Stages in the Industry Life Cycle

Describe the First Stage.

1.) Embryonic Stage: - Stage of new product or service introduction and development - Slow growth of demand - High price (no economies of scale) - High barriers to entry

Describe the Second Stage.

2.) Growth Stage: - First-time demand expands rapidly due to new customers in the market. - Prices fall - Low entry barriers - Expanding market - Rivalry is low

Describe the Third Stage.

3.) Industry Shakeout Stage: - Demand approaches saturation levels. - Rate of growth of demand slows - Rivalry between companies intensifies.

What are the Limitations of Models for Industry Analysis?

- Curve is a generalization ❖Not constant or even always followed ❖Time is relative to industry/product, not a constant rate ❖Can be restarted or truncated ❖Progress is not guaranteed, sequential or constant ❖Can loop or never advance - Can differ by product or industry or many other factors

Describe the Fourth Stage:

4.) Maturity Stage: - Saturated market, growth of demand stops - Lower threat of new entrants - Competition for market share - Rivalry can fluctuate but generally grows ❖Rivalry decreases as: ❖Barriers to entry strengthen ❖Rising EoS, strong brands develop ❖Fewer competitors remain ❖Oligopoly grows, tacit price setting ❖Rivalry intensifies as: ❖Price competition increases as pricing is used to maintain revenue by capturing market share

Describe the Fifth Stage:

5.) Decline Stage: - Growth of demand goes negative ❖Technological substitution ❖Social change ❖Demographic changes ❖International competition - Rivalry increases ❖Intensity of rivalry increases with: ❖Oligopoly condense or collapse ❖Strong exit barriers ❖Rapid decline

Graph of Industry Life

Graph

What is the Industry Life Cycle?

is a symbolic representation of how demand evolves and competition changes over time.

The Industry Life Cycle is simply a representation to stimulate __________ and stimulate _________.

understanding and thinking