Product Life Cycle

Chapter 1. Introduction

1.1 Evolution & Types of Switches:

A light switch is a switch, most commonly used to operate electric lights, permanently connected

equipment, or electrical outlets.

Because of electrical safety considerations in many countries their design and installation is

regulated either by law or by widely accepted industry standards. In the U.S. there is a complex

web of local and state laws and building codes. In practice however in most countries any

requirements for permits or certification are widely ignored and replacing a light switch is

considered a simple "do-it-yourself" task with the parts being widely available.

History of Electrical Switches

The first light-switch employing quick-break technology was invented by John Henry

Holmes in 1884 in the Shield field district of Newcastle-Upon-Tyne. Holmes was a

prolific inventor of other electrical devices including the "Castle" dynamo and early

electrical systems in trains.

Different Types of Traditional Switches

Toggle Switch:-

The toggle light switch was invented in 1916 by W. J. Newton and Morris Goldberg.

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The traditional light-switch mechanism is a toggle mechanism that provides "snap-

action" through the use of an "over center" geometry. The design was patented in 1916

by William J. Newton and Morris Goldberg. The switch handle does not control the

contacts directly, but through an intermediate arrangement of springs and levers. Turning

the handle does not initially cause any motion of the contacts, which in fact continue to

be positively held open by the force of the spring. Turning the handle gradually stretches

the spring. When the mechanism passes over the center point, the spring energy is

released and the spring, rather than the handle, drives the contacts rapidly and forcibly to

the closed position with an audible "snapping" sound. The snap-action switch is a

mechanical example of negative resistance.

This mechanism is safe, reliable, and durable, but produces a loud snap or click. (Many

people have at some point in their lives made an attempt to reduce this noise by operating

the handle slowly or gingerly. Of course this is to no avail, since the very purpose of the

mechanism is to ensure that the electrical portion of the switch always operates rapidly

and forcefully — and noisily — regardless of how the handle is manipulated).

Mercury switches:-

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Before the 1970s, mercury switches were popular. They cost more than other designs, but

were totally silent in operation. The switch handle simply tipped a glass vial, causing a

large drop of mercury to roll from one end to the other. As it rolled to one end, the drop

of mercury bridged a pair of contacts to complete the circuit. Many of them also would

glow faintly when they were "off" to aid people in finding them when the room was dark.

The vial was hermetically sealed, but concerns about the release of toxic mercury when

the switches were damaged or disposed of led to the abandonment of this design. In the

U.S. there has never been any effort to recall or replace existing mercury switches, and

millions of them remain in use.

Rocker Switches:-

An alternative design to the toggle switch is the rocker. This design sits flush to the wall,

and is activated by "rocking" a paddle, rather than pushing a short protruding handle up

and down. This type is near-universal in the UK, Ireland and India, where the toggle

design would be considered old-fashioned.

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1.2 Introduction of PHILIPS:

Philips Electronics N.V. (Royal Philips Electronics Inc.), most commonly known as Philips, is a multinational Dutch electronics corporation.

Philips is one of the largest electronics companies in the world. In 2009, its sales were €23.18 billion. The company employs 115,924 people in more than 60 countries.

Philips is organized in a number of sectors: Philips Consumer Lifestyles (formerly Philips Consumer Electronics and Philips Domestic Appliances and Personal Care), Philips Lighting and Philips Healthcare (formerly Philips Medical Systems).

The company was founded in 1891 by Gerard Philips, a maternal cousin of Karl Marx, in Eindhoven, Netherlands. Its first products were light bulbs and other electro-technical equipment. Its first factory survives as a museum devoted to light sculpture.[2] In the 1920s, the company started to manufacture other products, such as vacuum tubes (also known worldwide as 'valves'), In 1927 they acquired the British electronic valve manufacturers Mullard and in 1932 the German tube manufacturer Valvo, both of which became subsidiaries. In 1939 they introduced their electric razor, the Philishave (marketed in the USA using the Norelco brand name).

Headquarters: Amsterdam, Netherlands

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Chapter 2. Overview of PLC

What is product life cycle (PLC)?

Product is defines as "anything that is capable of satisfying customer needs”. Products

can be further classified into tangible product and intangible product.

Tangible Product:-

Tangible products are those product goods which can be ‘touched, felt, and seen.

E.g.:-Television, Car, etc.

Intangible Product:-

Intangible products are services which can be used but cannot be touched or felt.

E.g.:-Repairing of product, etc.

Businesses should manage their products carefully over time to ensure that they deliver

products that continue to meet customer wants. The process of managing groups of

brands and product lines is called portfolio planning.

Each product undergoes a specific life cycle which is known as “Product Life

Cycle:.There are various stages in product life cycle.

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Introduction Stage

At the Introduction (or development) Stage market size and growth is slight. It is possible

that substantial research and development costs have been incurred in getting the product

to this stage. In addition, marketing costs may be high in order to test the market, undergo

launch promotion and set up distribution channels. It is highly unlikely that companies

will make profits on products at the Introduction Stage. Products at this stage have to be

carefully monitored to ensure that they start to grow. Otherwise, the best option may be

to withdraw or end the product.

Growth Stage

The Growth Stage is characterized by rapid growth in sales and profits. Profits arise due

to an increase in output (economies of scale) and possibly better prices. At this stage, it is

cheaper for businesses to invest in increasing their market share as well as enjoying the

overall growth of the market. Accordingly, significant promotional resources are

traditionally invested in products that are firmly in the Growth Stage.

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Maturity Stage

The Maturity Stage is, perhaps, the most common stage for all markets. It is in this stage

that competition is most intense as companies fight to maintain their market share. Here,

both marketing and finance become key activities. Marketing spend has to be monitored

carefully, since any significant moves are likely to be copied by competitors. The

Maturity Stage is the time when most profit is earned by the market as a whole. Any

expenditure on research and development is likely to be restricted to product modification

and improvement and perhaps to improve production efficiency and quality.

Decline Stage

In the Decline Stage, the market is shrinking, reducing the overall amount of profit that

can be shared amongst the remaining competitors. At this stage, great care has to be taken

to manage the product carefully. It may be possible to take out some production cost, to

transfer production to a cheaper facility, sell the product into other, cheaper markets. Care

should be taken to control the amount of stocks of the product. Ultimately, depending on

whether the product remains profitable, a company may decide to end the product.

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Chapter 3. Market Needs

3.1 Need for PLC

Product Life Cycle for Push Technology Switches

As push technology switches are new to domestic and commercial market, product life

cycle for this product focuses on various aspects of market. It starts with research and

development stage and proceeds with different stages of Product lifecycle like

introduction, growth, maturity and decline stage.

1. Idea Generation

Technology behind Push switches is already used in many types of equipment,

machineries, but the implementation of that idea in domestic uses is not done. As

today’s customer are big time followers of trend in the market till the point new idea

arises. Push switch idea is going to replace the conventional concept of switches i.e.

one way switch and two way switch. Idea replicates the customer’s wants such as

sleek and stylish interface.

2. Idea Screening

By considering SWOT analysis for the product and taking into consideration

the factors such as product idea, the competitors, target market along with rough

estimates of market size, product price, development time and cost, manufacturing

cost, rate of return the product is said to be satisfying customer needs, value for the

money of the customer. Idea is able to capture the market and survive in the market

by generating profits.

3. Concept development

The concept of using Push technology in switches for domestic applications

can also be expanded to the commercial complex, Techno Park where most number

of offices is based, hospitals. Benefits this product is going to give to the customer

over the conventional are Push Button, Noiseless, Waterproof, Sleek interface,

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Integrated circuit, Shockproof, Stylish, User friendly. A customer is attracted towards

the product as soon as customer can make out value for the price.

4. Concept Testing

Concept or the product testing’s generally giving samples to the prospects and

to get the reviews of the product. For the product reviews are collected from the

upcoming construction builders and interior designers where these our customer will

display product to the end users in their model of house.

5. Marketing Strategy Development

After testing and selecting a product concept for development, a three-part

preliminary marketing-strategy plan for introducing the new product into the market.

The first part will describe the target market’s size, structure, and behavior; the

planned product positioning; and the sales, market share, and profit goals sought in

the first few years. The second part will outline the planned price, distribution

strategy, and marketing budget for the first year. The third part will describe the long-

run sales and profit goals and marketing-mix strategy over time.

6. Business Analysis

Taking into account current growth of economy and developments, rate of

growing new construction sites sales predicted for this product is Rs.240 crore, total

cost incurring for this is Rs.225 crore, and overall profit projections are up to 7% to

7.5%.This financial figures cannot be considered firm basis for company as new

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information emerges, the business analysis must be revised and expanded

accordingly.

7. Total Sales Estimates

Sales figure for this product Push technology switch can be predicted by

assuming that this technology is going to completely substitute the conventional

switches. First time sales include the Upcoming Residential complex and Techno

Parks, Small apartments, hospitals and pharmaceutical industry. Replacement sales

includes large no of sales ones the awareness of the product is complete. Repeat

purchases occur soon, providing that the product satisfies some buyers. Taking

assumption into consideration Total estimated sales are the sum of estimated first-

time sales, replacement sales, and repeat sales which is estimated at up to Rs. 240

crores.

8. Estimating Costs and Profits

Cost factor includes total fixed cost and total variable cost. Fixed cost which is

initial investment includes machinery cost, setup cost, and land acquired cost.

Variable cost includes mainly Material cost, labor cost, Marketing and Advertising

cost, Research & Development cost. Generally material cost is 70% of total cost and

fixed cost is 20 % of Total cost. Estimation of cost is important for the understanding

the breakeven point in which management estimates how many units of the product

the company will have to sell to break even with the given price and cost structure.

Calculating Cost for the 1st year (Introduction stage)

Target market: Upcoming Residential Complex in metros, Interior Designers, Techno

Park, Commercial complex

1. Upcoming Residential complex in metros – 300 * 5 No. of buildings in each

project = 1500 building.

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Target to reach 1000 buildings of 12 storey’s with 2 flats per floor and 5 electric

panels in each flat = 1, 20,000 panels

2. Techno Parks + Commercial buildings – 100 of 15 storey’s and 50 panels per

floor = 75,000 panels

Total number of panels = 2, 00,000

Estimated cost per panel = Rs. 600 (Cost calculated by taking into account all

components of panel + substitute product cost + adv., distribution and R&D)

Total sales Revenue = 2, 00,000 * 600 = 12 crore.

Based on this we calculate revenues for further years.

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3.2 SWOT Analysis

SWOT analysis is a strategic planning method used to evaluate the Strengths,

Weaknesses, Opportunities, and Threats involved in a project or in a business venture.

A SWOT analysis may be incorporated into the strategic planning model. Strategic

Planning has been the subject of much research.

Strengths: characteristics of the business or team that give it an advantage

over others in the industry.

Weaknesses: are characteristics that place the firm at a disadvantage

relative to others.

Opportunities: external chances to make greater sales or profits in the

environment.

Threats: external elements in the environment that could cause trouble for

the business.

SWOT Analysis of Push Technology Switches

STRENGTHS

Competitive advantages

o Pioneer in market

Since the product is innovative it would have an edge over the other

conventional systems employed.

o Brand image/loyalty

Philips being a renowned manufacturer, launching a new product line

under the brand would have a competitive advantage. As the company has

a widespread customer base, the new product launches will enjoy brand

loyalty.

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o Market share

In 2009 Philips became the world’s 42nd most valuable brand in the Inter-

brand global ranking, from 65th place in 2004 (our brand value almost

doubled to USD 8.1 billion in 2009 versus 2004). This will lead to an

increase in the brand value of the new product in the market.

o Presence in the international market

Headquartered in the Netherlands, Philips employs approximately 118,000

employees in more than 60 countries worldwide. With sales of EUR 23

billion in 2009, the company is a market leader in lighting.

USP's (Unique Selling Points)

o Push Button

Widely adopted in most of the gadgets and equipments, consumers would

find it easy to adapt to the change from the conventional switches.

o Noiseless

Relief from the regular “Tick – Tock” switches.

o Waterproof

Due to flat surface panel and restricted socket points, there is no water

penetration.

o Sleek interface

In-line wall panels

o Integrated circuit

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Advanced electrical circuit prevents any short circuits or sparks.

o Shockproof

As the panel and the circuit are concealed, there is no chance of spark or

electrical jumps.

o Durable

Due to single line panel and customized fittings, there are fewer

possibilities of breakage and damage.

o Stylish

As the panels are in-line, slim with LED light indicators, they are a style

statement in themselves.

o User friendly

It is not a change, rather it a transition from a traditional switch to push

switch.

Marketing - reach, distribution, awareness

o Initial target of metros with very high infrastructural development per

square kilometer

o Due to already established brand network the distribution would be free

flow

o Innovative aspects to release the product in the festival of lights i.e.,

Diwali

Price

o Penetrating pricing strategy, value for money paid, excellent quality

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WEAKNESSES

Presence and reach

o Initially the product will be launched only in metros, so it would not be

possible to capture the entire target market

o Also in the introduction and growth stage, only B2B distribution strategy

will be followed

Price of the product

Not concern with the lower class of the society

Not targeting promotion towards the lower class of the society

OPPORTUNITIES

Market developments

o As the real estate industry is booming in India there is a huge opportunity

of growth in lighting system and switches

o Philips already being a market leader has an opportunity to increase its

sales in the switches business as well

o As the standard of living in India has increased, the purchasing power of

the consumer has steeply increased

Competitors' vulnerabilities

o At the initial stage no competitor for this product

Value addition and Product Development

o There is a phenomenal scope for innovations in product development,

packaging and presentation.

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New markets, vertical, horizontal

o Expansion of B2B network to B2C network, Targeting Tier –Two cities

New USP's

o User interface providing default profile lighting functions; user can save

multiple profiles of lighting scheme as per his/her choice and selecting the

same by just a push

o Motion Sensors – To activate a particular lighting scheme when a person

enters the room

THREATS

Competitors

o Switch manufacturing companies like Havells, Anchor, Crabtree,

Legrand,.etc. in the market can be a threat in the future.

Competitor intentions

o As performance increases, differentiation between brandnames is going to

decrease. Philips’s rivals are finding ways to increase their marketshare by

replicating some of Philips’s advantages

o Competitors may provide cheaper products with additional features and

better styling

Environmental issues

o Due to expansion of “Go Green movement” and the growing demand of

environment friendly products, it can cause a drop in sales of the product.

As the Material of Construction (MOC) of the product is not biodegradable.

Disadvantages of proposition

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o People would be reluctant to change from the existing switch boards.

Market demand

o The threat with performance increasing each year is that there is a physical

limit to how far you can go. People will soon be satisfied with the level of

performance not to demand anything more, and are going to be more

susceptible to other things such as prices, or quality of the product. If

Philips only focuses on styling, this trend might be a threat in the future.

Chapter 4 .Product Life Cycle (Sleeki)

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4.1 Stages of PLC

1. Research and Development Stage

Before introducing new product in market, companies’ doe’s research on product

regarding feasibility, cost factor, raw materials etc. This stage is known as Research and

development stage.

1. Marketing research

Marketing research mainly deals with following

Desire of customers

Cost factor

Target market

2. Product research

Different steps in product research are

Material research

Design research

Prelaunch Testing

R & D stage is most cost incurring stage and does not provide any income. But it is a

stage where success of any product mostly depends on. This stage doesn’t deals with any

large scale production.

2. Introduction Stage

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Introduction stage is introducing of product in target market. This stage focuses more on

brand awareness and building customer base for product. Market share of product

throughout this stage is very low.

Characteristic of Introduction Stage

Sales:-

Sales of push technology switches will be less. As more focus is on corporate

customer, market is restricted to HNI’s.

Sales revenue expected in this stage in approximately Rs.41, 00, 00,000.

Cost:-

Cost of production included labor cost, raw material cost, maintenance etc.

During this stage cost of production is higher than sales revenue.

Cost of production expected during this stage is around Rs.40, 00, 00,000.

Profits:-

As cost of production is more than sales revenue, Company incurs losses at this

stage.

Customers:-

As this product is new in market, more focus is on corporate/Major parties. For

Push technology switches Upcoming Construction Project, Interior Decorators

will be target customer.

Competitors:-

There are fewer or no competitors. Main competition will be from the Market

Leaders who have other types of switches in market.

Marketing Objectives:-

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During Introduction stage, creating brand awareness and building customer base

is main objective. In Sample Flats of upcoming/under construction project, we

can install this switch free of cost so as to attract builders to use our switches in

their projects. Similarly, tie-ups with renowned interior decorators will also help

to create brand awareness.

Strategies:-

Product:-

With success in Research and development stage, products will basic features are

launched in market. At this stage, switches will have LED display. These switches

will also have additional layers to reduce sparks and avoid short circuit. Other

products with different features are in Research and Development stage.

Price:-

Pricing policy adopted during this stage is market skimming. As target is on high

profile customers purchasing flats or renovating their apartments, cost is more

than existing products in market. This will help in faster recovery of cost of

production.

Distribution:-

Initially metropolitan’s cities customers are target market. Hence existing

distribution channel of Philips will be used for distribution. Distribution would

consist of multiple channels to reach most of the prospective customers.

Advertising:-

Advertising is most important in building market. It enables companies to reach to

its prospective customers through print and electronic media. More customers can

be reached through advertisements.

Sales Promotion:-

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Sales promotion at this stage is important as it helps in success of product in

market.

3. Growth Stage

This is stage, were market acceptance is high. Target market and market shares grow

rapidly. Companies make more profit and try to get breakeven point in this stage.

Characteristic of this stage:-

Sales:-

With increase in customer base, sales rapidly rises. Sales revenue keeps on

increasing.

Approximate sales revenue during this phase is around Rs.64 Crore for period of

3 year...

Costs:-

With increase in customer and competitor, cost will probably decrease to attract

more customers from different segment. Cost will increase depending upon raw

material, government taxing policies etc.

Cost at stage will be approximately Rs.60 crore.

Profits:-

Sales revenue increases leading to increase in profit margin. Break Even point is

achieved at this stage. Profit increases with successive year in this stage. As sales

revenue is more than costs incurred, company gains more revenue through this

product.

Customers:-

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In previous stage, customer base was restricted to builders and Interior decorators.

But with transition from introduction to growth stage, customer market is also

extended to get more customers. Now organization targets retail customers

through network of retailers.

Competitors:-

Competitors are increasing in this stage. Competitors have introduced new ranges

of products with additional features to be on par with our product.

E.g.:-Anchor launches new product with feather touch switches.

Marketing Objective:-

Marketing objective at this stage will be to get more market share. Therefore

market has been extended to normal/retail customers. Even retail outlets in of

companies are started in metropolitans to provide more ranges of switches and to

get more customers.

Strategies:-

Product:-

There are various ranges of products available in market. Products from

competitors are available in market, at this stage. To attract more customers and

retain existing customer, value added services like warranty, extended warranty,

new range of products etc would be introduced in market. Service

Centers/replacement centers are opened in most cities, towns.

Price:-

Price of existing product will be reduced to entice low end customers. At the same

time, new products with enhanced features will be introduced in market to attract

high end customers.

Distribution:-

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Distribution channels will be increased. There is increase in level of distribution.

Third party distribution channel is introduced at this stage. Multiple channels of

wholesaler, Distributors, retailers etc are used at this stage.

Advertisement:-

As more focus is on retail customer, mass awareness is main objective of

advertising. So advertisement at this stage would be more aggressive with

Newspapers, Television, and Billboards at retailers etc. Budget for advertisement

will be similar to that in introduction as companies needs to retain its market

share.

Sales Promotion:-

As product is already pioneer in market, sales promotion can be decreased. Sales

promotion like free product sample, demonstration will be reduced at this stage.

4. Maturity Stage:-

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At some point, the rate of sales growth will slow, and the product will enter a stage of

relative maturity. Three strategies for the maturity stage are

(1) Market modification,

(2) Product modification, and

(3) Marketing-mix modification

(1) Market modification :

At this stage the strategy would be to expand the market for its mature product by

working to expand the number of product users. This is accomplished by

(1) Converting nonusers;

(2) Entering new market segments like moving towards rural areas and various different

segments or

(3) Winning competitors’ customers.

(2) Product modification :

The strategy would be to stimulate sales by modifying the product’s characteristics

through

(1) Quality improvement,

(2) Feature improvement, or

(3) Style improvement.

(1) Quality improvement aims at increasing the product’s functional performance—its

durability, reliability etc.

(2) Product with different feature for different purpose build the company’s image as an

innovator and win the loyalty of market segments that value these features.

(3) Marketing-mix modification:

At this stage the strategy would be to stimulate sales by modifying other marketing-mix

elements such as prices, distribution, advertising, sales promotion, personal selling, and

services.

Sales promotion has more impact at this stage because consumers have reached an

equilibrium in their buying patterns, and

Advertising is not as effective as sales-promotion deals.

Characteristic of this stage:-

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Sales:-Sales at this stage is at peak level. Sales figure continues to be similar for specific

period of time. During this stage, sale might start declining.

Estimated sales revenue during this stage will be around Rs 112 crore for the period

of three year.

Cost:-Increasing sales ensures low cost per customer i.e. with increase in production and

sales, cost incurred on machinery, labor, etc will be lesser.

Cost estimation for this period is around Rs 100 crore.

Profits:-Profits during this stage are high. Peak sales and decreased cost per customer

makers profit margin higher.

Customers:-This stage involves customers who prefer to buy product as per the review

and performance of product in market. Companies can retain its existing customer

as well as focus on acquiring new customer.

Competitors:-As our switches have been pioneer in market during growth stage,

competitors with smaller market share have already started to decline. Even

competitors will low profit margin starts to remove their product from market to

reduce losses.

Marketing Objective:-

Marketing objective at this stage is to retain market share and maximize profit.

Competitors have already started to decline in number. By introducing new

products and giving offers to customer will help in retaining market share.

Strategies:-

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Products:-

Earlier product will be enhanced according to customer’s requirement. Switch

panel with Power consumption meter will be introducing to attract customers.

Price:-

Price of enhanced switchboard will be slightly costlier than earlier version. Cost

might be adjusted according to competitors.

Distribution:-

Distribution channels will intensify with distributors in smaller towns.

Advertisement:-

Advertisement would focus most on unique selling point of switches. Switches

which are introduced at this stage has Power consumption meter which provides

information of consumed power by customers. This will attract customer who

focuses more on saving energy on their part.

Sales Promotion:-

With enhanced feature and environment friendly, competitors market will be

encouraged to switch to our products. More emphasis will be on giving offers,

discount to customers.

5. Decline Stage:-

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At this stage sales decline for many reasons including technological advances, shift in

customers preferences and increase in competitions.

Characteristics of this stage:-

Sales:

Sales decreases rapidly in this stage due to various reasons.

Costs:

The sales keep on decreasing but still the cost per customer is low.

Profits:

As sales decreases rapidly the profit also decline.

Customers:

At this stage the customers goes for the new product available in the market.

Competitors:

As customers shifts to new product available in the market and there is no demand

for our product at this stage. So competition also decreases as competitor working

with low margin shifts and some firms withdraw as soon as sales and profit

decline.

Marketing observation:-

As the sales for product decreases, cut down expenditure occurring for the

product such as labor cost, administrative cost, material cost, advertising and

promotion cost, and milking the product.

Strategies:-

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Product: -

As there are four types of different products, at this stage based on the

performance of the product decision is made to phase out weak product. Decrease

the volume of production i.e. cost of production.

Price: -

Total sales of the product decreases in the market (market share) to capture the

sales available in the market our price will be reduced compared to the

competitors.

Distribution: -

Distribution cost is reduced at this stage by closing unprofitable outlets in

particulars areas/regions. Number of the distribution channels decreases.

Advertising: -

At this stage, advertising is not required in intense mode, sales decreases. Cost is

reduced significantly, as product is already proved in the market.

Sales Promotion:-

Sales promotion is very less as company plans to launch switches with newer

technologies. Company plans to phase out this product and introduce product with

higher capability to maintain its market leadership.

Five possible decline strategies:

1. Increasing the firm’s investment to dominate the market or strengthen its competitive

position;

2. maintaining the firm’s investment level until the uncertainties of industry are resolved;

3. Decreasing the firm’s investment level selectively, by dropping unprofitable customer

groups, while simultaneously strengthening the firm’s investment in lucrative niches;

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4. Harvesting (“milking”) the firm’s investment to recover cash quickly; and

5. Divesting the business quickly by disposing of its assets as advantageously as possible.

Chapter 5. Performance Graphs

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5.1 Different Graphs

Sales Revenue Chart

Profit Chart

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R&D

Introduction

Growth

Maturity

Decline

Product Life Cycle

Sales Revenue v/s Profit

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Cost v/s Sales Revenue Chart

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5.2 Break Even Point

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What is breakeven point?

Break-even point (BEP) is the point at which cost or expenses and revenue are equal:

there is no net loss or gain, and one has "broken even". A profit or a loss has not been

made, although opportunity costs have been paid, and capital has received the risk-

adjusted, expected return. At this quantity, the costs and benefits are precisely balanced.

The managerial concept of break-even analysis seeks to find the quantity of output that

just covers all costs so that no loss is generated. Managers can determine the minimum

quantity of sales at which the company would avoid a loss in the production of a given

good. If a product cannot cover its own costs, it inherently reduces the profitability of the

firm.

A budget is predicted and corresponding graph is developed. Revenue is assumed to be

same for each quantity. No discounts or offers are taken into consideration at this stage.

Total cost of production is divided into two parts i.e. fixed cost and Variable cost. Fixed

cost are those cost which be incurred by company irrespective of sales of product. Factors

corresponding to fixed costs are infrastructure, research and development, etc.Variable

cost are those cost which changes according to unit of production. For E.g.:- Raw

material, logistics, etc.

Benefits of Break even point analysis

With breakeven point analysis, company can take further decision on production, pricing,

etc.Few benefits of breakeven point analysis are:-

1. Try to reduce the fixed costs (by renegotiating rent for example, or keeping better

control of telephone bills or other costs)

2. Try to reduce variable costs (the price it pays for the tables by finding a new

supplier)

3. Increase the selling price of their tables.

Limitations of Breakeven Point (BEP)

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Product Life Cycle

1. Break-even analysis provides information on organization front. It does not give

any information about market trend.

2. Even fixed cost may vary from time to time. Breakeven point assumes fixed cost

to be constant throughout the period.

3. It assumes average variable costs are constant per unit of output, at least in the

range of likely quantities of sales.

4. BEP assumes all quantity produced to be according to standard. There might be

production of product below standard or having fault. This reduces margin of

profit.

5. In multi-product companies, it assumes that the relative proportions of each

product sold and produced are constant.

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Product Life Cycle

Break Even Point of Sleeki

Switches are normally consumed in under construction projects/Renovation works

etc.Electrical market has restricted market. Switch market as compared to other product is

lesser.

Before commencement of research or production work, company incurs some cost. This

cost can be in acquiring infrastructure for project, Market research; etc.This usually is

cost to company without any revenue generation.

During Research and Development phases, company installs required

machinery/mechanism for further development. This cost is taken as fixed cost as it is

with company till end of product. In switches, company deploys machinery with advance

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Product Life Cycle

technology to provide high tech switches. This is cost to company without any returns at

this stage. There is also depreciation on this cost. This cost will be considered for entire

lifecycle of the product. Other cost incurred in this stage are human resources,

administrative cost, etc.There is also cost on pre-launch testing of product at customer

site.

In introduction stage, as promotion plays important role, company incurs more cost on

promotion. Company promotes it products through various media. Cost incurred for

promotion in our project is nearest 10% of total cost. During these phases, company starts

earning revenue. Sales revenue increase with promotion of switches. Also free of cost

distribution of sample switches for sample flat will increase in cost of company.

As we reach growth phase, more sales revenue and profit is generated. We are already

pioneer in Market. This helps in generating revenue through sales of product. With

increase in customer requirement, per customer production cost decreases. Promotion

efforts also cost lesser. As per our budget prediction, we would achieve BREAK EVEN

POINT during this stage. All the cost incurred in initial setup, raw materials, research and

development has been recovered through sales revenue. Now company starts generating

profit.

Maturity stage has continuation of profit. Cost incurred is less than profit. Company is

milking from its product.

Decline stage has decrease in sales figure. Company gets lesser income than expected. As

it is start of losses, we try to retain product for few years. But with increasing losses,

company cannot retain its product in market. This forces company to pullout its product

from market.

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Product Life Cycle

Chapter 6. Annexure

6.1 Product Variety:

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Product Life Cycle

6.2 Budget

  BUDGET REPORT 

  **ALL FIGURES IN RUPEES CRORE

  STAGES

 R & D INTRODUCTION GROWTH MATURITY DECLINE

 Fixed cost 2.50 7.46 7.25 6.97 6.62Depriciation   0.03 0.08 0.10 0.12           Variable cost :          Raw material 0.50 22.07 35.31 62.96 32.24Promotion 0.50 6.31 5.56 7.00 4.05

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Product Life Cycle

Labour   1.58 2.96 5.16 3.08Manufacturing   1.89 3.66 7.96 4.19Administrative 0.50 1.58 2.80 5.09 3.23Taxes 0.00 0.95 1.25 2.64 1.58Total variable cost 1.50 34.36 51.54 90.81 48.37           Total cost 4.00 41.82 58.78 97.77 54.99           Sales revenue 0.00 39.98 64.71 112.12 59.91           Profit/Loss -4.00 -1.83 5.92 14.34 4.92% Profit/Loss   -0.15 0.26 0.38 0.23           Increase market (sales revenue)   0.22 0.67 0.32 -0.25No. of panels ( in units, not in crs)   684000.00 1116000.00 1821000.00 971250.00

BIBLIOGRAPHY

Books

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Education(Singapore) Pte.Ltd., 2003.

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3. Panda, Tapan. Marketing Management 2nd Edition.New Delhi: Excel Books.2007.

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Product Life Cycle

4. Stanton, W., Etzel, M., Walker, B. Fundamentals of Marketing 10th Edition.

Singapore: McGraw-Hill Book Co.1994.

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1. “Product life cycle management (marketing).” www.wikipedia.org.19 October

2010. http://en.wikipedia.org/wiki/Product_life_cycle_management_(marketing)

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2010.http://en.wikipedia.org/wiki/SWOT_analysis

3. “The product life cycle.” http://www.netmba.com/marketing/product/lifecycle/

4. “The Product Life cycle.” http://www.quickmba.com/marketing/product/lifecycle/

5. Chapman, Alan. “SWOT Analysis.”

6. http://www.businessballs.com/swotanalysisfreetemplate.htm

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Product Life Cycle

7. “SWOT

template”http://www.businessballs.com/freematerialsinword/free_SWOT_analysi

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2010

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