Industry Life Cycle Analysis is an investigation of four stages such as Emerging or Embryonic stage, The Growing Stage, the Mature Stage and the Declining stage. Somewhere you can find 5 stages of the Industry life cycle. The industry life cycle is also known as the Stages of the Industry life cycle. We can consider two factors for the Life cycle analysis of the Industry – Market Size and Time. Somewhere 5 stages of Industry analysis can be observed. Below we have given complete information about Industry Life Cycle Analysis with suitable examples.
Introduction
Like products, every industry passes through different stages of growth. Every business or organization relates to a particular industry.
For example, Retail hypermarket is a part of the Retail Industry
The cement business is a part of the Cement Industry.
Typically Industries pass through 4 stages in their life –
- Embryonic or Emerging Stage
- Growth Stage
- Maturity stage
- Decline Stage
Somewhere we can observe 5 stages of the Industry life cycle which are –
- Embryonic or Emerging Stage
- Innovation or Growth Stage
- Shakeout or Cost phase (Dominant design, Economies of scale, Increased entry barriers for new companies)
- Maturity stage
- Decline Stage
All these stages depend on two factors –
- Market Size
- Time
STAGE 1. EMBRYONIC OR EMERGING STAGE
The emerging stage of the Industry Life Cycle has the following conditions.
Conditions
- Highest Investment
- Lower and Uncertain Returns
- Companies are first movers and fast followers who have to generate capital internally or attract outside capital usually from venture capitalists
- Unproven technology, and yet not standardized
- Customers lack Information
- Demand is being established
- High Business Uncertainty
- High risks in business decisions
Examples of Emerging industries in India
- Biotech
- Bioinformatics
- CyberMedia
- Drug Development
- Entertainment
- Green Products (Eco Friendly)
- Organic Foods services
- Growth
STAGE 2: GROWTH STAGE
Examples from India:
- Automobile
- Information Technology
- Mobile Telephony
- Pharmaceutical
- Primary Education
- Private Healthcare
- Retailing
Description
- Industry enters a growth stage as products and services gain sophistication and market expansion.
- Reasons for entry in the growth stage:
- Improved and ongoing technology
- Reduced costs
- Key complimentary product development
Conditions
- Decreased capital needs and investment
- Increased Returns (High returns)
- Demand is established
- Customers are informed about products and Industry
- Customers learn to differentiate between the product offerings
- Business Models take shape
- Managerial decisions invite moderate risks
- Increase in market share
- New bases for market segmentation emerges
STAGE 3:MATURITY STAGE
Examples from India
- Manufacturing
- Textile
- Steel
- Oil and gas business
- BPO (Business Process Outsourcing)
Description
- Saturated with more companies
- Increased competition
- There are few conditions for the Industry Life Cycle Analysis of this stage which is given below.
Conditions
- Capital Needs and Investment decreased significantly
- High Standardization
- Lessor few technological developments
- Lower but stable returns
- Customers are well aware and can differentiate products/options available easily
- Stable demand
- Well established business models
- Steady market share and jealously guarded
- Dominated by a small number of large companies
Business Strategies in this stage are:
- Cost leadership
- Differentiation
- Focus
All these strategies can be used at this stage to gain an advantage.
STAGE 4: DECLINE STAGE
Examples from India
- Agriculture
- Mining
- Tobacco (e.g. Beedi)
- Print Media
- Cotton textiles
- Paper and pulp Industry
- Metallurgical Industry
These are examples of Sick Industries (a popular term in India).
Description
This stage refers to individual industrial units that have declined in performance or are declining.
The below said are some conditions of the Declining stage of Industry Life Cycle Analysis.
Conditions
- Declined Returns
- Investment and Capital practically cease
- Technological development become superfluous
- Demand Shrink
- Very difficult to attract new customers
- Products tend to become a commodity and lose their brand power
- Market share reduced
- Retrenchment strategies for movement
- Retrenchment strategies mainly focus on cost reduction.
This is all about Industry Life Cycle Analysis in Strategic Business Management.
You may also like to READ: