What Is an Industry Lifecycle?
Industry Life Cycle Theory. The life cycle of an industry refers to the time it takes for an industry to emerge from its complete withdrawal from socio-economic activities. The industry's life development cycle mainly includes four stages of development: infancy, growth, maturity, and decline. As shown in the entry map. The life cycle curve of the industry ignores differences in specific product models, quality, and specifications, and only considers the problem from the perspective of the entire industry. The industry life cycle can be divided from the mature stage into the pre-mature stage and the late mature stage. In the early maturity period, almost all industries have S-shaped growth curves, while in the later mature period, they are roughly divided into two types.
Industry Life Cycle Theory
- The main indicators to identify the stages of the industry life cycle are:
- The industry life cycle has certain limitations in its application, because the life cycle curve is a typical curve that has been abstracted.
- The industry's life development cycle mainly includes four stages of development: infancy, growth, maturity, and decline. as the picture shows
- Cycle phase
- Specific development stages and characteristics:
- 1. In the initial stage, the scale of the enterprise may be small. There are different views on how the industry in this industry develops. The product types, characteristics, performance and target market are constantly developing and changing. The market is full of various newly invented products or services, and management adopts strategies to support product launches. Product design is not yet mature, industry product development is relatively slow, profit margins are low, and market growth is high.
- Strategy: track opponents, participate or wait and see.
- 2. The growth period The industry has formed and developed rapidly, and most companies continue to exist in the industry due to high growth rates. Management needs to ensure that production is fully expanded to reach the target market share. A large amount of money is needed to achieve high growth rates and expansion plans, and cash shortages. Use patents or reduce costs to set barriers to entry (inherent economies of scale) and prevent competitors from entering the industry.
- Strategy: increase investment, increase market share, and block new entrants.
- 3. The growth rate in the mature period has dropped to a relatively normal level and is relatively stable. The changes in sales volume and profit growth in each year are small, and competition is fiercer. In the later period, some companies withdrew from the industry due to unsatisfactory return on investment. A small number of companies dominate the industry and need to monitor potential merger opportunities (beer industry), explore new markets (Chinese tractor exports), develop new technologies, and develop new ones with different features product. Strategic management matters
- Strategy: improve efficiency, control costs, enter and control market segmentation. Merger and expansion, research and development of new products.
- 4. In the recession period, the industry was overcapacity, and the substitutes that appeared after the technology was imitated flooded the market. The market growth rate declined severely, and the product variety decreased. The level of industry activity decreased as companies withdrew from the industry. Merged into another industry. The industry exists longer than any single product. It's important to make the most of strategic management
- Strategy: Exit in time.