The Importance of Considering the Industry Life Cycle to Determine a Firm’s Business-Level Strategy and Its Relative Emphasis on Functional Area Strategies and Value-Creating Activities.

LO5.7: The Importance Of Considering The Industry Life Cycle To Determine A Firm’s Business-Level Strategy And Its Relative Emphasis On Functional Area Strategies And Value-Creating Activities.

Introduction Stage

• The introduction stage is when:

• Products are unfamiliar to consumers
• Market segments are not well-defined
• Product features are not clearly specified
• Competition tends to be limited

• Strategies:        

1. Develop a product and get users to try it
2. Generate exposure so the product becomes “standard”

Growth Stage

• The growth stage is:

• Characterized by strong increases in sales
• Attractive to potential competitors
• When firms can build brand recognition

• Strategies:

1. Strong brand recognition
2. Create differentiated products
3. Provide financial resources to support value-chain activities

Maturity Stage

• The maturity stage is when:

• Aggregate industry demand is slows
• Market becomes saturated, few new adopters
• Direct competition becomes predominant
• Marginal competitors begin to exit the market

• Strategies:

1. Create efficient manufacturing operations
2. Lower costs as customers become price-sensitive
3. Adopt reverse positioning or breakaway positioning

Decline Stage

• The decline stage is when:

• Industry sales and profits begin to fall
• Changes in consumer tastes or a technological innovation
• Price competition increases
• Firm’s strategic options depends on the competitors’ actions

• Strategies:

1. Maintaining the product position
2. Harvesting profits as much as possible & reducing costs
3. Exiting the market
4. Consolidating or acquiring surviving firms