Match the stage of the retail life cycle to its correct description.
What Is the Industry Life Cycle?The industry life cycle refers to the evolution of an industry or business through four stages based on the business characteristics commonly displayed in each phase. The four phases of an industry life cycle are the introduction, growth, maturity, and decline stages. Industries are born when new products are developed, with significant uncertainty regarding market size, product specifications, and main competitors. Consolidation and failure whittle down an established industry as it grows, and the remaining competitors minimize expenses as growth slows and demand eventually wanes. Show
Key Takeaways
Understanding the Industry Life CycleThere is no universal definition for the various stages of the industry life cycle, but commonly, it can be organized into introduction, growth, maturity, and decline. The relative length of each phase can also vary substantially among industries. The standard model typically deals with manufactured goods, but today's service economy can function somewhat differently, especially in the realm of Internet communications technology. Industry Life Cycle PhasesIntroduction PhaseThe introduction, or startup, phase involves the development and early marketing of a new product or service. Innovators often create new businesses to enable the production and proliferation of the new offering. Information on the products and industry participants are often limited, so demand tends to be unclear. Consumers of the goods and services need to learn more about them, while the new providers are still developing and honing the offering. The industry tends to be highly fragmented in this stage. Participants tend to be unprofitable because expenses are incurred to develop and market the offering while revenues are still low. Growth PhaseConsumers in the new industry have come to understand the value of the new offering, and demand grows rapidly. A handful of important players usually become apparent, and they compete to establish a share of the new market. Immediate profits usually are not a top priority as companies spend on research and development or marketing. Business processes are improved, and geographical expansion is common. Once the new product has demonstrated viability, larger companies in adjacent industries tend to enter the market through acquisitions or internal development. Maturity PhaseThe maturity phase begins with a shakeout period, during which growth slows, focus shifts toward expense reduction, and consolidation occurs. Some firms achieve economies of scale, hampering the sustainability of smaller competitors. As maturity is achieved, barriers to entry become higher, and the competitive landscape becomes more clear. Market share, cash flow, and profitability become the primary goals of the remaining companies now that growth is relatively less important. Price competition becomes much more relevant as product differentiation declines with consolidation. Decline PhaseThe decline phase marks the end of an industry's ability to support growth. Obsolescence and evolving end markets negatively impact demand, leading to declining revenues. This creates margin pressure, forcing weaker competitors out of the industry. Further consolidation is common as participants seek synergies and further gains from scale. Decline often signals the end of viability for the incumbent business model, pushing industry participants into adjacent markets. The decline phase can be delayed with large-scale product improvements or repurposing, but these tend to prolong the same process. Identify the different stages of the industry life cycle What is the Industry Life Cycle?An industry life cycle depicts the various stages where businesses operate, progress, and slump within an industry. An industry life cycle typically consists of five stages — startup, growth, shakeout, maturity, and decline. These stages can last for different amounts of time – some can be months, some can be years. Startup StageAt the startup stage, customer demand is limited due to unfamiliarity with the new product’s features and performance. Distribution channels are still underdeveloped. There is also a lack of complementary products that add value for the customers, limiting the profitability of the new product. Companies at the startup stage are likely to generate zero or very low revenue and experience negative cash flows and profits, due to the large amount of capital initially invested in technology, equipment, and other fixed costs. Growth StageAs the product slowly attracts attention from a bigger market segment, the industry moves on to the growth stage where profitability starts to rise. Improvement in product features increases the value to customers. Complementary products also start to become available in the market, so people have greater benefits from purchasing the product and its complements. As demand increases, product price goes down, which further increases customer demand. At the growth stage, revenue continues to rise and companies start generating positive cash flows and profits as product revenue and costs surpass break-even. Shakeout StageShakeout usually refers to the consolidation of an industry. Some businesses are naturally eliminated because they are unable to grow along with the industry or are still generating negative cash flows. Some companies merge with competitors or are acquired by those who were able to obtain bigger market shares at the growth stage. At the shakeout stage, the growth rate of revenue, cash flows, and profit start slowing down as the industry approaches maturity. Maturity StageAt the maturity stage, the majority of the companies in the industry are well-established and the industry reaches its saturation point. These companies collectively attempt to moderate the intensity of industry competition to protect themselves, and to maintain profitability by adopting strategies to deter the entry of new competitors into the industry. They also develop strategies to become a dominant player and reduce rivalry. At this stage, companies realize maximum revenue, profits, and cash flows because customer demand is fairly high and consistent. Products become more commonplace and popular among the general public, and the prices are fairly reasonable, as compared to new products. Decline StageThe decline stage is the last stage of an industry life cycle. The intensity of competition in a declining industry depends on several factors: speed of decline, the height of exit barriers, and the level of fixed costs. To deal with the decline, some companies might choose to focus on their most profitable product lines or services in order to maximize profits and stay in the industry. Some larger companies will attempt to acquire smaller or failing competitors to become the dominant player. For those who are facing huge losses and that do not believe there are opportunities to survive, divestment will be their optimal choice. More ResourcesThank you for visiting our resource on the industry life cycle. To learn more about external analysis and how to perform strategic analysis, enroll in our Corporate & Business Strategy course today! Additional relevant CFI resources include:
What is retail life cycle theory?The notion behind retail life cycle theory is that retail businesses and companies go through various stages of ups and downs ranging from emerging innovation, growth, and maturity to the decline stage. Just like the introduction of a new product in the market that has a huge sale during the Christmas season, and soon it kicks out of the market.
What is the emerging stage of the retail lifecycle?The emerging stage of the retail lifecycle resembles the infancy stage in human development. This is when a company is brand new. This stage is synonymous with innovation; new products, services and business opportunities are materializing.
What is the business life cycle?The business life cycle corresponds to the stages that a business goes through throughout its existence in the market, which are existence, survival of the fittest, success, take-off and maturity. The correct sequence for this question is C B D A E. The business is separate from the owner with responsibilities delegated to staff.
What happens to a product in the decline stage of development?a product in the decline stage tends to consumer a disproportionate share of resources relative to their future worth which of the following is true regarding the length of the product life cycle? a.
What are the 4 stages of retailing?Marketing dictionary
A theory of retail competition that states that retailing institutions, like the products they distribute, pass through an identifiable cycle. This cycle can be partitioned into four distinct stages: (1) innovation, (2) accelerated development, (3) maturity, and (4) decline.
What are the 5 stages of life cycle?Key Takeaways
There are five steps in a life cycle—product development, market introduction, growth, maturity, and decline/stability. Other types of cycles in business that follow a life cycle type trajectory include business, economic, and inventory cycles.
What are the 4 stages of product life cycle and explain?A product life cycle consists of four stages: introduction, growth, maturity, and decline. A lot of products continue to remain in a prolonged maturity state. However, eventually, in every product life cycle, the product eventually phases out from the market.
What are the 7 steps of product life cycle?It should continue over the product life cycle stages, i.e., idea generation, idea validation, validating PoC and prototype, MVP development, pre-launch, and post-launch.
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