The decline stage of the product life cycle is the one where the product ultimately 'dies' due to the low or negative growth rate in sales (see Figure 1). Profitability will fall, eventually to the point where it is no longer profitable to produce, and production will stop. As a number of companies start to dominate the market, it becomes increasingly difficult for the company in question to maintain its level of sales. Consumer tastes also change, as do new technologies which may make the product become ultimately obsolete (as in the case of CDs and DVDs, and now Blu-Ray). Features of the decline stage include:
* A decline in sales volume as competition becomes severe, and popularity of the product falls; * A fall in prices and profitability (the latter ultimately moving in the negative zone); * A counter-optimal cost structure;
* Profit increasingly becomes a challenge of production/distribution efficiency rather than increased sales. It is important to note that product termination is not usually the end of the business cycle; rather, it is only the end of a single entrant within the larger scope of an on-going business program. Example: The Personal Computer (PC)
Figure 0 shows the actual sales and price of the personal computer from 1992 to 2002. The PC was state-of-the-art technology in 1992. Only technologically-advanced individuals would buy one at the very steep price of $1800 (and bear in mind, $1800 in 1992 was worth a lot more than it is today). A large number of companies were competing in the field. As the market grew, businesses learned to be more efficient in producing the PC and prices came down. The drop in prices and improvements in technology made PCs more attractive to other consumers. However, the market became saturated after 2000 and went into decline. PCs started to become obsolete as laptops, net books, tablets, and smart phones started to enter the market, shifting the...