In order to successfully assess the role-played by market conditions in the interruption of the long-standing record of profitability and market leadership that Caterpillar enjoyed until 1982, it is firstly necessary to analyze the Product Life Cycle (PLC) theory and conceptualize the maturity stage that the markets undergo. There are several variants of the PLC theory. As figure 1 shows, the predominant version argues that throughout time all new products follow a S-shaped curve and they pass through four stages of sales growth. During the first stage, namely introduction, the product's novelty will result in low sales volume and slow growth pace; in this stage the curve will remain relatively flat. If the product is successful in the market, the stage of growth will follow; as market penetration accelerates and the product is recognized among a broader range of customers, the sales curve slopes upward. As the market saturates, the product market commences a maturity stage. In this stage the sales curve tends to flatten, as the revenue is mainly a result of sales to existing customers rather than new ones. Eventually, the product is entered into a decline stage: technologically superior products substitute the product causing the sales curve to follow a downward trend (Cox 1967; Porter 2004; Vernon 1966). .
For the purposes of this essay the most important transition to consider is the shift from the growth into the maturity phase of the PLC. In this stage intensive competition, which focuses on delivering more value to customers, replaces extensive competition, which aims at obtaining new customers. Therefore, in the mature market firms compete by improving quality, offering a broader range of products, and bundling their core product with other services. In this stage demand for the output of an organization is mostly depending on the replacement rates (Yoo 2010). The mature market is generally a cyclical market in which volume fluctuates at or around a steady pattern of demand: the value added for sales becomes cyclical and cash generation alternates from surplus to deficit (Neale, Haslam, Johal 2009).