Product Life Cycle

Chapter 1. Introduction

1.1 Evolution & Types of Switches:

A light switch is a switch, most commonly used to operate electric lights, permanently connected
equipment, or electrical outlets.

Because of electrical safety considerations in many countries their design and installation is
regulated either by law or by widely accepted industry standards. In the U.S. there is a complex
web of local and state laws and building codes. In practice however in most countries any
requirements for permits or certification are widely ignored and replacing a light switch is
considered a simple "do-it-yourself" task with the parts being widely available.

History of Electrical Switches

The first light-switch employing quick-break technology was invented by John Henry
Holmes in 1884 in the Shield field district of Newcastle-Upon-Tyne. Holmes was a
prolific inventor of other electrical devices including the "Castle" dynamo and early
electrical systems in trains.

Different Types of Traditional Switches

Toggle Switch:-

The toggle light switch was invented in 1916 by W. J. Newton and Morris Goldberg.

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The traditional light-switch mechanism is a toggle mechanism that provides "snap-

action" through the use of an "over center" geometry. The design was patented in 1916
by William J. Newton and Morris Goldberg. The switch handle does not control the
contacts directly, but through an intermediate arrangement of springs and levers. Turning
the handle does not initially cause any motion of the contacts, which in fact continue to
be positively held open by the force of the spring. Turning the handle gradually stretches
the spring. When the mechanism passes over the center point, the spring energy is
released and the spring, rather than the handle, drives the contacts rapidly and forcibly to
the closed position with an audible "snapping" sound. The snap-action switch is a
mechanical example of negative resistance.

This mechanism is safe, reliable, and durable, but produces a loud snap or click. (Many
people have at some point in their lives made an attempt to reduce this noise by operating
the handle slowly or gingerly. Of course this is to no avail, since the very purpose of the
mechanism is to ensure that the electrical portion of the switch always operates rapidly
and forcefully — and noisily — regardless of how the handle is manipulated).

Mercury switches:-

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Before the 1970s, mercury switches were popular. They cost more than other designs, but
were totally silent in operation. The switch handle simply tipped a glass vial, causing a
large drop of mercury to roll from one end to the other. As it rolled to one end, the drop
of mercury bridged a pair of contacts to complete the circuit. Many of them also would
glow faintly when they were "off" to aid people in finding them when the room was dark.
The vial was hermetically sealed, but concerns about the release of toxic mercury when
the switches were damaged or disposed of led to the abandonment of this design. In the
U.S. there has never been any effort to recall or replace existing mercury switches, and
millions of them remain in use.

Rocker Switches:-

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An alternative design to the toggle switch is the rocker. This design sits flush to the wall,
and is activated by "rocking" a paddle, rather than pushing a short protruding handle up
and down. This type is near-universal in the UK, Ireland and India, where the toggle
design would be considered old-fashioned.

1.2 Introduction of PHILIPS:

Philips Electronics N.V. (Royal Philips Electronics Inc.), most commonly known as
Philips, is a multinational Dutch electronics corporation.

Philips is one of the largest electronics companies in the world. In 2009, its sales were
€23.18 billion. The company employs 115,924 people in more than 60 countries.

Philips is organized in a number of sectors: Philips Consumer Lifestyles (formerly Philips

Consumer Electronics and Philips Domestic Appliances and Personal Care), Philips
Lighting and Philips Healthcare (formerly Philips Medical Systems).

The company was founded in 1891 by Gerard Philips, a maternal cousin of Karl Marx, in
Eindhoven, Netherlands. Its first products were light bulbs and other electro-technical
equipment. Its first factory survives as a museum devoted to light sculpture.[2] In the
1920s, the company started to manufacture other products, such as vacuum tubes (also
known worldwide as 'valves'), In 1927 they acquired the British electronic valve
manufacturers Mullard and in 1932 the German tube manufacturer Valvo, both of which
became subsidiaries. In 1939 they introduced their electric razor, the Philishave
(marketed in the USA using the Norelco brand name).

Headquarters: Amsterdam, Netherlands

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Chapter 2. Overview of PLC

What is product life cycle (PLC)?

Product is defines as "anything that is capable of satisfying customer needs”. Products

can be further classified into tangible product and intangible product.

Tangible Product:-

Tangible products are those product goods which can be ‘touched, felt, and seen.

E.g.:-Television, Car, etc.

Intangible Product:-

Intangible products are services which can be used but cannot be touched or felt.

E.g.:-Repairing of product, etc.

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Businesses should manage their products carefully over time to ensure that they deliver
products that continue to meet customer wants. The process of managing groups of
brands and product lines is called portfolio planning.

Each product undergoes a specific life cycle which is known as “Product Life
Cycle:.There are various stages in product life cycle.

Introduction Stage

At the Introduction (or development) Stage market size and growth is slight. It is possible
that substantial research and development costs have been incurred in getting the product
to this stage. In addition, marketing costs may be high in order to test the market, undergo
launch promotion and set up distribution channels. It is highly unlikely that companies
will make profits on products at the Introduction Stage. Products at this stage have to be
carefully monitored to ensure that they start to grow. Otherwise, the best option may be
to withdraw or end the product.

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Growth Stage

The Growth Stage is characterized by rapid growth in sales and profits. Profits arise due
to an increase in output (economies of scale) and possibly better prices. At this stage, it is
cheaper for businesses to invest in increasing their market share as well as enjoying the
overall growth of the market. Accordingly, significant promotional resources are
traditionally invested in products that are firmly in the Growth Stage.

Maturity Stage

The Maturity Stage is, perhaps, the most common stage for all markets. It is in this stage
that competition is most intense as companies fight to maintain their market share. Here,
both marketing and finance become key activities. Marketing spend has to be monitored
carefully, since any significant moves are likely to be copied by competitors. The
Maturity Stage is the time when most profit is earned by the market as a whole. Any
expenditure on research and development is likely to be restricted to product modification
and improvement and perhaps to improve production efficiency and quality.

Decline Stage

In the Decline Stage, the market is shrinking, reducing the overall amount of profit that
can be shared amongst the remaining competitors. At this stage, great care has to be taken
to manage the product carefully. It may be possible to take out some production cost, to
transfer production to a cheaper facility, sell the product into other, cheaper markets. Care
should be taken to control the amount of stocks of the product. Ultimately, depending on
whether the product remains profitable, a company may decide to end the product.

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Chapter 3. Market Needs

3.1 Need for PLC

Product Life Cycle for Push Technology Switches

As push technology switches are new to domestic and commercial market, product life
cycle for this product focuses on various aspects of market. It starts with research and
development stage and proceeds with different stages of Product lifecycle like
introduction, growth, maturity and decline stage.

1. Idea Generation

Technology behind Push switches is already used in many types of equipment,

machineries, but the implementation of that idea in domestic uses is not done. As
today’s customer are big time followers of trend in the market till the point new idea
arises. Push switch idea is going to replace the conventional concept of switches i.e.
one way switch and two way switch. Idea replicates the customer’s wants such as
sleek and stylish interface.

2. Idea Screening

By considering SWOT analysis for the product and taking into consideration
the factors such as product idea, the competitors, target market along with rough
estimates of market size, product price, development time and cost, manufacturing
cost, rate of return the product is said to be satisfying customer needs, value for the

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money of the customer. Idea is able to capture the market and survive in the market
by generating profits.

3. Concept development

The concept of using Push technology in switches for domestic applications

can also be expanded to the commercial complex, Techno Park where most number
of offices is based, hospitals. Benefits this product is going to give to the customer
over the conventional are Push Button, Noiseless, Waterproof, Sleek interface,
Integrated circuit, Shockproof, Stylish, User friendly. A customer is attracted towards
the product as soon as customer can make out value for the price.

4. Concept Testing

Concept or the product testing’s generally giving samples to the prospects and
to get the reviews of the product. For the product reviews are collected from the
upcoming construction builders and interior designers where these our customer will
display product to the end users in their model of house.

5. Marketing Strategy Development

After testing and selecting a product concept for development, a three-part

preliminary marketing-strategy plan for introducing the new product into the market.
The first part will describe the target market’s size, structure, and behavior; the
planned product positioning; and the sales, market share, and profit goals sought in
the first few years. The second part will outline the planned price, distribution

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strategy, and marketing budget for the first year. The third part will describe the long-
run sales and profit goals and marketing-mix strategy over time.

6. Business Analysis

Taking into account current growth of economy and developments, rate of

growing new construction sites sales predicted for this product is Rs.240 crore, total
cost incurring for this is Rs.225 crore, and overall profit projections are up to 7% to
7.5%.This financial figures cannot be considered firm basis for company as new
information emerges, the business analysis must be revised and expanded
accordingly.

7. Total Sales Estimates

Sales figure for this product Push technology switch can be predicted by
assuming that this technology is going to completely substitute the conventional
switches. First time sales include the Upcoming Residential complex and Techno
Parks, Small apartments, hospitals and pharmaceutical industry. Replacement sales
includes large no of sales ones the awareness of the product is complete. Repeat
purchases occur soon, providing that the product satisfies some buyers. Taking
assumption into consideration Total estimated sales are the sum of estimated first-
time sales, replacement sales, and repeat sales which is estimated at up to Rs. 240
crores.

8. Estimating Costs and Profits

Cost factor includes total fixed cost and total variable cost. Fixed cost which is
initial investment includes machinery cost, setup cost, and land acquired cost.
Variable cost includes mainly Material cost, labor cost, Marketing and Advertising
cost, Research & Development cost. Generally material cost is 70% of total cost and
fixed cost is 20 % of Total cost. Estimation of cost is important for the understanding
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the breakeven point in which management estimates how many units of the product
the company will have to sell to break even with the given price and cost structure.

Calculating Cost for the 1st year (Introduction stage)

Target market: Upcoming Residential Complex in metros, Interior Designers, Techno

Park, Commercial complex

1. Upcoming Residential complex in metros – 300 * 5 No. of buildings in each

project = 1500 building.

Target to reach 1000 buildings of 12 storey’s with 2 flats per floor and 5 electric
panels in each flat = 1, 20,000 panels

2. Techno Parks + Commercial buildings – 100 of 15 storey’s and 50 panels per

floor = 75,000 panels

Total number of panels = 2, 00,000

Estimated cost per panel = Rs. 600 (Cost calculated by taking into account all
components of panel + substitute product cost + adv., distribution and R&D)

Total sales Revenue = 2, 00,000 * 600 = 12 crore.

Based on this we calculate revenues for further years.

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3.2 SWOT Analysis

SWOT analysis is a strategic planning method used to evaluate the Strengths,

Weaknesses, Opportunities, and Threats involved in a project or in a business venture.

A SWOT analysis may be incorporated into the strategic planning model. Strategic
Planning has been the subject of much research.

• Strengths: characteristics of the business or team that give it an

advantage over others in the industry.
• Weaknesses: are characteristics that place the firm at a
disadvantage relative to others.
• Opportunities: external chances to make greater sales or profits in
the environment.
• Threats: external elements in the environment that could cause
trouble for the business.

SWOT Analysis of Push Technology Switches

STRENGTHS

• Competitive advantages

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o Pioneer in market

Since the product is innovative it would have an edge over the other
conventional systems employed.

o Brand image/loyalty

Philips being a renowned manufacturer, launching a new product line

under the brand would have a competitive advantage. As the company has
a widespread customer base, the new product launches will enjoy brand
loyalty.

o Market share

In 2009 Philips became the world’s 42nd most valuable brand in the Inter-
brand global ranking, from 65th place in 2004 (our brand value almost
doubled to USD 8.1 billion in 2009 versus 2004). This will lead to an
increase in the brand value of the new product in the market.

o Presence in the international market

Headquartered in the Netherlands, Philips employs approximately 118,000

employees in more than 60 countries worldwide. With sales of EUR 23
billion in 2009, the company is a market leader in lighting.

• USP's (Unique Selling Points)

o Push Button

Widely adopted in most of the gadgets and equipments, consumers would

find it easy to adapt to the change from the conventional switches.

o Noiseless

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Relief from the regular “Tick – Tock” switches.

o Waterproof

Due to flat surface panel and restricted socket points, there is no water
penetration.

o Sleek interface

In-line wall panels

o Integrated circuit

Advanced electrical circuit prevents any short circuits or sparks.

o Shockproof

As the panel and the circuit are concealed, there is no chance of spark or
electrical jumps.

o Durable

Due to single line panel and customized fittings, there are fewer
possibilities of breakage and damage.

o Stylish

As the panels are in-line, slim with LED light indicators, they are a style
statement in themselves.

o User friendly

It is not a change, rather it a transition from a traditional switch to push

switch.

• Marketing - reach, distribution, awareness

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o Initial target of metros with very high infrastructural development per

square kilometer

o Due to already established brand network the distribution would be free

flow

o Innovative aspects to release the product in the festival of lights i.e.,

Diwali

• Price

o Penetrating pricing strategy, value for money paid, excellent quality

WEAKNESSES

• Presence and reach

o Initially the product will be launched only in metros, so it would

not be possible to capture the entire target market

o Also in the introduction and growth stage, only B2B distribution

strategy will be followed

• Price of the product

• Not concern with the lower class of the society

• Not targeting promotion towards the lower class of the society

OPPORTUNITIES

• Market developments

o As the real estate industry is booming in India there is a huge

opportunity of growth in lighting system and switches

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o Philips already being a market leader has an opportunity to

increase its sales in the switches business as well
o As the standard of living in India has increased, the purchasing
power of the consumer has steeply increased

• Competitors' vulnerabilities

o At the initial stage no competitor for this product

• Value addition and Product Development

o There is a phenomenal scope for innovations in product

development, packaging and presentation.

• New markets, vertical, horizontal

o Expansion of B2B network to B2C network, Targeting Tier –Two cities

• New USP's

o User interface providing default profile lighting functions; user can save
multiple profiles of lighting scheme as per his/her choice and selecting the
same by just a push

o Motion Sensors – To activate a particular lighting scheme when a person

enters the room

THREATS

• Competitors

o Switch manufacturing companies like Havells, Anchor, Crabtree,

Legrand,.etc. in the market can be a threat in the future.

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• Competitor intentions
o As performance increases, differentiation between brandnames is
going to decrease. Philips’s rivals are finding ways to increase their
marketshare by replicating some of Philips’s advantages
o Competitors may provide cheaper products with additional features and
better styling

• Environmental issues

o Due to expansion of “Go Green movement” and the growing demand of

environment friendly products, it can cause a drop in sales of the product.
As the Material of Construction (MOC) of the product is not biodegradable.

• Disadvantages of proposition

o People would be reluctant to change from the existing switch boards.

• Market demand

o The threat with performance increasing each year is that there is a physical
limit to how far you can go. People will soon be satisfied with the level of
performance not to demand anything more, and are going to be more
susceptible to other things such as prices, or quality of the product. If
Philips only focuses on styling, this trend might be a threat in the future.

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Chapter 4 .Product Life Cycle (Sleeki)

4.1 Stages of PLC

1. Research and Development Stage

Before introducing new product in market, companies’ doe’s research on product

regarding feasibility, cost factor, raw materials etc. This stage is known as Research and
development stage.

1. Marketing research

Marketing research mainly deals with following

• Desire of customers

• Cost factor

• Target market

2. Product research

Different steps in product research are

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• Material research

• Design research

• Prelaunch Testing

R & D stage is most cost incurring stage and does not provide any income. But it is a
stage where success of any product mostly depends on. This stage doesn’t deals with any
large scale production.

2. Introduction Stage

Introduction stage is introducing of product in target market. This stage focuses more on
brand awareness and building customer base for product. Market share of product
throughout this stage is very low.

Characteristic of Introduction Stage

Sales:-

Sales of push technology switches will be less. As more focus is on corporate

customer, market is restricted to HNI’s.

Sales revenue expected in this stage in approximately Rs.41, 00, 00,000.

Cost:-
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Cost of production included labor cost, raw material cost, maintenance etc.
During this stage cost of production is higher than sales revenue.

Cost of production expected during this stage is around Rs.40, 00, 00,000.

Profits:-

As cost of production is more than sales revenue, Company incurs losses at this
stage.

Customers:-

As this product is new in market, more focus is on corporate/Major parties. For

Push technology switches Upcoming Construction Project, Interior Decorators
will be target customer.

Competitors:-

There are fewer or no competitors. Main competition will be from the Market
Leaders who have other types of switches in market.

Marketing Objectives:-

During Introduction stage, creating brand awareness and building customer base
is main objective. In Sample Flats of upcoming/under construction project, we
can install this switch free of cost so as to attract builders to use our switches in
their projects. Similarly, tie-ups with renowned interior decorators will also help
to create brand awareness.

Strategies:-

Product:-

With success in Research and development stage, products will basic features are
launched in market. At this stage, switches will have LED display. These switches
will also have additional layers to reduce sparks and avoid short circuit. Other
products with different features are in Research and Development stage.

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Price:-

Pricing policy adopted during this stage is market skimming. As target is on high
profile customers purchasing flats or renovating their apartments, cost is more
than existing products in market. This will help in faster recovery of cost of
production.

Distribution:-

Initially metropolitan’s cities customers are target market. Hence existing

distribution channel of Philips will be used for distribution. Distribution would
consist of multiple channels to reach most of the prospective customers.

Advertising:-

Advertising is most important in building market. It enables companies to reach to

its prospective customers through print and electronic media. More customers can
be reached through advertisements.

Sales Promotion:-

Sales promotion at this stage is important as it helps in success of product in

market.

3. Growth Stage

This is stage, were market acceptance is high. Target market and market shares grow
rapidly. Companies make more profit and try to get breakeven point in this stage.

Characteristic of this stage:-

Sales:-

With increase in customer base, sales rapidly rises. Sales revenue keeps on
increasing.

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Approximate sales revenue during this phase is around Rs.64 Crore for period of
3 year...

Costs:-

With increase in customer and competitor, cost will probably decrease to attract
more customers from different segment. Cost will increase depending upon raw
material, government taxing policies etc.

Cost at stage will be approximately Rs.60 crore.

Profits:-

Sales revenue increases leading to increase in profit margin. Break Even point is
achieved at this stage. Profit increases with successive year in this stage. As sales
revenue is more than costs incurred, company gains more revenue through this
product.

Customers:-

In previous stage, customer base was restricted to builders and Interior decorators.
But with transition from introduction to growth stage, customer market is also
extended to get more customers. Now organization targets retail customers
through network of retailers.

Competitors:-

Competitors are increasing in this stage. Competitors have introduced new ranges
of products with additional features to be on par with our product.

E.g.:-Anchor launches new product with feather touch switches.

Marketing Objective:-

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Marketing objective at this stage will be to get more market share. Therefore
market has been extended to normal/retail customers. Even retail outlets in of
companies are started in metropolitans to provide more ranges of switches and to
get more customers.

Strategies:-

Product:-

There are various ranges of products available in market. Products from

competitors are available in market, at this stage. To attract more customers and
retain existing customer, value added services like warranty, extended warranty,
new range of products etc would be introduced in market. Service
Centers/replacement centers are opened in most cities, towns.

Price:-

Price of existing product will be reduced to entice low end customers. At the same
time, new products with enhanced features will be introduced in market to attract
high end customers.

Distribution:-

Distribution channels will be increased. There is increase in level of distribution.

Third party distribution channel is introduced at this stage. Multiple channels of
wholesaler, Distributors, retailers etc are used at this stage.

Advertisement:-

As more focus is on retail customer, mass awareness is main objective of

advertising. So advertisement at this stage would be more aggressive with
Newspapers, Television, and Billboards at retailers etc. Budget for advertisement
will be similar to that in introduction as companies needs to retain its market
share.

Sales Promotion:-

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As product is already pioneer in market, sales promotion can be decreased. Sales

promotion like free product sample, demonstration will be reduced at this stage.

4. Maturity Stage:-

At some point, the rate of sales growth will slow, and the product will enter a stage of
relative maturity. Three strategies for the maturity stage are
(1) Market modification,
(2) Product modification, and
(3) Marketing-mix modification
(1) Market modification:
At this stage the strategy would be to expand the market for its mature product by
working to expand the number of product users. This is accomplished by
(1) Converting nonusers;
(2) Entering new market segments like moving towards rural areas and various different
segments or
(3) Winning competitors’ customers.

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(2) Product modification:

The strategy would be to stimulate sales by modifying the product’s characteristics
through
(1) Quality improvement,
(2) Feature improvement, or
(3) Style improvement.
(1) Quality improvement aims at increasing the product’s functional performance—its
durability, reliability etc.
(2) Product with different feature for different purpose build the company’s image as an
innovator and win the loyalty of market segments that value these features.
(3) Marketing-mix modification:
At this stage the strategy would be to stimulate sales by modifying other marketing-mix
elements such as prices, distribution, advertising, sales promotion, personal selling, and
services.
Sales promotion has more impact at this stage because consumers have reached an
equilibrium in their buying patterns, and
Advertising is not as effective as sales-promotion deals.
Characteristic of this stage:-

Sales:-Sales at this stage is at peak level. Sales figure continues to be similar for specific
period of time. During this stage, sale might start declining.

Estimated sales revenue during this stage will be around Rs 112 crore for the period
of three year.

Cost:-Increasing sales ensures low cost per customer i.e. with increase in production and
sales, cost incurred on machinery, labor, etc will be lesser.

Cost estimation for this period is around Rs 100 crore.

Profits:-Profits during this stage are high. Peak sales and decreased cost per customer
makers profit margin higher.

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Customers:-This stage involves customers who prefer to buy product as per the review
and performance of product in market. Companies can retain its existing customer
as well as focus on acquiring new customer.

Competitors:-As our switches have been pioneer in market during growth stage,
competitors with smaller market share have already started to decline. Even
competitors will low profit margin starts to remove their product from market to
reduce losses.

Marketing Objective:-

Marketing objective at this stage is to retain market share and maximize profit.
Competitors have already started to decline in number. By introducing new
products and giving offers to customer will help in retaining market share.

Strategies:-

Products:-

Earlier product will be enhanced according to customer’s requirement. Switch

panel with Power consumption meter will be introducing to attract customers.

Price:-

Price of enhanced switchboard will be slightly costlier than earlier version. Cost
might be adjusted according to competitors.

Distribution:-

Distribution channels will intensify with distributors in smaller towns.

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Advertisement:-

Advertisement would focus most on unique selling point of switches. Switches

which are introduced at this stage has Power consumption meter which provides
information of consumed power by customers. This will attract customer who
focuses more on saving energy on their part.

Sales Promotion:-

With enhanced feature and environment friendly, competitors market will be

encouraged to switch to our products. More emphasis will be on giving offers,
discount to customers.

5. Decline Stage:-

At this stage sales decline for many reasons including technological advances, shift in
customers preferences and increase in competitions.

Characteristics of this stage:-

Sales:

Sales decreases rapidly in this stage due to various reasons.

Costs:

The sales keep on decreasing but still the cost per customer is low.

Profits:

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As sales decreases rapidly the profit also decline.

Customers:

At this stage the customers goes for the new product available in the market.

Competitors:

As customers shifts to new product available in the market and there is no demand
for our product at this stage. So competition also decreases as competitor working
with low margin shifts and some firms withdraw as soon as sales and profit
decline.

Marketing observation:-

As the sales for product decreases, cut down expenditure occurring for the
product such as labor cost, administrative cost, material cost, advertising and
promotion cost, and milking the product.

Strategies:-

Product: -

As there are four types of different products, at this stage based on the
performance of the product decision is made to phase out weak product. Decrease
the volume of production i.e. cost of production.

Price: -

Total sales of the product decreases in the market (market share) to capture the
sales available in the market our price will be reduced compared to the
competitors.

Distribution: -

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Distribution cost is reduced at this stage by closing unprofitable outlets in

particulars areas/regions. Number of the distribution channels decreases.

Advertising: -

At this stage, advertising is not required in intense mode, sales decreases. Cost is
reduced significantly, as product is already proved in the market.

Sales Promotion:-

Sales promotion is very less as company plans to launch switches with newer
technologies. Company plans to phase out this product and introduce product with
higher capability to maintain its market leadership.

Five possible decline strategies:

1. Increasing the firm’s investment to dominate the market or strengthen its competitive
position;

2. maintaining the firm’s investment level until the uncertainties of industry are resolved;

3. Decreasing the firm’s investment level selectively, by dropping unprofitable customer

groups, while simultaneously strengthening the firm’s investment in lucrative niches;

4. Harvesting (“milking”) the firm’s investment to recover cash quickly; and

5. Divesting the business quickly by disposing of its assets as advantageously as possible.

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Chapter 5. Performance Graphs

5.1 Different Graphs

Sales Revenue Chart

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Maturity

Growth
Decline
Introducti

R&

Profit Chart

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Sales Revenue v/s Profit

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Cost v/s Sales Revenue Chart

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5.2 Break Even Point

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What is breakeven point?

Break-even point (BEP) is the point at which cost or expenses and revenue are equal:
there is no net loss or gain, and one has "broken even". A profit or a loss has not been
made, although opportunity costs have been paid, and capital has received the risk-
adjusted, expected return. At this quantity, the costs and benefits are precisely balanced.

The managerial concept of break-even analysis seeks to find the quantity of output that
just covers all costs so that no loss is generated. Managers can determine the minimum
quantity of sales at which the company would avoid a loss in the production of a given
good. If a product cannot cover its own costs, it inherently reduces the profitability of the
firm.

A budget is predicted and corresponding graph is developed. Revenue is assumed to be

same for each quantity. No discounts or offers are taken into consideration at this stage.
Total cost of production is divided into two parts i.e. fixed cost and Variable cost. Fixed
cost are those cost which be incurred by company irrespective of sales of product. Factors
corresponding to fixed costs are infrastructure, research and development, etc.Variable
cost are those cost which changes according to unit of production. For E.g.:- Raw
material, logistics, etc.

Benefits of Break even point analysis

With breakeven point analysis, company can take further decision on production, pricing,
etc.Few benefits of breakeven point analysis are:-

1. Try to reduce the fixed costs (by renegotiating rent for example, or keeping better
control of telephone bills or other costs)
2. Try to reduce variable costs (the price it pays for the tables by finding a new
supplier)
3. Increase the selling price of their tables.

Limitations of Breakeven Point (BEP)

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1. Break-even analysis provides information on organization front. It does not give

any information about market trend.
2. Even fixed cost may vary from time to time. Breakeven point assumes fixed cost
to be constant throughout the period.
3. It assumes average variable costs are constant per unit of output, at least in the
range of likely quantities of sales.
4. BEP assumes all quantity produced to be according to standard. There might be
production of product below standard or having fault. This reduces margin of
profit.
5. In multi-product companies, it assumes that the relative proportions of each
product sold and produced are constant.

Break Even Point of Sleeki

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Switches are normally consumed in under construction projects/Renovation works

etc.Electrical market has restricted market. Switch market as compared to other product is
lesser.

Before commencement of research or production work, company incurs some cost. This
cost can be in acquiring infrastructure for project, Market research; etc.This usually is
cost to company without any revenue generation.

During Research and Development phases, company installs required

machinery/mechanism for further development. This cost is taken as fixed cost as it is
with company till end of product. In switches, company deploys machinery with advance
technology to provide high tech switches. This is cost to company without any returns at
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this stage. There is also depreciation on this cost. This cost will be considered for entire
lifecycle of the product. Other cost incurred in this stage are human resources,
administrative cost, etc.There is also cost on pre-launch testing of product at customer
site.

In introduction stage, as promotion plays important role, company incurs more cost on
promotion. Company promotes it products through various media. Cost incurred for
promotion in our project is nearest 10% of total cost. During these phases, company starts
earning revenue. Sales revenue increase with promotion of switches. Also free of cost
distribution of sample switches for sample flat will increase in cost of company.

As we reach growth phase, more sales revenue and profit is generated. We are already
pioneer in Market. This helps in generating revenue through sales of product. With
increase in customer requirement, per customer production cost decreases. Promotion
efforts also cost lesser. As per our budget prediction, we would achieve BREAK EVEN
POINT during this stage. All the cost incurred in initial setup, raw materials, research and
development has been recovered through sales revenue. Now company starts generating
profit.

Maturity stage has continuation of profit. Cost incurred is less than profit. Company is
milking from its product.

Decline stage has decrease in sales figure. Company gets lesser income than expected. As
it is start of losses, we try to retain product for few years. But with increasing losses,
company cannot retain its product in market. This forces company to pullout its product
from market.

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Chapter 6. Annexure
6.1 Product Variety:

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6.2 Budget

BUDGET REPORT
**ALL FIGURES IN RUPEES CRORE
STAGES

R&D INTRODUCTION GROWTH MATURITY DECLINE

Fixed cost 2.50 7.46 7.25 6.97 6.62

Depriciation 0.03 0.08 0.10 0.12

Variable cost :
Raw material 0.50 22.07 35.31 62.96 32.24
Promotion 0.50 6.31 5.56 7.00 4.05
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Labour 1.58 2.96 5.16 3.08

Manufacturing 1.89 3.66 7.96 4.19
Administrative 0.50 1.58 2.80 5.09 3.23
Taxes 0.00 0.95 1.25 2.64 1.58
Total variable cost 1.50 34.36 51.54 90.81 48.37

Total cost 4.00 41.82 58.78 97.77 54.99

Sales revenue 0.00 39.98 64.71 112.12 59.91

Profit/Loss -4.00 -1.83 5.92 14.34 4.92

% Profit/Loss -0.15 0.26 0.38 0.23

Increase market
(sales revenue) 0.22 0.67 0.32 -0.25
No. of panels ( in
units, not in crs) 684000.00 1116000.00 1821000.00 971250.00

BIBLIOGRAPHY

Books

1. Kotler,Philip. Marketing Management 11th Edition. New delhi: Pearson

Education(Singapore) Pte.Ltd., 2003.

2. Ramaswamy, V., Namakumari, S. Marketing Management 4th Edition. New

Delhi: Macmillan Publishers India Ltd., 2010.

3. Panda, Tapan. Marketing Management 2nd Edition.New Delhi: Excel Books.2007.

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4. Stanton, W., Etzel, M., Walker, B. Fundamentals of Marketing 10th Edition.

Singapore: McGraw-Hill Book Co.1994.

5. Perreault, W., McCarthy, E. Basic Marketing. New Delhi: Tata McGraw-Hill

Publishing Co. Ltd.2002.

6. Hutt, M., Speh, T. Business Marketing Management: B2B. New Delhi:Cengage

Learning india Pvt. Ltd.2008.

7. Kale, N., Ahmed, M.MarketingManagement.Mumbai: VipulPrakashan. 2002.

Websites:

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1. “Product life cycle management (marketing).” www.wikipedia.org.19 October

2010. http://en.wikipedia.org/wiki/Product_life_cycle_management_(marketing)

2. “SWOT analysis.” www.wikipedia.org.21 October

2010.http://en.wikipedia.org/wiki/SWOT_analysis

3. “The product life cycle.” http://www.netmba.com/marketing/product/lifecycle/

4. “The Product Life cycle.” http://www.quickmba.com/marketing/product/lifecycle/

5. Chapman, Alan. “SWOT Analysis.”

6. http://www.businessballs.com/swotanalysisfreetemplate.htm

7. “SWOT
template”http://www.businessballs.com/freematerialsinword/free_SWOT_analysi
s_template.doc

8. “Havells India Ltd.-Research Center.” © Copyright 2010 Rediff.com India

Limited. http://money.rediff.com/companies/havells-india-ltd/13150020/balance-
sheet

9. “Philips.” www.wikipedia.org http://en.wikipedia.org/wiki/Philips.18 October

2010

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