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The industry life cycle
Industry structure, competition, and
success factors over the life cycle.
Anticipating and shaping the future.
The Industry Life Cycle
Industry Sales
Time
Drivers of industry evolution :
demand growth
creation and diffusion of knowledge
Product and Process Innovation Over Time
Product Innovation
Rate of innovation
Process Innovation
Time
Standardization of Product Features in Cars
HDTV
?
1900 50 90 07 1930 50 70 90 07
MOTORCYCLES TVs
Customers become
more knowledgeable Customers become
& experienced more price conscious
Quest for new
sources of
differentiation
Products become
more standardized
Diffusion of
Price competition
technology Production intensifies
Production shifts
becomes less R&D
to low-wage
& skill-intensive
countries
Excess capacity
increases
Demand growth Bargaining power
slows as market of distributors
saturation approaches Distribution channels increases
consolidate
Changes in the Population of Firms over the
Industry Life Cycle: US Auto Industry 1885-1961
250
200
150
No. of firms
100
50
0
1895 1905 1915 1925 1935 1945 1955
25
20
15 Real annual
ROI (%) growth rate <3%
10 Real annual
growth rate 3-6%
5 Real annual
growth rate >6%
0
Growth Maturity Decline
Strategy and Performance across the Industry Life Cycle
12
Growth
10 Maturity
Decline
8
2
Note: The figure
shows
0
Added/Revenue
standardized means
R&D/Sales
Advertising/Sales
ROI
Investment/Sales
Technical
New Products
% Sales from
New Products
Change
Product
FRAGMENTED SPECIALIZATION
Many
apparel, housebuilding pharmaceuticals, luxury cars
jewelry retailing, sawmills chocolate confectionery
SOURCES
OF STALEMATE VOLUME
ADVANTAGE
basic chemicals, volume jet engines, food supermarkets
grade paper, ship owning motorcycles, standard
Few
(VLCCs), wholesale banking microprocessors
Small Big
SIZE OF ADVANTAGE
BCGs Analysis of the Strategic Characteristics
of Specialization Businesses
CREATIVE EXPERIMENTAL
fashion, toiletries, magazines
low general publishing food products
ABILITY TO
PERCEPTIVE ANALYTICAL
SYSTEMATIZE
high tech luxury cars, confectionery
high paper towels
high low
ENVIRONMENTAL VARIABILITY