PLC and SWOT Reengineered: Strategy Development Tools for Service Industries in Global Competition

Traditional Plc And Swot

The PLC concept is based on the assumption that the “life” of a product, whether physical or service based is finite, that is, there is a beginning and an end. Furthermore, this finite life span can be divided into four stages.

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  Introductory stage: when the new product or service is first “introduced” into the market place until sales gain momentum and sales volumes become “meaningful.”

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  Growth stage: strong growth until the time sales growth slows down significantly and starts to plateau.

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  Mature stage: relatively steady sales until they start on a path of continuous decline and diminish until the product or service is discontinued.

It should be noted that only the start and the end of the PLC stages are clearly defined. The rest of the starting and ending points are “judgmental” and management defined (Golder & Tellis, 2004).

These points nevertheless are significant, because they involve important strategic changes which impact on resource utilization and business performance. They determine the way the business is managed. During Introduction the product or service is in an investment mode and the focus is on maximizing sales potential. The Growth stage is usually characterized by growing profitability while still looking to maintain strong growth. During Maturity the focus is on further improving profitability without negatively impacting sales. Finally, during the Decline, the focus is on maximizing the profit margin, while accepting that absolute sales and profits will be decreasing.

It should also be noted that the PLC concept is as relevant to service based industries as it is to those based on physical products. Accordingly, it would have been just as appropriate to rename PLC as SLC (Service Life Cycle) but it was considered unnecessary because the final output of a service based business is generally referred to as its “product.”

Figure 2 visualizes the profitability pattern of a product/service associated with the corresponding PLC sales by stage (Figure 1).

Figure 2.

PLC/SLC Profit Curve

Figure 1.

PLC/SLC (Product/Service Life Style) Sales Curve