Industry Life Cycle
Industry Life Cycle Stages: -
1. Emergence
2. Growth
3. Maturity
4. Decline
Emergence: — Emergence phase involves the development and early marketing of a new product or service. Innovators often create new businesses to enable the production and proliferation of the new offering. Information on the products and industry participants are often limited, so demand tends to be unclear.
Growth Phase: — Consumers in the new industry have come to understand the value of the new offering, and demand grows rapidly. A handful of important players usually become apparent, and they compete to establish a share of the new market. Immediate profits usually are not a top priority as companies spend on research and development or marketing. Business processes are improved, and geographical expansion is common
Maturity Phase: — The maturity phase begins with a shakeout period, during which growth slows, focus shifts on expense reduction, and consolidation occurs. Some firms achieve economies of scale, hampering the sustainability of smaller competitors. As maturity is achieved, barriers to entry become higher, and the competitive landscape becomes more clear. Market share, cash flow, and profitability become the primary goals of the remaining companies now that growth is relatively less important. Price competition becomes much more relevant as product differentiation declines with consolidation.
Decline Phase: — The decline phase marks the end of an industry’s ability to support growth. Obsolescence and evolving end markets negatively impact demand, leading to declining revenues. This creates margin pressure, forcing weaker competitors out of the industry. Further consolidation is common as participants seek synergies and further gains from scale. Decline often signals the end of viability for the incumbent business model, pushing industry participants into adjacent markets. The decline phase can be delayed with large-scale product improvements or repurposing, but these tend to prolong the same process.
