Fundamentals of Management, 8th ed

Sales volume

Introduction

Time

Stages

Growth

Maturity

Decline

High

Low

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F I G U R E 3 . 3

The Product Life Cycle

Managers can use the framework of the product life cycle—introduction, growth, maturity,

and decline—to plot strategy. For example, management may decide on a differentiation

strategy for a product in the introduction stage and a prospector approach for a product in

the growth stage. By understanding this cycle and where a particular product falls within

it, managers can develop more effective strategies for extending product life.

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Part 2: Planning

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FORMULATING CORPORATE-LEVEL STRATEGIES

Most large organizations are engaged in several businesses, industries, and markets.

Each business or set of businesses within such an organization is frequently referred

to as a strategic business unit (SBU). An organization such as GE operates hundreds

of different businesses, making and selling products as diverse as jet engines, nuclear

power plants, and lightbulbs. GE organizes these businesses into approximately

20 SBUs. Even organizations that sell only one product may operate in several distinct

markets.

Decisions about which businesses, industries, and markets an organization will

enter, and how to manage these different businesses, are based on an organization’s

corporate strategy. The most important strategic issue at the corporate level concerns

the extent and nature of organizational diversification.

Diversification

describes the

number of different businesses that an organization is engaged in and the extent to

which these businesses are related to one another. There are three types of diversifi-

cation strategies: single-product strategy, related diversification, and unrelated

diversification.

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