Industry Lifecycle - Definition
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What is an Industry Lifecycle?
Lifecycle refers to developmental stages that occur during the lifetime of a person or organism. Industry Lifecycle is the various stages or phases of a business through which it develops.
Commonly-understood stage of the business lifecycle include:
- Startup (Introduction, conception or creation),
- Maturity, and
A shakeout is an optional stage because not all industries experience this phase. Oftentimes, shakeouts come with the maturity phase.
Startup Phase of the Industry Lifecycle
The startup phase is the first stage in an industry lifecycle, this is when the industry is newly formed and is at the early stage. The startup stage features the development of a new product or service, innovation of new business ideas and offering of new concepts. When in industry is at the startup phase, it is often not well-known as people have little or no information about the industry. The startup phase is often unprofitable because the industry is at the early stage and is disbursing all resources to make a name for itself. The industry also has limited financing or revenue at this stage.
This is the stage where the industry is becoming more acceptable and there is information about the industry. Consumers become fully aware of an industry at the growth phase, including the products, services, and offerings of the industry. The growth stage is not a stage where an industry is fully established or grounded, rather, it is the stage of unfolding and gaining recognition. The growth stage features an expansion of business, offering additional products, improved performance, and larger acceptance. Also, profits margin is likely not to significantly increase at this phase, given that making profits is not the priority of the industry.
The shakeout period in an industry signals the beginning of the maturity phase. This is the period where the growth previously enjoyed by an industry becomes slow or retarded. At this phase, the industry begins to pay attention to how it can reduce expenses. Economies of scale are another attribute of the maturity phase.
The decline phase signals the end of an industry lifecycle. This is the period when growth and development cease in an industry, it marks the end of the industry. The decline place indicates that industry is no longer viable, thereby, causing market participants to consider other markets or industries.