OBJECTIVE
Define the maturity of
the industry in which a company is competing or the maturity of a product that it
is selling.
DESCRIPTION
Several studies have been carried out on
industries’ life cycles. Industries and products usually start from an emergent
phase, pass through a growth phase, and finally reach a mature phase. At this
point either they start the cycle again thanks to innovations or they decline.
This is a tool made
for reasoning about the maturity of the industry and the maturity of the kind
of products being manufactured. To define the phase in which the company is
positioned, consider the following:
- - Emergent phase: this is characterized by a small number of firms, low revenues, and usually zero or negative margins;
- - Growth phase: the margins are increasing rapidly (for a while, but less in the last part of the growth phase), as well as the number of firms;
- - Mature phase: the global revenues are increasing at a far slower rate; both the margins and the number of firms are decreasing.
Competitive Life Cycle
Usually, after the
emergent phase, the dominant standards are defined and the rise of one or a few
companies is experienced (annealing). Due to rapidly increasing margins, many
companies imitate those successful pioneers, and, consequently, the margins
start to decrease and a few companies start to leave the market (shakeout).
Only the most efficient firms remain in the market during the mature phase, at
the end of which we have either decline or disruption thanks to innovation or a
demand shift. Finally, the process starts again.
TEMPLATE