Product Life Cycle Theory

The reaping spiritedness bike possible action is used to comprehend and analyze various due date typifys of harvest-festivals and industries. Product innovation and diffusion influence long-term patterns of international get by. This term product living measure cycle was used for the offset time in 1965, by Theodore Levitt in an Harvard Business Re put one across article Exploit the Product Life Cycle. Anything that satisfies a consumers need is c in alled a product. It whitethorn be a appargonnt product (clothes, crockery, cars, house, gadgets) or an intangible service (banking, health c be, hotel service, airline service).Irrespective of the kind of product, all products introduced into the food trade undergo a common bread and merelyter cycle. To understand what this product life cycle theory is all about, let us abide a quick carriage at its definition. Product Life Cycle comment A product life cycle refers to the time period between the launch of a product into the market till it is in the end withdrawn. In a nut shell, product life cycle or PLC is an odyssey from new and innovative to old and outdated This cycle is split into four different academic degrees which encompass the products excursion from its entry to exit from the market. Product Life Cycle StagesThis cycle is based on the all familiar biological life cycle, wherein a seed is put (introduction stage), germinates (growth stage), sends out roots in the ground and shoots with branches and leaves against gravity, thereby maturing into an adult ( adulthood date stage). As the plant lives its life and nears old age, it shrivels up, shrinks and dies out ( refuse stage). Similarly, a product also has a life cycle of its own. A products entry or launching phase into the market corresponds to the introduction stage. As the product gains popularity and wins the trust of consumers it cast downs to grow.Further, with increasing gross sales, the product captures nice market constituent and gets stable in the market. This is called the maturity stage. However, after round time, the product gets overpowered by la runnel scientific raisements and entry of superior competitors in the market. presently the product becomes obsolete and needs to be withdrawn from the market. This is the decline phase. This was the crux of a product life cycle theory and the graph of a products life cycle looks like a bell-shaped curve. Let us delve more(prenominal) into this management theory. Introduction Stage After conducting thorough market research, the go with develops its product.Once the product is ready, a test market is carried out to check the viability of the product in the actual market, before it prat set foot into the mass market. Results of the test market atomic number 18 used to make correction if any and accordingly launched into the market with various promotional strategies. Since the product has just been introduced, growth observed is in truth slight, market size is small and marketing salute are steep (promotional cost, cost of setting up distri scarcelyion channels). Thus, introduction stage is an awareness creating stage and is not associated with profitsHowever, strict vigilance is required to ensure that the product enters the growth stage. Identifying hindering agents and nipping them off at the bud stage is authoritative for the products future. If corrections cannot be made or are impractical, the marketer withdraws the product from the market. Read more on types of market research. Growth Stage Once the canonic stage goes as per expected, the initial spark has been set, however, the fire has to be kindled by proper care. The marketer has managed to gain consumers attention and now works on increasing their products market voice.As output increases, economies of scale is seen and better prices come about, conducing to profits in this stage. The marketer maintains the quality and features of the product (white thorn add supererogatory features) and seek home run building. The aim here is to coax consumers to prefer and choose this product rather than those sold by competitors. As sales increase distribution channels are added and the product is marketed to a broader audience. Thus, rapid sales and profits are characteristics of this stage. Read more on marketing tools. Maturity StageThis stage views the most disputation as different companies struggle to maintain their respective market shares. The cliche survival of the fittest is applicable here. Companies are busy monitoring products value by the consumers and its sales generation. closely of the profits are made in this stage and research costs are minimum. Any research conducted will be confined to product enhancement and improvement al mavin. Since consumers are aware of the product, promotional and advertising costs will also be lower. In the midst of stiff competition, companies may even make out their prices in response to the tough times.The maturity stage is the stabilizing stage, wherein sales are high, but their pace is slow, however, brand loyalty develops imparting profits. Read more on marketing plans. Decline Stage After a period of stable growth, the revenue generated from sales of the product starts dipping due to market saturation, stiff competition and latest technological developments. The consumer loses interest in this product and begins to seek other options. This stage is characterized by shrinking market share, dwindling product popularity and plummeting profits. This stage is a very delicate stage and needs to be handled wisely.The type of response contributes to the future of the product. The company needs to take special efforts to raise the products popularity in the market once again, by either reducing cost of the product, tapping new markets or withdrawing the product. Read more on merchandise Services marketing Mix Marketing Tips It is important to note that, not all produ cts go through the entire life cycle. Just as how not all seeds sown germinate, not all products launched into the market succeed. Some flop at the introductory stage, while whatsoever fail to capture market share due to quick fizzling out.Moreover, some marketers quickly change strategies when the product r distributivelyes decline phase and by various promotional strategies regain the incapacitated glory, thereby achieving cyclic maturity phases. Application of product life cycle is important to marketers because via this analysis they can manage their product well and prevent it from incurring losses. A well-managed product life cycle leads to rise in profits and does not necessarily end. Product innovations, new marketing strategies,etc. keeps the product appealing to customers for a very long period of time.Hope this article on product life cycle theory was informative and helpful The product life-cycle theory is an economic theory that was certain by Raymond Vernon in resp onse to the failure of the Heckscher-Ohlin bewilder to explain the observed pattern of international trade. The theory suggests that early in a products life-cycle all the parts and labor associated with that product come from the area in which it was invented. After the product becomes adopted and used in the world markets, takings gradually moves away from the point of origin.In some situations, the product becomes an item that is imported by its original rural area of invention. 1 A commonly used example of this is the invention, growth and business of the personal computer with respect to the United States. The model applies to labor-saving and capital-using products that (at least at first) cater to high-income groups. In the new product stage, the product is produced and consumed in the US no export trade occurs. In the maturing product stage, mass-production techniques are developed and contradictory subscribe to (in developed countries) smashs the US now exports the product to other developed countries.In the standardized product stage, production moves to developing countries, which then export the product to developed countries. The model demonstrates dynamic comparative advantage. The country that has the comparative advantage in the production of the product changes from the innovating (developed) country to the developing countries. Contents hide 1 Product life-cycle o1. 1 Stage 1 Introduction o1. 2 Stage 2 Growth o1. 3 Stage 3 Maturity o1. 4 Stage 4 colour o1. 5 Stage 5 Decline 2 References editProduct life-cycle There are four stages in a products life cycle introduction ?growth ?maturity ?saturation ?decline The location of production depends on the stage of the cycle. editStage 1 Introduction New products are introduced to meet local (i. e. , national) needs, and new products are first exported to similar countries, countries with similar needs, preferences, and incomes. If we also presume similar evolutionary patterns for all countri es, then products are introduced in the most advanced nations. (E. g. , the IBM PCs were produced in the US and strewing quickly throughout the industrialized countries. ) editStage 2 GrowthA copy product is produced elsewhere and introduced in the home country (and elsewhere) to capture growth in the home market. This moves production to other countries, usually on the basis of cost of production. (E. g. , the clones of the early IBM PCs were not produced in the US. ) The Period till the the Maturity Stage is known as the intensiveness Period. editStage 3 Maturity The sedulousness contracts and concentrates the lowest cost producer wins here. (E. g. , the umpteen clones of the PC are made almost entirely in lowest cost locations. ) editStage 4 Saturation This is a period of stability.The sales of the product reach the peak and there is no throw out possibility to increase it. this stage is characterised by Saturation of sales (at the early part of this stage sales remain sta ble then it starts falling). It continues till substitutes enter into the market. Marketer must try to develop new and alternative uses of product. editStage 5 Decline Poor countries constitute the only markets for the product. Therefore almost all declining products are produced in developing countries. (E. g. , PCs are a very poor example here, mainly because there is weak demand for computers in developing countries.A better example is textiles. ) Note that a particular incorruptible or perseverance (in a country) stays in a market by adapting what they make and sell, i. e. , by riding the waves. For example, approximately 80% of the revenues of H-P are from products they did not sell five years ago. the profits go back to the host old country. ? trade theory holding that a company will begin by exporting its product and later undertake foreign straightaway investment as the product moves through its lifecycle ? As products mature, two location of sales and optimal producti on changes ?Affects the direction and flow of imports and exports ?Globalization and integration of the economy makes this theory less valid ?Trade implication ? ?Increased emphasis on technologys impact on product cost ? Explained international investment ?Limitations ?Most appropriate for technology-based products ?Some products not easily characterized by stages of maturity ? Most relevant to products produced through mass production Marketing > Product Life Cycle The Product Life Cycle A products life cycle (PLC) can be divided into several stages characterized by the revenue generated by the product.If a curve is drawn showing product revenue over time, it may take one of umteen different shapes, an example of which is shown below Product Life Cycle Curve The life cycle concept may moderate to a brand or to a category of product. Its duration may be as short as a few months for a hysteria item or a coke or more for product categories such as the gasoline-powered automobil e. Product development is the incubation stage of the product life cycle. There are no sales and the firm prepares to introduce the product. As the product girdes through its life cycle, changes in the marketing aggregate usually are equired in order to adjust to the evolving challenges and opportunities. Introduction Stage When the product is introduced, sales will be low until customers become aware of the product and its benefits. Some firms may announce their product before it is introduced, but such announcements also alert competitors and remove the element of surprise. Advertising costs typically are high during this stage in order to rapidly increase customer awareness of the product and to target the early adopters. During the introductory stage the firm is likely to incur additional costs associated with the initial distribution of the product.These higher costs coupled with a low sales volume usually make the introduction stage a period of negative profits. During the i ntroduction stage, the primary goal is to return a market and build primary demand for the product class. The following are some of the marketing mix implications of the introduction stage Product one or few products, relatively undifferentiated Price Generally high, assuming a play out pricing strategy for a high profit margin as the early adopters buy the product and the firm seeks to recoup development costs quickly.In some cases a penetration pricing strategy is used and introductory prices are set low to gain market share rapidly. Distribution Distribution is selective and scattered as the firm commences implementation of the distribution plan. Promotion Promotion is aimed at building brand awareness. Samples or trial incentives may be say toward early adopters. The introductory promotion also is intended to convince potential resellers to carry the product. Growth Stage The growth stage is a period of rapid revenue growth.Sales increase as more customers become aware of the product and its benefits and additional market segments are targeted. Once the product has been proven a victory and customers begin asking for it, sales will increase further as more retailers become interested in carrying it. The marketing team may expand the distribution at this point. When competitors enter the market, often during the later part of the growth stage, there may be price competition and/or increased promotional costs in order to convince consumers that the firms product is better than that of the competition.During the growth stage, the goal is to gain consumer preference and increase sales. The marketing mix may be modified as follows Product New product features and packaging options improvement of product quality. Price Maintained at a high level if demand is high, or reduced to capture additional customers. Distribution Distribution becomes more intensive. Trade discounts are minimal if resellers show a strong interest in the product. Promotion Incre ased advertising to build brand preference. Maturity Stage The maturity stage is the most profitable.While sales continue to increase into this stage, they do so at a slower pace. Because brand awareness is strong, advertising expenditures will be reduced. Competition may result in decreased market share and/or prices. The competing products may be very similar at this point, increasing the difficulty of differentiating the product. The firm places effort into encouraging competitors customers to switch, increasing usage per customer, and converting non-users into customers. Sales promotions may be offered to encourage retailers to give the product more shelf space over competing products.During the maturity stage, the primary goal is to maintain market share and come about the product life cycle. Marketing mix decisions may include Product Modifications are made and features are added in order to differentiate the product from competing products that may submit been introduced. Price Possible price reductions in response to competition while avoiding a price war. Distribution New distribution channels and incentives to resellers in order to avoid losing shelf space. Promotion Emphasis on differentiation and building of brand loyalty. Incentives to get competitors customers to switch.Decline Stage Eventually sales begin to decline as the market becomes saturated, the product becomes technologically obsolete, or customer tastes change. If the product has developed brand loyalty, the profitability may be maintained longer. Unit costs may increase with the declining production volumes and eventually no more profit can be made. During the decline phase, the firm generally has three options Maintain the product in hopes that competitors will exit. Reduce costs and find new uses for the product. Harvest it, reducing marketing support and coasting along until no more profit can be made. Discontinue the product when no more profit can be made or there is a succe ssor product. The marketing mix may be modified as follows Product The number of products in the product line may be reduced. Rejuvenate surviving products to make them look new again. Price Prices may be lowered to liquidate inventory of discontinued products. Prices may be maintained for continued products serving a niche market. Distribution Distribution becomes more selective. Channels that no longer are profitable are phased out. Promotion Expenditures are lower and aimed at reinforcing the brand foresee for continued products.Limitations of the Product Life Cycle Concept The term life cycle implies a well-defined life cycle as observed in living organisms, but products do not have such a predictable life and the specific life cycle curves followed by different products change substantially. Consequently, the life cycle concept is not well-suited for the forecasting of product sales. Furthermore, critics have argued that the product life cycle may become self-fulfilling. For example, if sales peak and then decline, managers may conclude that the product is in the decline phase and therefore cut the advertising budget, thus precipitating a further decline.Nonetheless, the product life cycle concept helps marketing managers to plan alternate marketing strategies to address the challenges that their products are likely to face. It also is useful for monitoring sales results over time and comparing them to those of products having a similar life cycle. Marketing > Product LifecycleThe Product Cycle and its Implications Let us begin by reviewing Vernons principal points regarding the technological and geographical transitions of industries. His product-cycle paradigm suggested that an industrys competitiveness will go through a predictable series of stages To begin with, U.S. -controlled enterprises generate new products and serve upes in response to the high per capita income and the relative availability of productive factors in the United States th ey introduce these products or processes abroad through exports when their export position is threatened they establish overseas subsidiaries to exploit what remains of their advantage they retain their oligopolistic advantage for a period of time, then lose it as the basis for the original lead is wholly eroded. (1971 66)While Vernons main objective was to explain the causes and consequences of foreign investment, the stages that he identified also implied that an industrys perspective on trade policyComment on Deardorff 2 will evolve. Industries can be expected to favor open markets when they are competitive and to favor protection when they are not. Deardorffs analysis is largely conformable with this cycle, but brings into closer consideration the role of developing countries exports in challenging the developed countries industries.While I am largely in agreement with the basic points brocaded by both Vernon and Deardorff, I would suggest two adjustments. The first is that a different policy headspring may be in order. To paraphrase, Deardorffs question seems to be, Will developed countries respond to increased competition from developing countries by erecting new barriers to trade? I would instead ask, How will the interests of declining industries in developed countries affect the pace and form of new trade liberalization? While I understand the usefulness of the simplifying assumption that the two countries in the model are initially engaged in free trade (ibid. 3), I think it is equally simple and more realistic to begin with the assumption that restrictions to trade already exist. It would be a great exaggeration to claim that the WTO rules are so watertight as to prevent countries from imposing any new restrictions on trade, but I would quarrel with the suggestion that we simply assume that increased import competition will lead the North to implement a tariff on imports (ibid. 9). The track render for both legislated protection 1 and safegu ards cases 2 suggests that protectionist industries have had little success in winning support from government.The clear trend of the past half century has been towards the reduction of tariffs and (more recently) the replacement or elimination of quotas. In an environment of declining tariff barriers, the best that most protectionist industries can hope for is to secure a pledge that their products be exempted from reductions. Even when one acknowledges the continuation of peak tariffs in some industries and the mischief that can be done with antidumping duties and other instruments of protection, the fact remains that markets are overmuch more open today than they were in decades past.Moreover, the rules are more comprehensive and enforceable under the WTO than they were under the GATT. The back up important departure is that the range of options is not limited to a dichotomous choice between free trade or protection. Beyond the almost trivial point that there are many degrees of openness, representing every step from zero barriers to confiscatory levels of protection, discrimination is an equally important consideration. Here the rules of the GATT and WTO have been permissive.Free trade agreements (FTAs) and customs unions are allowable exceptions to the general rule of worldwide most-favored-nation treatment ( bequeathd that they meet the requirements of GATT Article XXIV), and preferential trade programs such as the Generalized System of Preferences (GSP) are granted waivers. While each of these options provide for more liberal trade, and many extend special treatment to developing countries, they are widely seen as a second-best alternative to nondiscriminatory liberalization.For reasons that I research below, however, the increasing use of these discriminatory instruments can also be portrayed as a natural consequence of the product cycle. 1 Although there have been many efforts since the Hawley-Smoot Tariff Act of 1930 to enact bills imposing tari ffs or quotas on imports, no major bills have been enacted over a presidential veto. There have been several instances, however, in which presidents felt obliged to make concessions to protectionist demands in order to win congressional approval of some other market-opening initiative (especially new grants of negotiating effectiveness or the approval of a trade agreement).In other words, some of the rare steps backward have been price for making two steps forward. 2 Petitioners have succeeded in winning import protection in only 23 of the 70 cases considered in the quarter century since enactment of the current safeguards uprightness (section 201 of the Trade Act of 1974). Comment on Deardorff 3 Implications of the Product Cycle for Trade Policy The product-cycle model could be used to explain any one of three approaches to trade policy.Depending on how one views the interests of firms and the responses of government, the cycle could be predicted to encourage more open markets, m ore protection, or more discrimination. Under the benign view that seems implicit in Vernons analysis, the product cycle can be portrayed as a progressive mechanism. A country with an efficient process of creative destruction could theoretically sustain a permanent free-trade orientation, with few or no exceptions for specific industries.Vernons views were similar to those of Schumpeter (1936), who believed that a combination of entrepreneurial innovation and periodic depressions provided just such an engine of progress. A real free-trading country would regularly produce a new crop of innovators, while firms that lost their competitiveness would either find new lines of work or be swept away when the business cycle swung downward. The survivors favor open markets. This Darwinian optimism is challenged, however, if firms and workers in a declining industry refuse to go quietly into that good night.A more pessimistic interpretation is that old firms and their workers do not always co nveniently melt down or get reabsorbed into the economy, but instead seek ways to keep alive even after they pass their prime. Deardorffs analysis falls into this second category. He concludes that factor owners in the developed country will respond to a competitive challenge by demanding and receiving protection. I offer yet a third alternative, in which the product cycle encourages the reduction of trade barriers but does so in an increasingly discriminatory fashion.My adaptation of Vernons model, which is illustrated in catch 1, departs from the original in two ways. First, I believe that a wider range of stages should be represented in the model. Second, I more explicitly state what the trade (in addition to the investment) preferences of an industry will be as it passes through these stages. My adaptation recognizes that the policy options available to industries and countries are not limited to opening or finale the market, but also allow for discriminatory initiatives that better lend themselves to manipulation on behalf of specific firms or trading partners.The stages might respectively be termed pre-competitive, semi-competitive, competitive, and post-competitive. The distinctions between industries in stages 2, 3, and 4A are particularly important. Each one of these stages is pro-trade, but they favor different emphases in both the objectives and form of trade agreements. Only the Stage 3A industry is the pure free-trader. Industries in stages 2, 3B, and 4A each take a more qualified approach to open markets, and may be reluctant to support universal liberalization.An industrys most critical choice comes in the fourth stage, when it must choose between retreat into the domestic market or relocation of its production offshore. The initial decision to invest overseas might have been made in an earlier stage, prompted by such diverse objectives as gaining or maintaining plan of attack to a large and protected foreign market, taking advantage of lowe r wage rates and less restrictive regulatory environments, or reducing expatriate costs. When an industrys competitiveness declines, however, it could decide to shift most or all of its production offshore.Those firms that become multinational producers (Stage 4A) acquire interests and preferences very different from those that do not (Stage 4B). A multinational producer will be much more favorably disposed towards open markets than a mature domestic industry, but will not inevitably be a paragon of free-trade purism. These producers may perceive a strong incentive to support discriminatory options, especially if they progress to sanctuary markets at home or abroad. Home About Privacy Reprints Terms of UseCopyright 2002-2010 NetMBA. com. All rights reserved. This web site is operated by the Internet Center for focussing and Business Administration, Inc. Search NetMBA Site Information Home About Privacy Reprints Terms of Use Marketing Accounting Economics Finance Management M arketing Operations Statistics Strategy ? ?In recent years an extensive theoretical literature has been offered examining the implications of the product cycle (PC) model of trade (Hirsch 1967 Vernon 1966). 1) Emphasizing knowledge transfers, Krugman (1979) constructed a general equilibrium model consisting of an innovating North country and an imitating southeastward country. (2) A key implication of the PC is that the North must continually innovate in the face of the southwesterlys ability to eventually imitate each new product. The flying-geese (FG) theory (inter alia, Akamatsu, 1935 Kojima, 2000, 2003 Ozawa, 1993, 2001, 2005) elaborates on the mature stage of the PC by examining conditions under which an initially imitating South country itself looses the comparative advantage in producing the mature product due to rising labor costs.The loss in comparative advantage results in the further and sequential transfer of production to less developed other South countries and the a ccompanying recycling of the Norths import market among themselves, a phenomenon that can be called market or comparative advantage recycling (Ozawa, 1993 United Nations Conference on Trade and Development, 1995). ?This article specifically examines one particular mature PC import, TV sets, in the U. S. arket and its ever-changing pattern of exporting economies from East Asiafirst, from Japan and then from the Newly Industrializing Economies (NIEs) (Hong Kong, Singapore, Taiwan, and South Korea), from the Association of Southeast Asian Nations-4 (ASEAN-4) (Thailand, Malaysia, Indonesia, and the Philippines), and more recently, from China. ?True, technological progress continues in the TV set industry (e. g. , digitalization, flat-panel sets, and high definition TV HDTV), but set manufacturing has practically disappeared in the United States (Chandler, 2001).Incremental innovations are now universe introduced mostly in the South/follower countries themselves, especially in Japan and South Korea. East Asia has emerged as the worlds largest concentration of consumer electronics production. (3) In this sense, TV sets are sure enough a mature product for the United States (too mature to be retained). In short, our study examines the phenomenon of PC-based imports and market recycling as witnessed in the United States and explores policy implications for both North and South countries in the age of globalization. There have been several tests for the existence of the PC. Tsurumi and Tsurumi (1980) found support for the PC by find out that the U. S. price snap bean of demand for color TV sets increased over time as U. S. consumers chose between domestic- and Japanese-produced color TV sets. Audretsch (1987) also found support by determining that growth industries tend to be more R D oriented while mature industries allocate fewer resources to this activity.Cantwell (1995) concluded that over time the share of patents of multinational corporations located abroad increased for most countries from 1920 to 1990, which supported the internationalization of investment by technological leaders. Gagnon and Rose (1995) found that a trade overindulgence (deficit) of a commodity is likely to persist over a long period of time, a trend that is counter to the PC and more consistent with factor proportions theory (which closely parallels the FG theory). ?Econometric tests for the FG theory have been limited.Dowling and Cheang (2000) found support for the FG theory by utilizing both Balassas revealed comparative advantage index and foreign direct investment (FDI) ratios for East Asian countries. victimisation Spearman rank correlation coefficients and examining three periods (1970-95, 1970-85, and 1985-95), they found that economic development trickled down from Japan to the NIEs and then to ASEAN-4. Cutler et al. (2003) analyzed labor-intensive trade data from Japan, the NIEs, the ASEAN-4, and China to the United States and found support for the FG th eory (market recycling). In this article, we are interested in testing for the dynamics of the combined PC-FG framework. Using annual data from 1961 to 2002 for TV sets, we use cointegration techniques to estimate a system of multiple cointegrated vectors representing the sequential transfer of the U. S. TV import market from Japan to the NIEs, to the ASEAN-4, and finally to China. We develop a methodology of interpreting both the cointegrating vectors and the speeds of adjustment as a technique to test for the recycling of the U. S. import market among the East Asian economies.We argue that our analysis has implications for the emerging HDTV and flat-panel TV sets markets as well as patterns of behavior in lower developed South countries such as China, Vietnam, and India as these countries are actively pursuing inward FDI in higher value-added industries. ?Section II presents the theoretical framework, and section III provides the data and background randomness about the regions T V set manufacturing. Section IV discusses the empirical techniques and results of the analysis. Section V touches on policy implications and offers conclusions. ?II.CONCEPTUAL FRAMEWORK ?Electronics is an R & D-based industry where new products and processes are constantly innovated and competitiveness shifts from one product to another sequentially, an industry that is characterized by short PCs. The Schumpeterian concept of creative destruction aptly applies to innovators home markets. A closely pace of technological standardization and maturity for a given new product leads to an equally swift outward shift of production from the innovators (North) country to overseas, as conceptualized in the PC theory of trade and investment.In the early developmental phase of electronics, the United States was the dominant source of innovations, as seen in the original PC theory (Hirsch, 1967 Vernon, 1966), but other countries in Europe and East Asia also soon emerged as active innovators, as presented in the revised version (Vernon, 1979). Nonetheless, the United States subdued continues to play the major roles of both technology and market providers to East Asian economies.Yet, as described in the original PC theory, conventional TV sets and many other mature electronic products have followed the typical pattern of a sequence from U. S. domestic production to exports, to overseas production, and to imports. (4) These imports come mostly from East Asia. ?What is equally interesting is that once an electronic product becomes a mature commodity, whose competitiveness is basically determined by labor costs, its production shifts from one South country to another in the persistent search of lower cost labor.This development is facilitated especially when lower echelon South countries liberalize their trade and investment regimes so as to attract production from higher developed South countries. Such a successive transmigration of production of a standardized product there fore exhibits a changing pattern of production over time within the South countries, while the United States remains the major import market.This phenomenon of production transmigration down the intraregional hierarchy of South countries differentiated in terms of the stages of economic development and the levels of technological sophistication is captured in the FG model. ?Viewed in the above light, the PC theory and the FG model complement each other, as schematically illustrated in Figure 1. A new product is innovated first in a high-income (high-wage) country like the United States and initially manufacture and exported from the innovators home country (i. e. , the introduction and growth stages, from ?