Rise and Decline in the Industry Lifecycle

All firms go through a process known as the industry lifecycle. This is synonymous to the process humans go through in their lives, mainly identified as birth, growth, maturity and death. To assess which stage of the lifecycle the industry is currently passing through, the sales of the firm are thoroughly analyzed. The main phases of the industry lifecycle are as follows: introduction, growth, maturity and decline. The first two phases deal with the rise, and the last two stages concern the decline in the industry lifecycle.

Introduction

At this stage, the firm might just be starting out, or perhaps it might have developed a new product. This is the stage in which the company is incurring costs much faster than it is gaining sales. Since significant amounts of money have already been invested in developing, testing, launching and finally marketing the product, essentially no money will be made at this stage. The industry must develop a specialized strategy for this new product to make its place in the market, and customers ought to be interested enough to test it out.

Growth

At this stage, the sales go up significantly. If the marketing efforts of the industry are working out, the product catches the attention of the public, and hence, profitability picks up. Assuming sales of the product are increasing rapidly, several firms now enter the market, and competition rises immensely. The industry lifecycle curve becomes steeper--representing growth. However, it must be kept in mind that the speed with which the product grows and the period for which it experiences growth are highly dependent on the kind of industry it is a part of. For example, new fashions in clothing tend to go through an extremely short growth stage and quickly move onto the declining stage when their popularity levels fall.

Maturity

This stage is characterized by low costs, and stability in sales is apparent since the industry lifecycle curve tends to flatten out considerably. The sales growth at this point is equivalent to the rate of economic growth in the industry. The relative stability in sales can also be caused by new entrants in the market that take over part of the market share of the existing product. The price of the product also seems to decrease for the above reason. Overall, the industrial profits will go down due to the maturation of the industry. To bring sales back to a profitable level, a more persuasive sort of marketing strategy can be utilized; otherwise, the industry is officially in the maturity stage of this lifecycle.

Decline

Unfortunately, all industries have to pass through this stage, given the competitors or changes in the market that eventually come in. Profits practically diminish, which is obviously the result of extremely low sales. Generally, instability is the main characteristic of this stage with a major decline apparent in various attributes of the industry. Most of the industries in this phase shall be forced to exit the market entirely. Another possible strategy in this scenario can be to merge with another industry or to diversify the product line to survive in the market.

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