The International Product Life Cycle

Vernon and Wells (1996)

The product life cycle influences the pattersn of internatioanl trade. An innovating country will initially consume all the production of a product, but as overseas markets develop domestic production will be exported, but as the market matures domestic production will be increasingly challenged by imports from lower cost countries until imports exceed domestic production (fig1)

. As markets develop in other advanced countries domestic producers will begin to meet the demand, where there are cost advantages or market advantageshen the product becomes standardisd, this domestic production will exceed consumption and the country will become a net exporter.

In developing countries domestic production is unlikely tot begin until the product has reached maturity and as domestic sonsumptioni less developed countries is slow to grow very quickly the domestic production uses low costs to produce for the export markets.

Although the production in less developed countries the capital might be provided from the innovating country to take advantage of low labour costs.