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Industry life cycle

Terms in this set (3)

Industry life cycle typically comprise four stage: introduction, growth, maturity and decline. This evolution is driven by changes in industries' growth rates over time, changes in technology and the creation of diffusion technology over time.

During the introduction phase, the emphasis is on product innovation and marketing. For example: introduction of personal computer in 1970s. They were of interest only to knowledgeable enthusiasts. Different firms pioneered different competitive operating systems and innovated in different ways. No dominant standards were commonly accepted.

During growth phase, the key success is being able to scale up production efficiently and effectively. At the end of 1980s sales soared. Successive ways of technical improvements increased in performance of computers in terms of their power and speed. Also became easier to operate and more user-friendly. IBM PC became the dominant design. IBM adopted open architecture. New entrants flooded and cloned products. Technical knowledge diffused rapidly. Product became cheaper, more customers bought it. Suppliers produced software and other equipment.

By the time a market reaches maturity price competition tends to be intense and successful strategies involve cost efficiency through mass production and low input prices. By 1990s rate of growth began to slow. However, continuous improvements produced multiple generations of PCs and customers became accustomed to the need to upgrade hardware and software. New markets began to develop. Competition during 2008 and 2014 focused on price with sales price of the standard pc declining steadily over time as changes in process technology reduced the systems and assembly of PC have moved offshore to specialist contractors operating in low cost countries, particularly China. Brands choose to focus on core competences of product innovation, design and marketing.

In thee decline phase firms can still operate profitability if they can rationalise capacity in an orderly way, find protected market niches or innovate. The alternative is to exit at an appropriate time.