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Product Life Cycle Theory
Stage 2
Maturity
Perfection of product
and production
Stage 3
Standardisation
Long period of mass production.
Eventually sales drop as alternatives
or better products are developed
Sales
Stage 1
Development
Continual
change to
improve the
product and
production
Labour
0
Location Close to HQ
and/or R&D
centre.
Metropolitan
region
Time (Years)
10
20
Decentralisation of
Location in branch plants in periphery
production to peripheral only. As sales fall,
regions begins
rationalisation/restructuring and
closure of may branch plants
30
The main difference between the 2 life cycle models is the time covered by each of them. The product life
cycle of a TV is much longer than a computer, lasting for 30 years compared to 7 for a computer. Computer
technology is advancing much quicker than TV technology. Computers become obsolete much quicker
than TVs. All stages are shorter for computers with a very rapid development programme.
These differences have an effect on industrial location. Personal computers will be produced near core
areas as it is not worth setting up mass production in branch plants given the short production run. Colour
TVs may be produced in periphery regions, as there is a very long production run so they are cheaper. Both
are first developed in core areas for R&D.
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The Location of Branch Plants in Mexico
Branch plants (maquiladora) have developed in Mexico. These branch plants almost solely produce goods
for the US market using Mexican labour. There are approximately 2100 maquiladora in Mexico employing
600,000 workers. They also receive government subsidies such as preferential tariffs & taxation.
Most maquiladora are mature & labour intensive. They are situated near the US border in order to reduce
transport costs. Companies use maquiladora in order to cut labour costs by exploiting Mexico’s slack wage
laws. Maquiladora have had a large impact on employment in the USA and the growth of manufacturing
employment in Mexico. This has continued since the development of NAFTA. There has been rapid
economic development in the North of Mexico but this has caused environmental problems & has led to
regional inequality.
Location – International Scale
It is popular with US companies because of cheap wages. Mexico is near to the US for markets and so
transport costs are lower. Mexican plants are easily supplied with components by US companies.
Location – Regional Scale
Maquiladora are located very close to the US border. Transport costs & delivery costs are lower. Tijuana
has good access to California. Also Branch managers can commute from the USA and so valuable staff are
not lost.
Location – Urban Scale
Located near population centres that provide vast pools cheap labour e.g. Tijuana.
Located on developed sites with good infrastructure – factory buildings
Model of a TNC
Company
Headquarters
Location
Location Requirement
Changes
Metropolitan Areas
Need for face to face contact
Beginnings of suburbanisation
Developments in telecommunications
dispensing with need for physical proximity
R&D
Suburban areas,
small cities
Routine
Assembly
Plants
Small Cities, Rural
Areas
Close to business services
Close to government agencies
Good environment to attract
workers
Low taxes
Growth In Sunbelt USA and developing
countries
Cheap Labour
Low taxes
Location of different functions in a TNC
Functions
Headquarters
Administration/distribution
Production
Major
city



Movement to and growth in smaller towns in
amenity rich areas
Regional
urban
centre
Peripheral
regions



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Branch Plant Closure – Birdseye, Kirkby
Reasons for Closure
 Workers would not accept better production techniques, although they disagree.
 They were not producing enough food even though they were still in profit.



Workers believe the plant was not making enough money
Also believe Unilever not prepared to pay the money to keep the factory open
Grimsby plant is cheaper to operate as the workers are part time

Prime minister believes closed because it couldn’t increase production and reduce costs.
Events
Plant was closed in March 1989, as it was outdated and inefficient.
Production moved to a new plant at Grimsby with the loss of 380 jobs. The company still wanted
to close the plant down even though they made profits of £1,516 mlln. The workers made a small
attempt to avoid closure but other plants refused to help by going on strike. The Kirkby plant
would not agree to slicker production methods, as Birdseye would not pay off workers fairly.
Finally the plant did close, increasing unemployment to 21% of the Kirkby population.
Location of Birds-eye
The British HQ of Birdseye is Walton-on-Thames located near London. This is a core area near to
financial services and government. There are better-qualified workers who are needed at the HQ
but not the branch plants.
Kirkby is located on Merseyside in the borough of Knowsley on the edge of Liverpool. Therefore
Kirkby is in the NW with a periphery location as land and wages are cheaper.
Transferability of Capital in TNCs
Capital is not easily transferable in large multi-plant firms as all the money goes to the HQ rather
than the branch. They are then unwilling to spend the profits on other plants. Unilever made a
huge profit in Japan but did not want to use the money to save the Kirkby plant or pay for
redundancies. There is some capital transfer as Unilever did finally pay £8000 as pay off for
workers.
The plant was relatively easy to close as the labour was unskilled and so could be found cheaper
in many other places. There was little capital investment in the plant as some of it had already
shut down. There were huge financial benefits in moving the factory and there was very little
resistance from workers.
Advantages of Grimsby
 Grimsby is nearer to the huge market of Europe and so transport costs are lower
 People work part-time so do not have overtime or holiday. Therefore labour is cheaper.
 The factory is more modern and so production is higher.
Branch-plant Economies
Branch-plant economies can be unreliable, as it is easy for the parent company to pull out. The
plants do provide jobs for a large number of people but they are easily lost. The jobs are low paid
and low skilled and so does not bring a lot of money to the area. Most of the profits go to the HQ
and so little gets put back into the area.