Introduction
Planned obsolescence is a business strategy that many companies quietly use to keep customers buying again and again. It happens when a product is designed to last for a short period or to become outdated sooner than expected. This approach helps firms increase sales, but it often harms customers who must replace products more frequently.
The concept of planned obsolescence has become a major discussion point in business ethics and sustainability studies. From smartphones that slow down after updates to appliances that fail after a few years, it shows how easily consumer behavior can be shaped by hidden corporate decisions. In the world of finance and accounting, especially for students of CA and ACCA, understanding the planned obsolescence strategy is important. It shows how profit-making decisions can affect brand reputation, consumer trust, and long-term financial reporting.
Planned obsolescence might bring short-term gains, but it raises serious ethical, environmental, and accounting questions. For future accountants, auditors, and finance professionals following the CA x ACCA path, analyzing such strategies helps build a better understanding of ethical business practices and sustainable growth.
Understanding Planned Obsolescence
The concept of planned obsolescence describes how a company deliberately plans the life span of its products. It is not always about poor quality. Sometimes it is about timing. A product may be designed to work perfectly for a few years and then slowly lose performance, stop receiving updates, or go out of style. The goal behind this strategy is to make the customer return and buy again.
The idea of planned obsolescence first became known in the early twentieth century. Manufacturers noticed that if products lasted too long, customers would not replace them. This created a problem for companies that wanted constant sales growth. So, they started designing goods with limited durability or features that would soon feel outdated. Over time, this approach became common in industries such as electronics, automobiles, and fashion.
From a business point of view, the planned obsolescence strategy looks attractive. It allows firms to keep production lines active and generate predictable revenue. For example, if a company knows that its smartphone battery or software will stop working efficiently after three years, it can plan its next model and marketing campaign accordingly. This keeps demand flowing and stock prices stable.
However, this practice creates a deep ethical conflict. It benefits shareholders in the short term but harms consumers in the long term. Customers pay more for frequent replacements, and many do not realize that the product’s short life was intentional. It also increases waste and puts pressure on natural resources. This is why the planned obsolescence concept has become a key topic in sustainability reporting and ethical business education.
In accounting and finance, professionals are now expected to recognize the hidden costs behind such strategies. A company might report strong sales growth due to planned obsolescence, but those profits may not be sustainable. Accountants and auditors, especially those trained under CA or ACCA, need to understand that the long-term impact can include damaged brand reputation, warranty liabilities, and declining customer trust.
Planned obsolescence also connects to corporate governance and social responsibility. Businesses that follow transparent and ethical reporting practices are more likely to earn long-term loyalty. Regulators and investors increasingly look for signs of sustainability and fairness in company reports. Firms that hide behind short product life cycles risk facing stricter scrutiny and legal penalties.
Major Types of Planned Obsolescence
Planned obsolescence appears in several forms, and each one works differently to shorten a product’s useful life. Understanding these variations helps identify how companies apply the strategy in their operations. For CA and ACCA students, knowing these forms also provides insight into how financial and ethical consequences arise in real business situations.
1. Technical or Functional Obsolescence
This is when a product is designed to fail or lose performance after a specific period. Manufacturers may use lower-quality materials or design parts that wear out sooner. For example, a washing machine motor may be built to last only a few years, or a smartphone battery may lose efficiency quickly. The company knows that once the product stops working, the customer will likely purchase the next version.
2. Software Obsolescence
This form is common in digital and electronic products. Companies may stop releasing updates or make older versions incompatible with new applications. A phone or laptop that no longer supports the latest software becomes less useful even if its hardware still works. This method pushes customers to upgrade to newer models, which keeps sales growing but also creates unnecessary electronic waste.
3. Design Obsolescence
Design obsolescence focuses on changing a product’s appearance instead of its function. New colors, shapes, or minor design changes make older models look outdated. For instance, when car manufacturers release new shapes every few years or when clothing brands launch fresh collections each season, it encourages people to replace perfectly usable items. This process builds constant demand but promotes wasteful consumption.
4. Perceived or Psychological Obsolescence
Here, marketing plays the main role. Companies use advertisements and social trends to make customers feel that they must own the newest version. Even though their current product still works, they believe it is old-fashioned or less valuable. Fashion, mobile phones, and luxury goods often use this approach to maintain their premium image and high sales.
5. Compatibility Obsolescence
Some manufacturers use special connectors, chips, or spare parts that only they produce. When the product breaks, consumers find that repairs are costly or unavailable elsewhere. This forces them to buy a new model from the same company. For example, printers that stop functioning when a cartridge chip expires or accessories that only fit one brand’s devices.
Real World Examples of Planned Obsolescence
The planned obsolescence strategy can be seen in nearly every industry today. Some examples are visible to the public, while others are hidden within the design, production, or software systems of products. Understanding real cases helps connect theory with practice, especially for accounting and finance professionals who analyze how such decisions affect business performance and ethics.
1. Smartphone Industry
Smartphones are one of the most common examples of planned obsolescence. Many models start slowing down after a few years due to software updates that are designed for newer hardware. Some companies even stop providing updates to older devices, making them incompatible with modern apps or security systems. A well-known global brand once admitted to reducing the speed of older models through software updates, claiming it was to protect battery life. This case highlighted how easily technical obsolescence can be disguised as customer care.
2. Home Appliances
Household appliances such as washing machines, refrigerators, and microwave ovens once lasted for decades. Now, many fail after only a few years. Some have parts that are sealed or impossible to repair. A small fault in one component may require the replacement of the entire unit. Manufacturers know that many consumers prefer to buy new products instead of paying for expensive repairs. This method keeps sales high but adds to electronic waste and resource depletion.
3. Printers and Ink Cartridges
Printer companies are often criticized for compatibility obsolescence. Many printers stop functioning when a specific cartridge chip expires, even if ink is still available. Others reject third-party cartridges and display error messages. This forces users to buy costly original supplies or new printers altogether. From an accounting view, this creates predictable revenue for the manufacturer but also brings ethical concerns about manipulation of consumer choice.
4. Fashion Industry
In fashion, the form of obsolescence is psychological. Clothing brands release new designs every few months to make old styles feel outdated. Consumers, influenced by advertising and social media, feel pressure to replace items even when they are still in perfect condition. This cycle benefits fast fashion companies but causes massive textile waste and poor labor conditions, issues now under review by regulators and ethical auditors worldwide.
5. Automotive Sector
Car manufacturers often release new models with only small technical or cosmetic changes. This design obsolescence encourages buyers to trade in old vehicles to maintain social image or access minor upgrades. In some regions, spare parts for older cars become scarce, making repairs difficult. Accountants must recognize that such strategies can affect brand loyalty, after-sales service costs, and long-term revenue stability.
6. The Light Bulb Cartel
One of the earliest recorded examples of planned obsolescence came from the light bulb industry. In the 1920s, major manufacturers formed an agreement to limit bulb life to 1,000 hours to increase sales. This practice became known as the “Phoebus cartel.” It showed how companies could collaborate to reduce product life while maintaining high profits. The case is still used in business ethics education to demonstrate how profit-seeking can conflict with public interest.
How Planned Obsolescence Exploits Customers
Planned obsolescence directly affects customers by increasing their long-term costs and reducing product value. When a product is designed to fail early, customers are forced to spend again on repairs or replacements. This cycle benefits companies but weakens consumer trust.
It also creates environmental problems as old devices and appliances turn into waste. Customers pay more, receive less value, and unknowingly support unsustainable practices. In the end, planned obsolescence transfers the cost of short-term business gain to consumers and society.
For CA x ACCA professionals, this highlights the need for ethical accounting, transparent reporting, and greater awareness of how business strategies impact real people and the environment.
Ethical and Accounting Perspective
The planned obsolescence strategy may look profitable in financial statements, but it raises strong ethical and accounting concerns. Businesses that follow this approach record higher sales and turnover in the short term. However, these figures do not always show the long-term risks that come with it. When customers lose trust, brand value and goodwill decline, and warranty claims increase. These effects often appear later, hidden behind the initial success.
From an ethical viewpoint, planned obsolescence conflicts with principles of honesty, integrity, and transparency. Companies have a duty to serve customers fairly. Designing products to fail or mislead users through marketing is not consistent with professional ethics promoted by CA and ACCA frameworks. It violates the idea of stewardship, which means managing business resources responsibly for the benefit of both owners and society.
For accountants and auditors, understanding this issue is important. Financial professionals are responsible for ensuring that sustainability and product lifespan costs are reflected in financial reports. When depreciation policies or warranty provisions are understated, the accounts may show an unrealistic picture of profitability. Ethical accounting requires recognition of these hidden costs and proper disclosure to stakeholders.
Auditors also play a key role. They must review whether management is applying fair policies and maintaining truthful disclosures. If a company depends heavily on short product life cycles, the auditor should assess its future viability and risk of customer dissatisfaction. This links to corporate governance, as boards are expected to consider the social and environmental consequences of their strategies.
Planned obsolescence also connects with sustainability reporting. Many global reporting frameworks now include measures for product durability, waste reduction, and resource use. CA and ACCA professionals involved in integrated reporting or ESG assurance must ensure that companies follow transparent practices. Ethical accountants can help organizations shift from a short-term profit model to a sustainable one that builds trust and long-term value.
Regulatory Efforts and Right-to-Repair Movement
In recent years, many governments have started to regulate against planned obsolescence. Lawmakers understand that customers deserve longer-lasting and repairable products. The European Union has introduced rules that require manufacturers to provide spare parts for a specific number of years. Similar efforts are being discussed in the United States, the United Kingdom, and parts of Asia.
The Right-to-Repair Movement is also growing worldwide. It supports the idea that customers should be allowed to repair their own devices instead of being forced to buy new ones. The movement encourages transparency, repair manuals, and fair pricing for spare parts. This approach reduces waste, saves money, and makes businesses more accountable.
For CA and ACCA professionals, such regulations create new compliance areas. Accountants and auditors must understand how sustainability policies, repair obligations, and environmental reporting affect financial statements. Companies that ignore these requirements may face penalties or reputational loss.
How Businesses Can Act Ethically
Ethical business practices can reduce the negative impact of planned obsolescence. Companies that design durable products not only build customer loyalty but also gain a competitive advantage in the long term. There are several ways to achieve this.
- Design for Longevity
Businesses can focus on product quality and ensure that spare parts remain available for repair. This shows responsibility toward customers and the environment. - Transparent Communication
Honest marketing is essential. Firms should clearly inform customers about the product’s lifespan and service options rather than using hidden conditions. - Fair Update and Support Policies
Software-based products should receive updates for a reasonable time. Ending support too early harms consumers and damages reputation. - Sustainability Reporting
Companies should disclose environmental and social impacts in their annual reports. This aligns with the principles taught in CA and ACCA programs about accountability and ethical conduct.
Ethical actions may reduce short-term profits, but they build long-term trust, improve investor confidence, and create a stable brand image.
What Consumers Can Do
Customers also have a role in reducing the impact of planned obsolescence. Being aware of how this strategy works helps make smarter buying decisions.
- Buy Durable Products
Consumers should check repairability ratings, spare part availability, and warranty duration before buying. - Use Warranty and Consumer Rights
If a product fails too early, customers can use warranty claims or consumer protection laws to seek replacement or repair. - Support Ethical Brands
Choosing companies that focus on sustainability and repairable designs encourages better business behavior. - Join Right-to-Repair Campaigns
Supporting these movements can push manufacturers toward more transparent and fair practices.
Through informed choices, consumers can help shape a market that rewards responsibility over exploitation.
Conclusion
Planned obsolescence is not just a marketing idea. It is a calculated business strategy that often puts profit above fairness. While it may bring short-term financial success, it damages trust, increases waste, and raises serious ethical questions. For accounting and finance professionals, especially those in the CA x ACCA community, understanding this concept is vital. It connects directly with the principles of integrity, accountability, and sustainability that define professional ethics.
In the future, companies that follow transparent and ethical models will stand out. Planned obsolescence may keep sales rising for a while, but sustainable business practices will keep reputations strong for generations.
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