Industry Analysis

INDUSTRY ANALYSIS

Industries are collections of organizations with common products and technologies.

Industry Life Cycle

Industries, like products, have life cycles and progress through their life cycles. During this process, the nature of competition and consumer demand change. The entire nature of industries can be different or even change from one stage in the life cycle to the next. The three key stages of an industry life cycle are growth, maturity and decline.

Emerging industries are those which are either newly formed or reformed because of technological innovations, shifts in cost relationships, emergence of consumer needs or other economic and sociological changes. There is no preconceived ideas on how to operate competitively.

Factors that influence companies participating in emerging industries:

* Lack of information about competitors, their customers and their strategic approaches

* Lack of information about sales, market share data and technological changes

* Lack of experience in the introduction phase leading to high operational costs (e.g., engineering, R&D, production, etc.)

* Changeover costs are high because of rapidly changing technologies – early versions of products become rapidly obsolete

Maturing industries are those where growth has slowed down with time. Maturity does not occur at any fixed point in development. There can be more than one transition to maturity.

Characteristics of maturing industries:

* Significant changes take place in the competitive environment with increasingly aggressive competition and retaliation.

* Price competition increases due to increasing capacity and over production of companies.

* Decline in industry growth rate means that companies cannot keep up their own growth rate in the industry – they cannot maintain sales and hold their market share.

* Examples of strategies for continued growth and survival are: innovations, breakthrough strategies, price...