Industry Lifecycle Analysis - Explained
What is an Industry Life Cycle Analysis?
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Table of ContentsWhat is the Industry Life Cycle Analysis?Stages of the Industry Life Cycle Analysis
What is the Industry Life Cycle Analysis?
Industry life cycle analysis is a tool for assessing industries and companies based on the stages of development at a particular period.
Four stages have been identified in the lifecycle of a business or industry, they are; expansion, peak, contraction, trough.
Other terms used in describing these stages are introduction, growth and maturity.
Businesses and analysts use the industry life cycle analysis to evaluate the developmental stage a business is in and also make future projections of the performance of the business or industry.
Stages of the Industry Life Cycle Analysis
There are four stages in an industry life cycle, these are;
- Expansion: During this stage, a company or an industry experiences growth, increased sales and profits margins and develop the capacity to produce more goods needed to meet the demand of the customers.
- Peak: At this stage, the growth has reached the last stage as well the demand have been met, it then drops to level zero. The profit previously accumulated also flattens out as growth drops to zero.
- Contraction: This is a period when an industry experiences lower sales and profits, the company also records less activities. The contraction stage is often accompanied by a recession in the economy.
- Trough: This is the period when the industry begins to gather momentum and heads towards recovery. Once the industry regains strength, it begins its life cycle again with expansion.