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  • Essay / Advantages of Product Life Cycle Theory - 1673

    There are mainly three scenarios in which the PLC model would deviate from the norm of international product trade. As already discussed, tariffs and transportation costs can have a substantial effect on the growth of export/import markets. These types of trade barriers can be used as a means to enhance international trade or as protectionist measures that discourage trade. As a result, high tariffs and high transport costs discourage trade whereas low tariffs and transport costs would encourage them. Countries that resort to protectionist measures generally see much greater competition in their domestic markets early on. Likewise, the effect of economies of scale largely affects how quickly foreign manufacturers are able to compete. In sectors where economies of scale do not generate significant gains, small production facilities are capable of producing as well as large production facilities; the advantage given to the country of the original manufacturer is nullified, which consequently leads to foreign manufacturers entering the market earlier and undercutting prices, both at home and abroad, earlier. Thus, products that are more quickly able to be price competitive regularly observe a significantly shortened cycle that may even skip certain stages. At the opposite end of this cycle shortening are high-income products, which are systematically subject to a