There are four stages of a product. The first stage of the product life-cycle is the introduction. At this stage, the product is introduced in the market. This is the most difficult stage for a product because the company at this stage makes low or no profits with multiple teething problems. The second stage is growth, at this stage, the business starts experiencing high sales. The sales increase and the business gets the benefits of economies of scale by promoting growth.
The third stage is maturity, this is a stage where a business should start worrying. The sales level off at this stage, the sales stop increasing and the business starts experiencing some diseconomies of scale which means that the business becomes too large to be handled. After this, comes the last stage of the business. The last stage is a failure, this is the stage where the business fails. Many entrepreneurs often fail to understand that their business is failing. They think that it is just a hard time for the business and it is facing low sales but in reality, there are times when a business can reach the last stage unexpectedly.
If you experience low sales for a very long time, then you need to understand that your business is failing and you need to do something about it. Low sales for a short period of time can be justified. There are times when the income of people decreases or some other external factor affects the sales, however, persistent low sales is a bad signal for a business. This means that the managers should take some steps to save the drowning business. The demand of the product will slowly fall in the market. The customers will stop buying the product and this is high time, an action needs to be taken.
When a business reaches its last stage, the shareholders start divesting. They think that the business will fail and give more losses so they try to get their money back as soon as possible. Some good strategies by managers can actually save a business at this stage.