Product Life Cycle Theory

Product Life Cycle Theory

Naturally, as the international scenario where trading is done evolves on a daily basis, existing trade theories are continuously at a loss in tackling the ever-rising ambiguities put forth by the emerging trade scenarios.  The 1960s was a period of technology explosion in various fields and this directly reflected and influenced on the way international trade is conducted.

            Developed by Vernon in 1966, the crux of the product life cycle theory is that technical revolution and the corresponding extension of the market are the decisive factors in setting the blueprint of foreign trade. Though the size of the market is a powerful determinant of the nature of trade at the international level, technology is the crucial dynamic (Morgan 1997)

(Product life cycle curve adapted from <http://newlycorporate.com/2008/08/04/you-better-recognize/>)

This theory explains that a cycle of trade is created in the process of manufacture of a product originally by a company and then subsequent manufacture by the nation’s allies and other nations and at all places as time goes by. In doing so,the product which was the export material of the parent country finaly goes on to become its import material possible (Vernon 1966, 1972; Wells 1972)