The life cycle of the industry

The life cycle of the industry mainly includes four stages of development: childish, growth, maturity, and recession. as the picture shows.

The life cycle curve of the industry ignores the differences in specific product models, quality, and specifications, and only considers issues from the perspective of the entire industry. The industry life cycle can be classified from mature to pre-mature and end-mature. In the early stages of maturity, almost all industries have a similar S-shaped growth curve, and in the later stages of maturation are roughly divided into two types: The first type is the industry is a long-term maturity, so as to form a stable industry, as shown in the upper right Square curve 1; The second type is that the industry enters a recession period quickly, thus forming a rapidly declining industry, such as curve 2 in the figure. The industry life cycle is a qualitative theory, and the industry life cycle curve is an approximate assumption curve.

Specific development stages and features:

1. Start-up period ,The size of the company may be very small. There are different views on how the companies in the industry develop, and the types, characteristics, performance, and target markets of the industry are constantly changing. The market is filled with a variety of newly invented products or services, and management adopts a strategy to support the listing of products. Product design is not yet mature, industry product development is relatively slow, profit margins are low, and market growth rates are high.

Strategy: Track opponents, participate or wait and see.

2. Growth period, The industry has formed and rapidly developed, and most companies continue to exist in the industry due to high growth rates. Management needs to ensure that production is fully expanded to reach the target market share. A lot of money is needed to achieve high growth rates and expansion plans, and there is a shortage of cash. Use patents or reduce costs to set barriers to entry (internal economies of scale) and prevent competitors from entering the industry.

Strategy: Increase investment, increase market share, and block new entrants.

3. In the mature period, the growth rate has fallen to a relatively normal level and is relatively stable. The annual sales volume and profit growth rate are relatively small, and competition is fiercer. In the later period some companies withdrew from the industry due to unsatisfactory investment returns. A small number of companies led the industry and needed to monitor potential merger opportunities (beer industry), explore new markets (China tractor exports), develop new technologies, and develop new features with different features. product. Strategic management is essential

Strategy: Improve efficiency, cost control, access and control market segmentation. Merger and expansion, research and development of new products.

4. The overcapacity of the industry in the recession period, the substitution of substitutes that appeared after the technology was imitated in the market, the market growth rate dropped sharply, the product variety decreased, and the level of industry activity decreased with the withdrawal of companies from the industry. The industry may no longer exist or be Merge into another industry. The industry has a longer life than any single product. It is important to make full use of strategic management

Strategy: Exit in time.