Industry Life Cycle Flashcards, test questions and answers

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What is Industry Life Cycle?

Industry life cycles are a concept that outlines the various stages of development in an industry over time. This concept is important to understand because it can help companies anticipate the future of their business and make strategic decisions accordingly. The life cycle consists of four distinct stages: introduction, growth, maturity, and decline. The introduction stage is when a new product or service is introduced into the market and there is limited knowledge about its potential success. During this stage, firms may need to invest heavily in marketing and research & development in order to build brand recognition and establish customer base. At this point, demand for the product or service may be low but still growing as consumers become aware of its existence. The growth stage occurs when demand for the product or service rises significantly as more customers become aware of its benefits. Companies will usually experience high sales volumes during this stage which allows them to generate profits. It is also typically associated with increased competition from other businesses entering the market offering similar products or services at lower prices which can lead to decreased margins for firms operating during this phase of the cycle. The maturity stage marks a period where demand begins to plateau as most potential customers have already been served by existing firms in the industry. Companies often focus on cost-cutting initiatives such as reducing production costs and consolidating operations in order to remain competitive during this time period while also introducing new products or services that will appeal to a wider customer base than their existing offerings have been able to reach thus far. Finally, there comes a point where markets become saturated due to oversupply which causes demand for products or services within an industry to decline considerably resulting in reduced profit margins and eventually leading into a decline stage if not addressed properly by firms operating within that industry segment. During this period companies may need to restructure their business models by introducing innovative new offerings that meet consumer needs better than existing alternatives do in order for them stay afloat until markets begin recovering from oversaturation once again allowing them access back into profitable territory once more.