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Definition

Industry Life Cycle

What is Industry Life Cycle?

Industry Life Cycle represents the life rotations of a corporation in a field from start to finish. It depicts how the company can enter the market and expand, including its height of achievement and subsequent fall or divestiture. These phases can persist for a variety of duration, ranging from months to several years.

Understanding Industry Life Cycle 

The stages of industry life cycle are significant for a businessman because these describe how the company changes constantly.  As the corporate image becomes more established, it may be worth understanding what to assume in the sector. 

Whenever new goods are produced, there is a lot of ambiguity about the size of the market, characteristics of the product, as well as the primary rivals. As an experienced industry expands, competition and loss trim it down and the surviving rivals reduce spending as demand drops and interest finally fades away.

The Stages

During a cycle, the industry structure as well as market pressures that form the atmosphere in which companies operate evolve. An industrial life cycle is divided into five phases:

 

  • Initiation: Customer requirement is restricted during the initial period owing to relative inexperience with the newest product's characteristics and performance.
  • Development: As the good gradually gains traction in a greater market sector, the business advances to the developmental phase, when profit begins to climb.
  • Transformation: At this point, the pace of progress begins to decelerate. Businesses began to fight for market dominance immediately with one another.
  • Progression: At this point, the marketplace has reached its full size, and the industry has reached its peak. 
  • Decline: The decline stage results in a significant decrease in sales volume. At this point, numerous enterprises may begin to abandon the industry, reducing overall competitiveness.

 

Practical Example

Ice cream and raincoat businesses are two examples. The ice cream industry will be at its peak during the summer. However, during the wintertime, this business suffers a decline. The same is true for raincoat firms; during the rainy season, consumers prefer to buy a lot of raincoats, and during other seasons, these items are useless.

In Sentences

  • The degree of competitiveness in the decreasing stage of the industry life cycle is determined by various parameters, including the gradual decline rate, the degree of exit blocks, as well as the number of fixed expenses.
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