Competitive Life Cycle

All industries are constantly evolving

and the power of the forces within
industry is changing. Even
companies that are highly successful
Competiti at one time may not be able to
adapt to new circumstances in the
ve Life their industry.

Cycle of Timing and new industry dynamics

played a role in the history of these
the companies. The circumstance
changed (new technology, new
industry business model, change in demand,
etc.) and they were not able to
transition.
 Competitive
Life Cycle
(CLC)
CLC analysis is the
assessment of
competition within
dynamic market/industry
environment.
 Development

Growth
5 (6)
stages of Shake-out

industry Maturity
life-cycle
Decline
• Disruption
 Industry Life Cycle
Ma
rke Cumulative
t
Development Revenues
Siz

Shake-out
e

Maturity

Decline
Growth

Time
Disruption
 • The power of the industry forces typically
varies with the stages of the industry life
cycle.
• The industry life-cycle concept proposes that
industries
– start small in their development stage,
The – then go through a period of rapid growth (the
equivalent to 'adolescence’ in the human life
Industry cycle),
– culminating in a period of ‘shake-out’.
life cycle • The final two stages are first
– a period of slow or even zero growth (‘maturity’),
– before the final stage of decline (‘old age’).
• Each of these stages has implications for the
five forces.
 Development Stage:

• The development stage is an

experimental one, typically with
few players exercising little direct
rivalry and highly differentiated
products.
• The five forces are likely to be
weak, therefore, though profits
may actually be scarce because of
high investment requirements.
Commercial
Commercial
Space
Space
Line
Line
Electric Vehicle Industry
 Growth Stage
• Development typically, gives way to the
growth phase. As uncertainty in the
technology or design is reduces, more
customer are willing to purchase leading
to significant growth in demand.
• This is not to say that products and
technologies do not continue to evolve
and advance, but greater emphasis is
placed on replication and expanding to
meet growing demand.
• This is a high growth stage, with rivalry
low as there is plenty of market
opportunity for everybody.
 Growth Stage
• One downside of the growth stage for current
market competitors is that barriers to entry may
be low, specially at the beginning of this stage,
because..
– Existing competitors have not built up much
scale, experience or customer loyalty.
– Also existing competitors are focused more
on getting new customers
• Another potential downside is the power of
suppliers…
– In a fast growing industry, businesses need
components or materials for expansion at a
faster pace. This leads to suppliers for that
growing industry be in high demand, hence
strong supplier power.
 • The shake-out stage begins as the growth
rate starts to slowdown, and marginally
competitive firms exit the market, leading
to emergent of few dominant player.
Shake
-out • Increased rivalry forces the weakest of the
Stage new entrants out of the business, so
marginally competitive firms exist the
market and a handful dominant player
emerge
• In the maturity stage, barriers to entry tend to
increase, as control over distribution is
established and economies of scale and
experience curve benefits come into play. Ma
• For a company, growth is still possible, but it is
likely to be less pronounced and often comes
turi
from stealing marker share from competitors. ty
• Products or service tend to standardize. Sta
• Buyers become more powerful as they
become less enthusiastic for the industry’s
ge
products or services and more confident in
switching between companies.
• For major players, market share is
typically key to survival, providing

Maturity Stage
leverage against buyers and competitive
advantage in terms of cost.
• We still may see entry of new firms in
the mature phase, but new entrants
tend to be small players capturing
unexploited niches in the market.
• Finally, the decline stage can be a period of
extreme rivalry, especially where there are high
exit barriers as falling sales force remaining
competitors into fierce competition.

Decline Stage
Ma
rke
t
Siz
Development

Shake-out

Maturity

Decline
Growth

Time
-Low Rivalry, -Low -Increasing -Strong rivalry , -Extreme
High Rivalry; rivalry, strong buyers, low rivalry, price
Differentiati High slower growth, standard competition
on, growth, growth, products, high entry & cost is
Innovation is weak some exist, barriers, market key, many
key, first buyers, mergers & share, cost, exists
mover low entry acquisition economies of scale is
advantage barrier key
 t

e
Siz
rke
Ma
Development

Growth

Time
Shake-out

Maturity

Decline
INV.
Industry Life Cycle

Development

Growth
Disruption
Shake-out

Maturity

Decline
• **Disruption takes place somewhere around
mature stage, usually at the end, or in the decline
stage.
• Disruption is the start of the new development
stage

Decline Stage