PRODUCT LIFE CYCLE (PLC) AND GATS

GROUP MEMBERS
1. Pooja Pandey
2. Prachi Garg
3. Priya Mishra
4. Rachit Malhotra
5. Rajat Gilotra
6. Rajat Juneja
7. Ran Vijay Kumar
 Contents

Product Life Cycle (PLC) GATS

• Overview
• What Is The Product Life Cycle Theory?
• International Product Life Cycle • Objectives Of Gats
• Introduction and Growth of the product
• Maturity • Modes Of Supply
• Decline
• The Product Cycle and Trade Implications • Conclusion
• Diagrammatic explanation of IPLC theory
 What Is The
Product Life Cycle Theory?
• The product life-cycle theory is an economic theory that was developed by Raymond Vernon

• The intent of his International Product Life Cycle model (IPLC) was to advance trade theory beyond David
Ricardo’s static framework of comparative advantages and also overcome the shortcomings of Heckscher-Ohlin
theory

• The product life cycle - explain how trade patterns change overtime.
International Product Life Cycle
Introduction and Growth of the product

• New products are introduced to meet local

(i.e., national) needs, and new products are
first exported to similar countries, countries
with similar needs, preferences, and incomes.
E.g., the IBM PCs were produced in the US and
spread quickly throughout the industrialized
countries.

• Increase in sale of new product attracts

competitors.

• Increase of demand in advanced countries;

exports – increase further innovation in
product cost reduction, market process takes
place (tech equipped)

• Shift manufacturing to foreign countries

Maturity

• World wide production; Export decline.

• Large scale of production

• Low cost production – shift manufacturing to

developing countries

• Tech become standard

Decline

• Market for the products

concentrate in less developed
countries as the customers in
advanced countries shift their
demand to further new products –
thus products in developing
countries

• Original innovator becomes

importer
 The Product Cycle and Trade
Implications

• Increased emphasis on technology’s impact on product cost

• Most appropriate for technology-based products

• Some products not easily characterized by stages of maturity

• Most relevant to products produced through mass production

• The globalization and integration of the world economy has made this theory less valid today
 the theory is ethnocentric
 production today is dispersed globally
 products today are introduced in multiple markets simultaneously
Diagrammatic explanation of IPLC theory
GATS
 Overview

• GATS is the first multilateral agreement that were signed under the purview of the world trade organization (WTO)
which entered into force in January ,1995 and was one of the landmark achievements of the GATT URUGUAY ROUND
,that covers all internationally trade services. For Example :- Telecommunication, Banking, Tourism, Professional
services etc.

• All the members of WTO are signatories to the GATS.

• While the overall goals of GATS is to remove barriers to trade, members are free to choose which sectors are to be
progressively that mode of supply would apply to a particular sector like made.
 Objectives Of Gats
• Creating a credible and reliable system of international trade rules.

• Ensuring fair and equitable treatment of all participants (principles of non- discrimination).

• Stimulating economic activity through guaranteed policy bindings.

• Promoting trade and development through progressive liberalization.

 Modes Of Supply

The trade in services is different from trade in physical goods. It often involves a different mode of supply than
trade in goods.

MODE 1 :- Cross Border Supply :- Trade takes places from the territory of country A into that of B.
Example :- 1) The purchase of insurance or computer software by a consumer from a producer located abroad.
2) International telephone calls.

MODE 2 :- Consumption Abroad :- Services consumed by nationals of country A in territory of country B.

Example :- Tourism , Education or Health Services etc.
MODE 3 :- Commercial Presence :- A service supplier of country A cross the border to establish and provide a
service in country B.
Example :- Domestic subsidiaries of foreign insurance companies or hotel chains, foreign bank setting up
operation.

MODE 4 :- Presence of Natural Person :- Temporary movements from country A to B to supply a service.
Example :- Accountants , doctors , software consultants travelling to another country to supply services.
 CONCLUSION

GATS is the “ first & foremost, an instrument for the benefit of business, & not only for business in general , but
for individual service companies wishing to export services or to invest & operate abroad”