BUSINESS LIFE CYCLE

The progressing stages of a market

What is Business Life
Cycle?
The term business cycle has several
different meanings in business. Today we
would focus on the three most frequently
used definitions for the term. The primary
"meaning" would be explained in depth, in
context with related concepts such as
economic cycle, recession, and depression.
 FIRST MEANING:
BUSINESS CYCLE FOR COUNTRY ECONOMY
The primary meaning of business cycle refers to
fluctuations in economic output in a country or countries.
These are the well-known phases of the business cycle
such as recession, depression, recovery, and expansion.
"Economic cycle" is another name for the same sequence.
This business cycle often parallels changes in
stock market prices, which are part of the stock
market cycle.
 SECOND MEANING:
BUSINESS CYCLE FOR COMPANY LIFE SPAN
STAGES
 The term business cycle sometimes refers to stages
in the lifespan of a single company.

In this sense, " stages" in one company's lifespan may include the following:
1.Birth (or Startup) stage 5.Decline stage
6.Demise stage or change into a
2.Initial Growth stage or
Change into a different company
3.Expansion stage (e.g., through merger or acquisition)
4.Maturity stage
The four life cycle stages are:

● Introduction
● Growth
● Maturity
● Decline
The economic business cycle (first meaning) can impact
stages of the company business cycle (second
meaning). Birth and Growth stages tend to accelerate
during economic recovery and expansion, of course.
Company Decline and Demise occur faster during
economic recession and depression.
 THIRD MEANING:
BUSINESS CYCLE FOR AN ONGOING
COMPANY
The third meaning for business cycle also refers to a
repeating series of phases in the life of an ongoing
business. Here, however, the sequence does not picture the
birth, growth, and demise of a company. Instead, the third
meaning describes a repeating series of adjustments a
company makes to its business model and strategies. The
series may cover a year or several years, and then repeat
many times during the company's life.
Note especially that a business cycle in this
sense might include stages such as these:
● Firstly, the company takes in revenues from
ordinary operations for a year or more.
● Secondly, leaders and analysts re-evaluate company
business performance and growth prospects. For
this, they give particular attention to evaluating:
○ Company business model performance. Here,
they will focus mainly on their pricing and
margin models.
○ Competitive strategy effectiveness.
○ Marketing strategy effectiveness.
● Thirdly, leaders adjust or change the
business model and strategies.
○ Successful strategies and models
undergo fine-tuning.
○ The company replaces failing strategies
and models.
● Finally, company resumes business for
another period before re-evaluating.
 DEFINING BUSINESS CYCLE PHASES:
RECESSION, DEPRESSION, RECOVERY AND EXPANSION
The primary meaning of business cycle and economic
cycle refers to changes in economic activity within a
country or countries. Because these two terms are
names for the same sequence, they are interchangeable.
Economists define the cycle by referring to economic
output, which they measure as the country's
gross domestic product (GDP).
Note that GDP is just the market value of all goods and
services produced within the country during a year. And,
when multi-national companies produce in other countries,
that activity is not part of home country GDP.
The stock market cycle typically runs more or less
parallel to the business cycle, but ahead of the business
cycle. Some analysts, therefore, see the stock market
cycle as a leading indicator of future business cycle
phases.
Note that stock market prices usually rise or fall ahead of
like changes in the economy (GDP).

In reality, these cycles tend to be less predictable, less

regular, and less smooth than those in the chart. The
length, severity, and sequence of phases may differ from
what the figure shows.
Each business cycle has
four phases. They are
expansion, peak,
contraction, and trough.
They don’t occur at regular
intervals. But they do have
recognizable indicators.
SEASONAL CYCLES ARE DIFFERENT FROM ECONOMIC
CYCLE
Changes due to seasonality tend to impact some
companies and industries more than others. And,
they are tied predictably to calendar seasons or short-
lived fads. By contrast, the business (economic) cycle
has broad impacts across companies, industries, and
calendar seasons instead.
BUSINESS CYCLE IMPACTS
GDP figures are the primary evidence for the business
cycle. It is not surprising, therefore, that people who
contribute directly to the GDP feel life-cycle phase
changes most keenly.
They are most aware of changes in areas such as
these:
● Employment and unemployment. Also, in hiring
rates.
● Wholesale sales and retail sales. And, especially,
consumer sales.
● New building loans and new building starts. Also in
mortgage rates.
● Building closures and property foreclosures.
● Business start-ups and business growth. Also,
business failures.
THE ECONOMIC BUSINESS CYCLE:
ARE THERE KNOWN CAUSES AND CURES?
During recessions and depressions governments and
private industry alike are keenly motivated to act on
measures that might move the economy back into
recovery and expansion. Any attempt to remedy
economic downturn, however, should start with an
understanding of why slowdowns occur in the first
place. And, it would be helpful to know which factors
trigger recovery.
This subject is central to the field of macroeconomics.
Not surprisingly, this field is characterized by competing
theories and speculation, but few established "laws."

A few factors are known to correlate with upturns or

downturns in the economy. However, the extent to which
they are either causes or results is less well known.
These factors include the following:
● An imbalance or balance between country
money supply, inflation, and interest rates. In the
United States, the Federal Reserve Board (FRB) is
responsible for keeping this balance.
● Excessive government spending.
Deficit spending is especially detrimental when
spent outside the country or on non-productive
domestic programs.
● Consumer and business optimism or
pessimism.
Here, spending depends heavily on consumer
expectations for business growth and inflation.
● Substantial increases or decreases in the price
of oil.
● Weak demand for goods and services.
The latter factor, weak demand, is a central focus in so-
called Keynesian economics (after John Maynard Keynes).
Since the 1930s, governments with capitalist economies
have held—to some degree—a Keynesian view.
This view holds that during recessions and
depressions, the government should increase
aggregate demand by doing the following:
● Firstly, increasing the money supply.
● Secondly, increasing government spending and
reducing taxes.
Who manages the business
cycle?
The government manages the business cycle.
Legislators use fiscal policy to influence the economy.
They use expansionary fiscal policy when they want to
end a recession. They should use contractionary fiscal
policy to keep the economy from overheating. But that
rarely happens because they get voted out of office
when they raise taxes or cut popular programs.
The nation's central bank uses monetary policy. It
lowers interest rates to end a contraction or trough.
That's called expansionary monetary policy. The
central bank raises rates to manage an expansion so it
doesn't peak. That's contractionary monetary policy.
The goal of economic policy is to keep the economy
growing at a sustainable rate. It should be strong enough
to create jobs for everyone who wants one but slow
enough to avoid inflation.
Three factors
cause each phase of the business cycle. Those
are the forces of supply and demand, the
availability of capital, and consumer confidence.
The most critical is confidence in the future. The
economy grows when there is faith in the future
and in policymakers. It does the opposite when
confidence drops.
LIFE CYCLE
THROUGH STAGES
At this stage the product
comes to the market and
the business tries to gain
foothold.
 The business looks to gain foothold on the sales ladder by:

Establishing An initial low pricing Promotion of the

policy to get into the Selection of a
branding and distribution product through
market, though with
assuring the little competition. model to get the aiming it at
market the quality Price maybe high product onto the specific target
of the new initially to recoup market. groups such as
product development costs. online forums.
Sales Low Sales

Costs High cost per customer

Profit Negative

Marketing Objectives Create product awareness and trial

Product Offer a basic product

Price Use cost plu

Distribution Build selective distribution

Advertising Build product awareness among early
adopters and dealers
INTRODUCTION STRATEGY
Marketing strategies used in introduction stages include:
rapid skimming - launching the product at a high
price and high promotional level
slow skimming - launching the product at a high price
and low promotional level
rapid penetration - launching the product at a low
price with significant promotion
slow penetration - launching the product at a low
price and minimal promotion
During the introduction stage, the aim is to:
establish a clear brand identity
connect with the right partners to promote your product
set up consumer tests, or provide samples or trials to key target markets
price the product or service as high as you believe you can sell it, and to reflect
the quality level you are providing
Being selective can boost demand.
 This stage will take developments at the first stage to another level by:

Maintaining the Marketing

Keeping the Increasing
quality of the campaigns aimed
price at a good distribution and
product and adding at a broader
level to maintain sourcing new
any extra services audience and at
or support that faster ways of
sales growth. growing market
becomes obvious getting the product
into the shelves. share for the
during the
product.
introduction.
Sales Rapidly rising sales

Costs Average cost per customer

Profit Rising Profit

Marketing Objectives Maximize market share

Product Offer product extensions, service, warranty

Price Price to penetrate into the market

Distribution Build intensive distribution

Advertising Build awareness and interest in the
market
GROWTH STRATEGY
Marketing strategies used in the growth stage mainly aim to
increase profits.
Some of the common strategies are:
improving product quality
adding new product features or support services to
grow your market share
enter new markets segments
keep pricing as high as is reasonable to keep demand
and profits high
increase distribution channels to cope with growing
demand
shifting marketing messages from product awareness
to product preference
skimming product prices if your profits are too low.
Seek to maximise the sales, profit and market share.
When your sales peak,
your product will enter the
maturity stage. This often
means that your market
will be saturated and you
may find that you need to
change your marketing
tactics to prolong the life
cycle of your product.
 The business deals with this stage by:

Adding features that New promotions

Cutting the price Revising distribution
will make the that aim to show
channels and using
product differ from to counter differences
incentives to
the inevitable competition. encourage stores to between products.
competitors that
stock the original
enter the market.
products rather than
the newcomers.
Sales Peak sales

Costs Low cost per customer

Profit High Profit

Marketing Objectives Maximise profit while defending market

share.

Product Diversify brand and models

Price Price to match or best competitors

Distribution Build more intensive distribution

Advertising Stress brand differences and benefits
MATURITY STRATEGY
Common strategies that can help during this stage fall
under one of two categories:
market modification - this includes entering new
market segments, redefining target markets,
winning over competitor’s customers,
converting non-users
product modification - for example, adjusting or
improving your product’s features, quality,
pricing and differentiating it from other
products in the marking
 The business deals with this stage by:

Reducing costs Discontinuing the

Keeping the and production
product on the product or selling
and keeping it the production
market but adding
or removing just for a niche rights to another
features or finding segment of the company.
new uses for it. market.
Sales Declining sales

Costs Low cost per customer

Profit Declining Profit

Marketing Objectives Reduce expenditure and milk the brand.

Product Phase out weak items

Price Cut price

Distribution Go selective: phase out unprofitable outlets

Advertising Reduce to level needed to retain hardcore
loyal customers
DECLINE STRATEGY
During the end stages of your product, you will see
declining sales and profits. This can be caused by changes
in consumer preferences, technological advances and
alternatives on the market.
At this stage, you will have to decide what strategies to take. If you
want to save money, you can:
reduce your promotional expenditure on the products
reduce the number of distribution outlets that sell them
implement price cuts to get the customers to buy the product
find another use for the product
maintain the product and wait for competitors to withdraw from the
market first
harvest the product or service before discontinuing it
Another option is for your business to discontinue the product from
your offering. You may choose to:
sell the brand to another business
significantly reduce the price to get rid of all the inventory
Many businesses find that the best strategy is to modify their
product in the maturity stage to avoid entering the decline stage.
THANK YOU
Hope you understood at
least 60% of it!!!