- Slow growth as customers are still unfamiliar with the product.
- High prices as volumes are too low to achieve significant economies of scale.
- Significant initial investment.
- High risk of failure.
- New customers entering the market, which increases demand.
- Improved profitability as sales grow rapidly.
- Lower prices as econmies of scale are achieved.
- Relatively low competition among companies in the industry as the overall market size is growing rapidly. Firms do no need to wrestle market share away from competitors to grow.
- High threat of new competitors entering the market due to low barriers to entry.
- Slower demand growth as fewer new customers are left to enter the industry.
- Intense competition as growth becomes dependent on market share growth.
- Excess industry capacity, which leads to price reductions and declining profitability.
- Little or no growth in demand as the market is completely saturated.
- Companies move towards consolidation. They recognize that they are interdependent so they stay away from price wars However, price wars may occur during downturns.
- High barriers to entry in the form of brand loyalty and relatively efficient cost structures.
- Negative growth
- Excess capacity due to diminishing demand.
- Price competition due to excess capacity.
- Weaker firms leaving the industry.
Limitations of Industry Life-Cycle Analysis
The following factors may
- change the shape of the industry life cycle,
- cause some stages to be longer or shorter than expected, or
- even result in certain stages being skipped altogether.
- Technological changes
- Regulatory changes
- Social changes
Industry life-cycles analysis is most useful in analyzing industries during periods of relative stability.
It is not as useful in analyzing industries experiencing rapid change.
Not all companies in an industry display similar performance.