Profits generally continue to increase throughout the life cycle caused by industry expertise, economies of scale providing scope to reduce unit costs over time.
At growth stage the characteristics are different. After all the market exercises having been done product is recognised by the consumers and demanded at a rapid speed resulting in reduction in cost. Economies of scale are achieved by this time. Sales volume increases quiet high at this stage. When cost is reduced due to economies of scale and sales revenues increases the profitability increases too. Demand factors remaining higher the business tends to increase product prices higher. Once the product is well accepted and becomes a favourite consumer pays the price asked for by the seller. The product acquires a quality image in the minds of consumers and they feel to enjoy a consumer's surplus even at higher price. Simple promotional efforts and advertising help consumers to retain the product in mind that promote the product selling easily. The competition gradually becomes aware of the product and its revenue yielding capacity. They start venturing into the business to get a market share and earn profits. The increase in competition exerts pressure in the market thereby reducing the market prices. The product gradually enters into maturity phase.
Maturity phase: the business gets a lot of experience in the growth phase. Production volume increases very high. Many competitions enter in to the market arena and put thrust on the product prices and market outlets. The market gradually gets saturated. Extra efforts are employed to retain the sales volume. Prices to lower because of so many products fighting for the same market size. Market share drops that creates pressure on the entire business. Extra marketing efforts, brand differentiation and product diversification with new features have to be introduced costing more to the company. Profit volume tends to lower. Company and its business being old invite demands for higher wages and bonus from workers that put pressure on the profitability of the business. Curtailment in production leading to closure of some departments deprives the company of the benefits of economies of scale. Overall profitability is down and makes the business unsustainable.
In course of the growth phase adolescent phase comes which is characterised with high growth and sales volume accompanied by increase in performance and product variance. The product is placed in the star corners of the BCG matrix with high growing sales revenue with offensive product prices. The product is powerful to be offensive and adopts aggressive pricing with a view to create a premium positing in the market to make customers view it as a superior product that can not be matched by the competition.
Market growth is accompanied by market fragmentation. This in turn causes competition. But competition in market growth is not less intense compared to the intensity in market maturity. In the growth phase, almost every organization remains in profits because of the growing and greater demand, whereas in maturity, organizations have to struggle for