Question

Discuss the relationship between the firm’s product life-cycle (PLC) and cash flows statements. You need to provide a listed firm from any stock market in the world to justify your argument.

Answer 1

1)Introduction Stage of an Apple iPhone

This is the stage of product introduction to the market. prices should keep low to the maximum market share.
But In the Introduction Stage of the Product Life Cycle of Apple iPhone, the price is kept high so as to maintain the exclusivity of ownership.
advertising, sales & marketing costs are usually high with low prices, which result in negative cash flow,
Advertising and marketing campaigns has to spend a lot of money. And therefore in the Introduction stage of the product life cycle of Apple iPhone, the company doesn’t make profits.

2)Growth Stage of Apple iPhone:-

This is the time when product quality is maintained & also keeping customers

For marketing of product firms spending more money on marketing to reach out to a wider audience as well as to become a top-of-the-mind brand. the sales are expected to pick up sharply in the growth stage.

In the case of Apple iPhone, every subsequent launch gets more sales and adds to the overall sales volume.

The one in the growth stage will be the predecessor of the latest model, i.e. iPhone 8, 7 and its variants. The latest one will be closest to the introduction, the middle ones closer to maturity, and the earliest ones closest to decline.

3)Maturity Stage of Apple iPhone:-

During this phase, the rate of increase in sales may decline but the overall sales are maintained at a certain level.

iPhone 8 will be the maturity stage where sales is stable more or less.

4)Decline Stage of Apple iPhone-:

By this time, the audience moves on to better things in life. They are no longer interested in your product because they offer nothing new as compared to other products that are currently in the introduction or growth phase.

The cash flow cahnge with the change of product life cycle, Initially huge marketing cost and manufacturing costs there is negative cash flow, once they turn into the growth phase and then in maturity, the cash flow start to change as positive with the change in product life cycle.