The Product Life Cycle assumptions that there are four stages in which a product goes through in order to reach international markets, assumes that believes that all businesses starts from low levels and then grow to high levels. This is a partial theory that believes that all businesses start at the same level hence follow the same trend. Currently, firms have numerous and vast strategies on how to conduct their activities. Notably, the different managerial skills and capital base make firms to be launched with different strategic objectives.
This theory holds for some small and middle level enterprises that depend on their performances and profitability in the local market in order to expand their presence in the international market. Clearly, small firms with low capital investments will focus on their local markets as a short term goal. On the other hand, their entry into the international market will be a long term objective that will be guided by the returns from the local market. This theory contends that business growth starts from small volumes to large volumes yet other firms do not follow this assumption by the theory.
Presently, the technological development like online shopping disapproves this theory. This innovative idea has enabled firms of all sizes to enter the international market as customers can access and order for their products in any part of the globe. Moreover, the current systems of product development encourage amalgamation and cooperation among different companies across the globe. Other means like outsourcing enables products to move into the global market within the shortest time possible. Companies are also producing similar products in the market and with the globalized world, research and development takes shorter time than the earlier times.
International trade can be defined as the exchange of goods and services between or among countries. This type of trade has benefits that can be revealed through the analysis of the volume of an economy trade in relative to the total output. It simply implies that countries benefit when their exports bring in more returns than they spend on the imports. Some of the benefits include job creation, expansion of customer-choice on goods and services and spread of the entrepreneurial culture. Notably, in international trade, countries depend on each other. That is the producer country depends on the consumer country as the final destination point of their products.
Some of which include mercantilism that was in practice in the late 1700s. It encouraged nations to encourage exports but discourages imports through stocking of gold as financial wealth. However, this theory enhanced unequal benefit among the trading countries. That is the producer countries were benefiting at the expense of colonial countries. In addition, there is absolute advantage that analyzes the aptitude of an organization to produce goods and services more efficiently than other nations.
In addition, there is the factor promotion theory that asserts that nations export only products that they have their resources in abundant while import products that they have their resources in limited supply. This theory shows the supports occurrence of this trade. There is also the international product cycle that believes that products go through a cycle before going into the international market. Lastly is the New Trade theory that contemplates that an increase in economies of scale and specialization leads to gains to a given country. This theory lays considerable emphasis on productivity.
