The term “life cycle” may not be the same for everything. For instance, when we talk about the human being’s life cycle, it means everything from birth to death is a part of the life cycle. The “in-between” stages include childhood, teenage, adulthood, maturity, old age, and ultimately death.
Similarly, non-science phenomena also follow a life cycle. Let’s say we talk about a product, which also follows a similar life cycle just as humans. It starts with an introduction in the market, then comes growth, maturity, and ultimately the decline.
However, some life cycles are different. How? Take the example of a plant. You sow a seed, it starts growing, and it keeps getting better and better. The older it gets, the stronger it becomes. It will be there unless you or a storm put it down. A completely different life cycle, isn’t it?
Similarly, some elements in the business world have life cycles, just like plants. A common example is the industry life cycle. It also starts with the introduction to the market and then comes the growth and maturity stage. However, it will be wrong to say that industries don’t retire. They do retire if they fail to cope up with the changing consumer needs. But their life cycle is way longer than a product’s life cycle.
An industry life cycle is fairly different than a product life cycle, and we will talk more about it in this article. Let’s begin with the basics.
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What is the Industry Life cycle?
An industry life cycle refers to those stages which are involved in that lifecycle. Every industry goes through these stages, and the duration of each stage depends on different factors. Mainly, there are five stages of an industry life cycle:
Any industry starts with a new idea that may or may not succeed. However, industries can last for centuries if companies keep coming up with innovation and improvisation.
Product Life Cycle Stages
Here is a detailed explanation of every stage of the industry life cycle.
The process starts with a new and distinctive idea. This is a stage where a firm(s) creates a new product(s)and start educating the customers. This is probably the trickiest phase of the life cycle because the acceptance or rejection of an idea plays a vital role.
However, at the introduction stage, the number of competitors is almost negligible because the introduction stage involves bringing up something new. The pioneering firm spends a heavy budget on marketing its product. Not only marketing but the distribution costs are also very high at this stage. In simpler words, the pioneer firm(s) makes huge investments during this stage to make its presence felt.
If the firm succeeds in creating a quality and valuable product, market the product efficiently, and educate the customer properly, the chances of success become higher. In the case of a recognizable success, the firm will start facing competition, and this is how the industry takes “birth.”
So mainly, the introduction stage revolves around:
- High focus on distribution
- And huge investments in marketing.
If the firm makes a quality product and gives value to the customers, the customers start taking more interest in knowing the product better. Yes, the competition may start rising, but only those firms take the lead who can deliver what they promise.
Moreover, governments or regulatory authorities intervene during this stage. That said, they set the standards or benchmarks for ways of doing business. Although the competition rises at this stage, the growing customer demand provides abundant opportunities to firms.
Growth stages also bring further and continuous improvement and innovation in the related product(s). Firms pay greater attention to improve different things, such as research, manufacturing processes, distribution, and marketing. Not only this, but firms also try to establish a competitive advantage to differentiate themselves from competitors.
In short, the growth stage includes:
- Increasing sales
- Growing market share
- Making industry benchmarks
- Continuous innovation
The shakeout stage is more of a “scrutiny” stage. During this stage, the competing firms may face stronger competition, and the growth rate may decline. However, at this stage, customers also scrutinize the competing firms.
Those firms who fail to give quality and innovation start losing the race. Moreover, ineffective marketing, low-quality customer and after-sales support force many firms to retreat.
On the contrary, stronger firms strengthen their position. However, this stage also brings fierce competition and price reductions. The summary of the shakeout stage is:
- Growing competition
- Price reductions
- Product development and innovation
The industry life cycle then hits the maturity stage, where the industry growth starts declining, or it may even become zero. Again, companies with better marketing strategies and continuous innovation ensure their survival and keep dominating the market. This market situation is generally termed as an oligopoly, where only a few big companies rule the market.
Moreover, the sale volume remains almost the same because of no further growth. Companies reap the rewards and churn out a lot of money through regular sales. During the maturity stage, customers are also well educated about the product. Moreover, lesser or no alternatives also force people to buy the same products again and again.
Maturity stage includes:
- No or minimal growth
- Bigger firms enjoy constant sales.
- Maximum consumer awareness
The decline stage brings a noticeable reduction in sales volume. Customer demand starts declining, which ultimately reduces sales. At this stage, many firms may start exiting the industry, and the overall competition decreases.
Some stronger firms may consolidate by bringing something new or merging/readjusting with other industries. However, companies do succeed in delaying the decline stage by bringing innovation to the table. Some industries never face the decline stage because of constant improvement.
Industry life cycle V/S Product life cycle
Although both life cycles share similar stages, the major difference between them is the longevity of these stages. A product life cycle is generally short-lived as compared to the industry lifecycle. Industry life cycles are fairly longer than the product life cycle. Moreover, a product is one element of the industry. Here is an example to understand the difference.
Let’s take an example of the music industry, and it has been there for centuries. It started with no or minimal equipment, but with time, musicians started improvising by making instruments to add flavor. Things kept getting better and better as technology allowed singers to record their voices.
As of today, the music industry has come a long way. Many instruments became obsolete and were replaced by new ones. But, the core ingredient-singing has remained the same. Different music genres evolved with time but became obsolete or were improvised with time. The products may have lived shorter, but the industry is still here, booming with every passing day.
Examples of Industry life cycle
Following are the real examples of industry life cycle.
The history of the automobile industry goes back to 1769 when Nicholas-Joseph Cugnot, a French inventor, made a three-wheeled streamer. Nicholas developed this engine to help the French army in hauling artillery pieces.
Later, Oliver Evans created a motorized vehicle for both road and water movement. Although the machine was considerably slower, it triggered something magnificent. It was 1896 when the United States saw the commercial production of automobiles. Since then, the industry has only seen one thing, and that is constant innovation.
The concept of electric cars has revolutionized the industry. In fact, it isn’t a concept anymore because it has turned into reality. The latest entrant or the potential entrant is flying cars. No doubt, the automobile industry has come a long way. Although several automobile models have totally been wiped out, the industry still stands tall.
The banking sector is one of the oldest industries that started centuries ago. The banking sector originated in different forms in different parts of the world, but it was the Romans who initiated the banking system in the true sense. Before them, banking transactions were carried out in temples or other informal places.
Romans formalized the banking sector with proper institutional buildings. The monarchs in Europe also consolidated the banking institution during the 14th and 15th centuries. Different countries followed different banking protocols or models over time.
Banking has evolved over time with hundreds of changes and a lot of innovation. From manual to computerized to online banking, the banking sector has become one of the biggest industries in the world. Most importantly, customer facilitation has grown immensely over time.