UGF Lecture 4

Management > Global Firm > Vernon > 1. Product development > 2. Mature product > 3. Standardised product > Changes

Changes

Two factors have changed the context for PCM behaviour since Vernon outlined the original model:

1. Time element

According to Vernon, the good was originally innovated in the then highest income market (the US), with a strong demand only emerging later in other markets, such as Europe when their levels of income had caught up that of the time of initial US introduction. There was an income-related time lag in demand.

By about 1980 there were many countries at similar high levels of income. This means that a firm innovating a new product would not benefit from doing it in one country and waiting for demand to emerge in other markets. The innovation process would now need to take immediate and direct account of all important markets.

2. Speed of innovation

In the mature stage of PCM the subsidiaries play active roles in the MNE's approach to product development, such as updates on changing local tastes and new technologies. This will result in greater speed of implementing innovation of the product and its application into new markets