Industry Lifecycle – Definition

Cite this article as:"Industry Lifecycle – Definition," in The Business Professor, updated January 10, 2020, last accessed August 11, 2020, https://thebusinessprofessor.com/lesson/industry-lifecycle-definition/.

Back to: STRATEGY, ENTREPRENEURSHIP, & INNOVATION

Industry Lifecycle Definition

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 and fully matured. The lifecycle of an industry starts from the inception or creation of the industry to when products are developed alongside other phases.  This lifecycle entails stages of business operation, growth, and progress, decline and uncertainty. It is also possible for various firms in the same industry to be at different stages, entirely different from the phase of the industry.

A Little More on What is an Industry Lifecycle

There are different states of a lifecycle, these are;

  • Startup (Introduction, conception or creation),
  • Growth,
  • Shakeout,
  • Maturity, and
  • Decline.

A shakeout is an optional stage because not all industries experience this phase, oftentimes, shakeouts come with the maturity phase. The other four stages are mandatory in an industry lifecycle. All the above-named phrases or stages do not have the same duration, the length of each phase varies.

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.

Growth Phase

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.

Maturity Phase

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.

Decline 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.

References for “Industry Lifecycle

https://corporatefinanceinstitute.com/resources/knowledge/strategy/industry-life-cycle/

https://www.inc.com/encyclopedia/industry-life-cycle.html

https://www.investopedia.com › Investing › Financial Analysis

www.businessdictionary.com/definition/industry-lifecycle.html

https://academic.oup.com/icc/article-pdf/6/1/145/6768942/6-1-145.pdf

Was this article helpful?