Product Life Cycle theory was proposed by Raymond Vernon in the mid 1960s. He didn't agree with the earlier theory and emphasized on information, risk and economies of scale rather than on cost. Raymond Vernon focused on the life cycle of the product and came up with his Product Life Cycle Theory which identified three distinct stages:
1. New Product Stage:
The need for a new product in the domestic market is identified and it is developed, manufactured and marketed in limited numbers. It is not exported in sizable quantities since it is primarily for national market.
Once the product has become popular in the domestic market, foreign demand increases and manufacturing facility abroad may be setup to meet demand there. After success in the foreign market and towards the end of product maturity stage, the manufacturers try and produce it in the developing countries.
In Standardized Product Stage of the Life Cycle Theory, the product becomes the commodity, the price becomes optimised and the makers look for countries where it can be made with the least production cost.
Example Product Life Cycle Theory:
Dell manufactures hardware in Asia, which is then transported to US, it's country of origin. Hence, a product which started as export product of a country may end up becoming an import product.
