The document discusses Raymond Vernon's international product life cycle theory from 1966. It proposes that a new product is launched in the innovating country, then enters mature and standardized stages as production shifts to other developed and developing nations respectively. This occurs as production costs decline through economies of scale, and local competitors in other countries emerge over time. The theory explains the three stages from the perspective of the innovating country's trade and markets.

1. International Product Life Cycle Dr.K.Prabhakar © provenmodels

2. international product life cycle © provenmodels based on: Raymond Vernon , 1966. International investment and international trade in the product cycle , The Quarterly Journal of Economics, 80(2), pp. 190-207. new product inventor’s country developing country developed country mature product standardised product country where new product is launched other advanced, high-income country developing, low-income country export net time

3. list of innovations © provenmodels source: Raymond Vernon , the economic environment of international business, Prentice-Hall, USA, 1972. innovating country innovation market stimulant United States rifle with interchangeable parts scarcity of artisan labour railway automatic signal block high cost of unskilled labour automatic bottle-making machine scarcity of artisan labour mass-produced automobile large size middle-income market drip-dry shirt high cost of laundries atomic reactors guaranteed military demand jumbo jet guaranteed military demand frozen foods large size middle-income market Germany synthetic fertiliser scarcity of fertile land synthetic dyestuffs guaranteed military demand ethical drugs subsidised universal medical care rayon scarcity of raw materials Japan synthetic paper scarcity of raw materials miniature television relative small size of homes

4. three stages from the initiating country’s viewpoint © provenmodels based on: Raymond Vernon , 1966. International investment and international trade in the product cycle , The Quarterly Journal of Economics, 80(2), pp. 190-207. international product life cycle product stage trade target market competitors production cost locally 1 new limited; production for home market USA / inventor’s country few local firms initially high 2 mature increasing exports USA, advanced and later developing markets competitors from advanced markets declining due to economies of scale 3 standardisation declining export at first; later in phase become imports USA / inventor’s country competitors from mostly developing markets increase owing to lower economies of scale and comparative disadvantages