Identify the different stages of the industry life cycle Show
What is the Industry Life Cycle?An industry life cycle depicts the various stages where businesses operate, progress, and slump within an industry. An industry life cycle typically consists of five stages — startup, growth, shakeout, maturity, and decline. These stages can last for different amounts of time – some can be months, some can be years. Startup StageAt the startup stage, customer demand is limited due to unfamiliarity with the new product’s features and performance. Distribution channels are still underdeveloped. There is also a lack of complementary products that add value for the customers, limiting the profitability of the new product. Companies at the startup stage are likely to generate zero or very low revenue and experience negative cash flows and profits, due to the large amount of capital initially invested in technology, equipment, and other fixed costs. Growth StageAs the product slowly attracts attention from a bigger market segment, the industry moves on to the growth stage where profitability starts to rise. Improvement in product features increases the value to customers. Complementary products also start to become available in the market, so people have greater benefits from purchasing the product and its complements. As demand increases, product price goes down, which further increases customer demand. At the growth stage, revenue continues to rise and companies start generating positive cash flows and profits as product revenue and costs surpass break-even. Shakeout StageShakeout usually refers to the consolidation of an industry. Some businesses are naturally eliminated because they are unable to grow along with the industry or are still generating negative cash flows. Some companies merge with competitors or are acquired by those who were able to obtain bigger market shares at the growth stage. At the shakeout stage, the growth rate of revenue, cash flows, and profit start slowing down as the industry approaches maturity. Maturity StageAt the maturity stage, the majority of the companies in the industry are well-established and the industry reaches its saturation point. These companies collectively attempt to moderate the intensity of industry competition to protect themselves, and to maintain profitability by adopting strategies to deter the entry of new competitors into the industry. They also develop strategies to become a dominant player and reduce rivalry. At this stage, companies realize maximum revenue, profits, and cash flows because customer demand is fairly high and consistent. Products become more commonplace and popular among the general public, and the prices are fairly reasonable, as compared to new products. Decline StageThe decline stage is the last stage of an industry life cycle. The intensity of competition in a declining industry depends on several factors: speed of decline, the height of exit barriers, and the level of fixed costs. To deal with the decline, some companies might choose to focus on their most profitable product lines or services in order to maximize profits and stay in the industry. Some larger companies will attempt to acquire smaller or failing competitors to become the dominant player. For those who are facing huge losses and that do not believe there are opportunities to survive, divestment will be their optimal choice. More ResourcesThank you for visiting our resource on the industry life cycle. To learn more about external analysis and how to perform strategic analysis, enroll in our Corporate & Business Strategy course today! Additional relevant CFI resources include:
In which of the following stages of product life cycle a company reduces sales promotion to take advantage of heavy consumer demand?
Answer (Detailed Solution Below)Option 2 : Growth Free Teaching Aptitude Mock Test 10 Questions 20 Marks 12 Mins Product Life Cycle:
For any product, it’s PLC will go to the decline stage, where the product’s sales and profits fall very quickly, and most competitors leave the market. Sales Promotion Strategy: Reduce to a minimal level. Thus, option 2 is the correct answer. Last updated on Nov 5, 2022 UGC NET Final Result Out on 5th November 2022. Along with the results UGC has also released the UGC NET Cut-Off. The candidates just need their application number and DOB to view their results.The answer key for all phases of the UGC NET Merged Cycle (December 2021 and June 2022) was released on 2nd November 2022. The UGC NET CBT exam consists of two papers - Paper I and Paper II. Paper I consists of 50 questions and Paper II consists of 100 questions. By qualifying this exam, candidates will be deemed eligible for JRF and Assistant Professor posts in Universities and Institutes across the country. Which best characterizes the decline stage of product development?Common characteristics of the decline stage include a decrease in sales, an increasing difficulty to make a profit, and a decrease in advertising.
Which three items characterize the decline stage of the product life cycle?The decline stage of the product life cycle is associated with decreasing revenue due to market saturation, high competition, and changing customer needs. Companies at this stage have several options: Discontinue the product.
Which of the following best represents the option a company has when a product is declining?# Hence, the best option a company has when a product is declining is to - maintain, harvest, or drop the product.
Which of the stages in the product life cycle is characterized by rapid market acceptance increasing sales and increasing profits?During the growth stage, consumers have accepted the product in the market and customers are beginning to truly buy in. That means demand and profits are growing, hopefully at a steadily rapid pace. The growth stage is when the market for the product is expanding and competition begins developing.
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