entrepreneurship.
As entry barriers become insurmountable, smaller firms face limited opportunities for growth and expansion, further consolidating the market power of incumbents and perpetuating inequities in the economic landscape (Ahmed, 2024)
Example of new trade theory
TESLA is a popular brand in the electric vehicle segment.BTESLABhad been the early entrant or the first mover into manufacturing electric vehicles (EVs) for the public on a large scale With time, it transformed from an American EV to a global EV manufacturer TESLA gained a monopoly in the market by doing the following:
- Being the first mover into EV;
- Having economies of scale due to huge funding available; and
- Rising value of its cars, creating network effects, led to monopolistic tendencies in the EV manufacturing sector.B(Ahmed, 2024)
NATIONAL COMPETITIVE ADVANTAGE: PORTER’S DIAMOND
Definition: What is Porter’s diamond theory?
Porter Diamond Model discusses factors and traits of a business that make it more successful than others in a particular region It enables companies to identify the resources that need to be developed to enhance their performance compared to the rest of the entities dealing in the same category of products and services.
Michael Eugene Porter, an American academician and influential thinker on management and competitiveness, developed the Porter Diamond model It is an economic model for businesses, especially multinational organizations planning to expand their operations in different markets The model lets companies identify the key areas to focus on to capture global markets effectively.
With the help of this theory, the business players can understand the reason for certain industries being widespread in particular nations On this basis, they can analyze their position in the market and thereby implement strategies to compete and excel.
The Porter Diamond theory outlines four main factors that reveal how businesses enjoy a national advantage in the international markets These attributes make certain nations become more competitive than others for specific industries For example, Germany is well known for its engineering, while
Greece is famous for the tourism services it offers on a global platform (Ahmed, 2024)
Content of Porter’s Diamond of Competitive Advantage
The four main attributes of this Model are Factor endowments, Demand conditions, Relating and supporting industries and Firm strategy, structure, and rivalry Additionally,there are two components supporting this model namely : the role of the Government and Chance
3.2.1 Four attributes that promote or impede the creation of competitive advantage
Factor endowments: According to Porter, the most important of the attributes is factor conditions Factor conditions are those elements that refer to the natural, capital and human resources available, such as a large pool of skilled labor, technological innovation, infrastructure, and capital Factor endowments can either be basic (including natural resources, climate) or advanced (skilled labor, infrastructure).B
Take Saudi Arabia as an example being rich in natural resources Others, such as Singapore, are rich in their advanced factors Factors such asB a skilled labor force, excellent infrastructure and a solid scientific knowledge base can be established or created The created factors are much more important over the long term for ensuring the country’s competitive advantage than “naturally” occurring factors.
Demand conditions: Demand conditions refer to the nature of home demand for the industry’s product or service, which also influences the development of capabilities The presence of sophisticated and demanding conditions from local customers also pushes companies to compete, grow, innovate and improve quality.
Take the airline industry as an example Spurred by strong local demand (from both companies and the government), Boeing grew to be one of the leading aerospace manufacturers in the world.
Relating and supporting industries: It refers to the presence or absence of supplier industries and related industries that are internationally competitive They are the key for the development of companies that use those suppliers for cost- effective access to quality inputs In addition, knowledge and information can be shared through suppliers and manufacturers giving companies within an industry early access to new products Successful industries tend to be grouped in clusters in countries.B
For example, within the computer industry, Apple benefited widely from the existence of highly capable suppliers who not only manufactured parts, but also supplied Apple with innovative products that spurred growth.
Firm strategy, structure, and rivalry: The conditions how companies are created, organized and managed: it affects their strategy and how they structure themselves Moreover, domestic rivalry is effective for growing internationally resulting from developing unique and sustainable strengths and capabilities
A good example for this is the Japanese automobile industry with intense rivalry between players such as Nissan, Honda,Toyota, Suzuki, Mitsubishi and Subaru Because of their own intense domestic competition, Japan has become able to more confidently compete in foreign markets as well.B (Bruin, 2018)(Nayal, 2020)
3.2.2 Two supporting components of Porter’s Diamond Theory: Government: Government policy can affect demand through product standards, influence rivalry through regulation and antitrust laws and impact the availability of highly educated workers and advanced transportation infrastructure.BB
If we look up the US government, it has enacted antitrust laws in an open-market economy and that are meticulously implemented In 1998, when the US government felt that Microsoft was cornering the operating system and browser markets, they threatened to break the company up.
Chance: Even though Porter originally didn’t mention anything about chance in his published theory, the role of chance is often considered as one component in the Diamond Model because it is likely for external events such as war and natural disasters that can affect a country or industry positively or negatively.B
For instance, the heightened border security, resulting from the September 11 terrorist attacks on the US undermined import traffic volumes from Mexico, which has had a large impact onMexican exporters The discontinuities created by chance may lead to advantages for some and disadvantages for other companies (Bruin, 2018) (Nayal, 2020)
Case study: South Korea electric industry
The Porter Diamond Model Analysis has played a pivotal role in shaping the economic landscape of South Korea, elucidating the factors that contribute to its competitive advantage in the global market Developed by renowned economist Michael Porter, this framework examines the interconnectedness of factors such as factor conditions, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry In the case of South Korea, the model has been instrumental in decoding the nation’s success in industries like technology, automotive, and electronics By systematically evaluating the intricate relationships between these elements, the Porter Diamond Model has provided valuable insights into how South Korea has effectively leveraged its skilled workforce, innovation capabilities, favorable market demand, and robust industry clusters to emerge as a dynamic player on the international economic stage
South Korea enjoys several innate factor endowments The first important factor is the country's geographical location. South Korea is located close to China which has emerged as one of the world's leading technology hubs and fastest thriving economies Therefore, the two nations can collaborate in research and development activities aimed at producing cutting- edge products Other than its proximity to China, South Korea's location near other emerging Asian market economies means that it can readily capitalize on the potentially prosperous neighbors By its location alone, South Korea can easily draw inspiration from its aggressive neighbors and tap into the immense opportunities that the region has to offer The fact that the region has many emerging markets for technological products means that the South Korean technology firms will have a ready regional market (Porter s Diamond Model - notes, 2020)
Secondly, the success of the education system is due to several factors, including a culture that values education and a focus on rigorous academic standards The government has also invested heavily in education, with spending on education accounting for nearly 4% of the country’s GDP South Korea also has a highly educated population, with a literacy rate of nearly 100% This is in part due to the country’s emphasis on education, as well as its robust system of public schools and universities Education is highly valued and deeply ingrained in the cultural fabric of South Korea Renowned for its academic excellence and impressive student achievements, South Korea has emerged as a global leader in education (learnkoreawithus, 2023)
Thirdly, South Korea benefits from a robust infrastructure,including advanced telecommunications networks, efficient transportation systems, and modern facilities This infrastructure facilitates the movement of goods and services and supports the rapid pace of technological advancements Additionally, the government’s proactive policies and investments in technology and innovation have created an environment conducive to research and development, promoting a continuous innovation cycle The combination of a highly skilled workforce, advanced infrastructure, government support for innovation, and strategic resource management has positioned South Korea as a formidable player in the global marketplace, illustrating the significance of favorable factor conditions in the nation’s economic achievements
South Korea’s success in related and supporting industries, as per the Porter Diamond Model, has fostered a competitive advantage on the global stage The country has developed a robust ecosystem of interconnected industries that complement and support each other, contributing to overall economic strength One noteworthy aspect is the strong linkage between large corporations, such as Samsung, Hyundai, and LG, and a network of small and medium-sized enterprises (SMEs) that serve as suppliers and subcontractors.
The close collaboration between these major corporations and their supporting industries has led to a highly efficient and integrated supply chain This collaboration ensures a steady and reliable flow of inputs and facilitates knowledge transfer and technology diffusion throughout the industry network South Korea’s focus on building and nurturing a competitive supplier base has contributed to increased productivity, innovation, and cost-effectiveness in the production processes.
Moreover, the government has played a proactive role in promoting the development of supporting industries through policies that encourage research and development, technology transfer, and skills development The synergy between research institutions, universities, and industries has further strengthened the innovation ecosystem This collaboration has been crucial in fostering a climate where technology and knowledge spill-overs occur, benefiting the entire industrial landscape.
South Korea’s emphasis on creating clusters of related industries has also been pivotal Clustering firms in specific geographic regions has led to a concentration of specialized skills, infrastructure, and knowledge, creating a competitive advantage for those industries For example, Daejeon is one of 5 major cities in Korea Considered the "Silicon Valley of Asia", Daejeon has more than 200 major research institutes across the country, such as Samsung, LG, major scientific research universities KAIST, has fueled innovation and competitiveness in the technology sector.
South Korea’s success in related and supporting industries can be attributed to the synergistic relationships between large corporations and SMEs, strategic government policies, and the development of industry clusters These factors have collectively contributed to the nation’s prowess in creating a well-integrated and competitive industrial landscape (Review, 2024)
South Korea’s demand conditions, as outlined by the PorterDiamond Model, have also played an essential role in shaping the country’s economic success in the electronics industry.South Korea’s customer base strongly desires quality,innovation, and advanced technology for consumer electronics,including smartphones, televisions, and appliances Additionally,
South Korean consumers are known for their enthusiasm for home entertainment systems and appliances, such as high- definition televisions, sound systems, and smart home devices, which provides a strong foundation for local electronics firms to innovate and compete The rapid urbanisation and rising income levels in South Korea have also fueled domestic demand for a wide range of products and services As a result, electronic companies operating in South Korea must invest in research and development, product differentiation, and continuous improvement to stay competitive in the dynamic domestic market.B(Review, 2024)
Firm strategy, structure, and rivalry:
For this attribute, the strategy and structure of two of the most successful electronic companies in South Korea; LG and Samsung.B
Both LG and Samsung employ a differentiation strategy,focusing on innovation and product differentiation to stand out in the highly competitive electronics market They invest heavily in research and development to introduce new features and technologies in their products, aiming to create unique value propositions for consumers These firms have adopted aggressive global expansion strategies, establishing a strong presence in international markets They leverage their brand reputation, economies of scale, and distribution networks to penetrate new markets and gain market share globally LG andSamsung have vertically integrated business structures,controlling various stages of the value chain, from component manufacturing to final product assembly This integration allows them to optimise production processes, ensure quality control,and maintain cost competitiveness Competition among SouthKorean electronics firms, including LG and Samsung, is fierce.These companies constantly strive to outperform each other in terms of product innovation, quality, and market share This intense rivalry motivates continuous improvement and drives innovation in the industry (Staff, 2008)
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Pettinger, T (2017, April 26) New Trade Theory Đư2c truy l4c t5 economicshelp: https://www.economicshelp.org/blog/6957/trade/new-trade-theory/
Porter s Diamond Model - notes (2020, June 1) Đư2c truy l4c t5 Studocu: https://www.studocu.com/en-ie/document/national-university-of-ireland- maynooth/global-business-and-marketing/porter-s-diamond-model-notes/
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Team, I E (2022, October 1) What is a product life cycle? (With benefits and limitations) Đư2c truy l4c t5 Indeed: https://uk.indeed.com/career-advice/career- development/what-is-product-life-cycle
ID Work process Evaluati on
- Part 1: definition, 4 stages of product life – cycle theory.
- Part 3: 4 attributes of Porter’s Diamond Theory, case study.
- Part 2: definition, content of new trade theory