Identify a growth industry, a mature industry, and a declining industry.

For each industry, identify the

following: (a) the number and size distribution of companies; (b) the nature of barriers to entry; (c) the
height of barriers to entry; and (d) the extent of product differentiation. What do these factors tell you
about the nature of competition in each industry? What are the implications for the company in terms
of opportunities and threats?

Growth Industry

 A growth industry is that sector of an economy which experiences a higher-than-average

growth rate as compared to other sectors.
 Include e-commerce and online auctions industry
 The number and size distribution of companies: There are many companies, but there are
few big companies like Amazon and Ebay
 The nature of barriers to entry: Capital requirements and an efficient website
 The height of barriers to entry: Medium to high
 The extent of product differentiation: Relatively low. All of the companies sell the same or
similar types of products, the only differentiation lies in online presentation of stores and the
prices of products.
 Competition in the growth industry is very high but the opportunities are also high.
Nowadays, people prefer to buy online, so there is too much scope for the companies to grow.
 Threat: Lack of product differentiation

Mature Industry

 A mature industry is one that has passed both the emerging and growth phases of industry
growth.
 Include the auto industry, airline industry and beer industry.
 The number and size distribution of companies: Fewer companies and are more
consolidated than growth industries
 The nature of barriers to entry: Cost economies and brand loyalties
 The height of barriers to entry: High
 The extent of product differentiation: Greater as an industry approaches maturity
 Emphasis on non-price competition as a means of avoiding damaging price wars, although
price wars may break out from time to time.
 Stable demand gives them the opportunity to enter into price-leadership agreements, reducing
the intensity of rivalry and allowing greater profitability.
 However, the stability of a mature industry is always threatened by further price wars,
especially in an economic downturn.

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 Declining industry

 A declining industry is an industry where growth is either negative or is not growing at the
broader rate of economic growth.
 Include the tobacco industry, sugar and steel industry.
 The number and size distribution of companies: Fewer companies and are more
consolidated than growth industries
 The nature of barriers to entry: Cost economies and brand loyalties
 The height of barriers to entry: Higher barriers to entry
 The extent of product differentiation: Greater as an industry approaches maturity
 Competition depends on the speed of decline and the height of exit barriers.
 The faster the decline and the higher the exit barriers, the more intense is the competition
within a declining industry (greater threat of severe price competition)

In summary, the availability of opportunities decreases and the intensity of competitive threats
increases as an industry passes from growth through maturity and into decline.

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