@AMRITA bar Gee ven (eM aCelatere aU AHEAD online ATT RTT UA uae cg ene ec EN eRe eee Industry Life Cycle Analysi Industry Life Cycle Analysis One that is just beginning to develop. Growth at this stage is slow due to: buyer's unfamiliarity with the industry's product, high prices due to lack of economies of scale in firm’s operations and poorly developed distribution channels. Example:- (1) 1970s - PC’s & Biotechnology (2) 1980s — Wireless Communications (3) 1990s — Internet Retailing (4) Today - Nanotechnology Embryonic Industries Mav also be the creation of one comnanv's innovative efforts.Example:- (1) Microprocessors — Intel (2) Vacuum Cleaners — Hoover (3) Photocopiers — Xerox (4) Small Package Express Delivery — FedEx (5) Internet Search Engines - Google Industry Life Cycle Analysi Demand for an industry's product begins to increase. First-time demand expands rapidly as many new customers enter the market. Customers become familiar with the product, prices fall due to scale economies & distribution channels develop. Growth Low rivalry. Rapid growth in demand enables companies to expand their revenues & profits without taking market share away from competitors. Example:- The US wireless telephone industry remained in the growth stage for most of the 1985 ~ 2012 period. Industry Life Cycle Analysis Demand approaches saturation levels. More & more of the demand is limited to replacement because fewer potential first-time buyers remain. Industry Rivalry increases. Shakeout Z Excess capacity vi In an attempt to use excess capacity, companies often cut prices. This result in price war that drives inefficient companies into bankruptcy & deters new entry. vis demand. ‘Growth in Demand and Capecity Nace dustry Life Cycle Analysis Market is totally saturated. Demand is limited to replacement demand. Growth is low or zero. Competition for market share develops, driving down prices & often producing a price war.To survive the shakeout, companies begin to focus on minimizing costs & building brand loyalty. By the time an industry matures, the surviving companies are those that have secured brand loyalty & efficient low-cost operations. Both brand loyalty & efficient low-cost operations constitute a significant barrier to entry. Due to this, threat of entry by potential competitors is often greatly diminished. Mature Industries Most industries in the maturity stage consolidate & become oligopolies. Example:- Beer industry, breakfast cereal industry etc. Industry Life Cycle Analysis Growth becomes negative. The degree of rivalry among established companies usually increases. Declining Falling demand leads to the emergence of excess capacity. Industries In trying to use this capacity, companies begin to cut prices, thus sparking a price war. The higher the exit barriers, the harder it is for companies to reduce capacity, and the greater the threat of severe price competition.