The distinct stages of an industry life cycle are: introduction, growth, maturity, and It may be a small entrepreneurial company or a proven company which used technological superiority, or advantageous relationships with vendors within the usually fewer firms, and those that survive will be larger and more dominant. During the growth of a small business, a company will go through the stages Understanding the different stages of the business lifecycle will help you you will need to capture a larger market share and find new revenue. The type, intensity and direction of development of the relationship of internal and Every phase of the life cycle demands a new, innovative business strategy. .. it is also used as a strategy of strategic business units of large companies.
Business Life Cycle
It starts with an entrepreneur who perceives an opportunity, creates an organization to pursue it, assembles the required resources, implements a practical plan, assumes the risks and the rewards, all in a timely manner for all involved. We present the seven stages in the Entrepreneurial Life Cycle. Entrepreneurs are directly involved in the dynamic, and very complex, interrelationship between financial management and business strategy.
This is the significant difference that sets entrepreneurial management apart from all business management practices. In almost all cases, the person making the decisions has personal risk at stake.
Global Entrepreneurship Institute
The worst case for entrepreneurs is losing their home, personal credit, and lifestyle, as well as the destruction of family relationships.
We define entrepreneurial management as the practice of taking entrepreneurial knowledge and utilizing it for increasing the effectiveness of new business venturing as well as small- and medium-sized businesses. The heart of entrepreneurial management is continually juggling these vital management issues: What is this venture about?
The entrepreneurial life cycle repeats itself in businesses of all sizes, from start-ups in a garage to corporate entrepreneurship activities in global Fortune companies. It was once said that entrepreneurship is a lot like driving fast on an icy road. We prefer to think of entrepreneurship as less reckless and more methodical.
Entrepreneurship is a continual problem-solving process. Not all entrepreneurial life cycles follow a single process, but our research suggests that the stages we present below are common in the most successful emerging growth ventures. We believe that by knowing and understanding these stages entrepreneurs, business managers, investors, and consultants will be able to make more informed decisions, and most of all, be prepared themselves for challenges that lie ahead.
It often occurs over a considerable period of time ranging from one month to ten years. At this stage it is important to research and understand the dimensions of the opportunity, the concept itself, and determine how to decide whether it is attractive or unattractive. The individuals need to look internally and see if they are truly ready for entrepreneurship.
Commitment of Resources Most entrepreneurs see commitment as incorporating their business or quitting their day job. But this stage actually starts with developing the business plan. Because there is industry-wide acceptance of the product, more new entrants join the industry and more intense competition results. The duration of the growth stage, as all the other stages, depends on the particular industry or product line under study.
Some items—like fad clothing, for example—may experience a very short growth stage and move almost immediately into the next stages of maturity and decline. A hot toy this holiday season may be nonexistent or relegated to the back shelves of a deep-discounter the following year. Because many new product introductions fail, the growth stage may be short or nonexistent for some products. However, for other products the growth stage may be longer due to frequent product upgrades and enhancements that forestall movement into maturity.
The computer industry today is an example of an industry with a long growth stage due to upgrades in hardware, services, and add-on products and features. During the growth stage, the life cycle curve is very steep, indicating fast growth. Firms tend to spread out geographically during this stage of the life cycle and continue to disperse during the maturity and decline stages.
As an example, the automobile industry in the United States was initially concentrated in the Detroit area and surrounding cities. Today, as the industry has matured, automobile manufacturers are spread throughout the country and internationally. Maturity As the industry approaches maturity, the industry life cycle curve becomes noticeably flatter, indicating slowing growth.
Some experts have labeled an additional stage, called expansion, between growth and maturity. While sales are expanding and earnings are growing from these "cash cow" products, the rate has slowed from the growth stage. In fact, the rate of sales expansion is typically equal to the growth rate of the economy. Some competition from late entrants will be apparent, and these new entrants will try to steal market share from existing products.
Business Life Cycle - Understanding the 5 Different Stages
Thus, the marketing effort must remain strong and must stress the unique features of the product or the firm to continue to differentiate a firm's offerings from industry competitors.
A firm at this stage may have excess cash to pay dividends to shareholders. But in mature industries, there are usually fewer firms, and those that survive will be larger and more dominant. While innovations continue they are not as radical as before and may be only a change in color or formulation to stress "new" or "improved" to consumers.
Laundry detergents are examples of mature products. Decline Declines are almost inevitable in an industry. In this phase, sales are decreasing at an accelerating rate. This is often accompanied by another, larger shake-out in the industry as competitors who did not leave during the maturity stage now exit the industry.
Yet some firms will remain to compete in the smaller market.
Production improvements, like just-in-time methods and lean manufacturing, can result in extra profits. Technology, automation, and linking suppliers and customers in a tight supply chain are also methods to improve efficiency. New uses of a product can also revitalize an old brand.
Insales were dropping due to the introduction of packaged foods with baking soda as an added ingredient and an overall decline in home baking. New uses for the product as a deodorizer for refrigerators and later as a laundry additive, toothpaste additive, and carpet freshener extended the life cycle of the baking soda industry.
Promoting new uses for old brands can increase sales by increasing usage frequency. In some cases, this strategy is cheaper than trying to convert new users in a mature market. To extend the growth phase as well as industry profits, firms approaching maturity can pursue expansion into other countries and new markets.
Expansion into another geographic region is an effective response to declining demand. Because organizations have control over internal factors and can often influence external factors, the life cycle does not have to end.
An example is feminine hygiene products. Sales in the United States have reached maturity due to a number of external reasons, like the stable to declining population growth rate and the aging of the baby boomers, who may no longer be consumers for these products. But when makers of these products concentrated on foreign markets, sales grew and the maturity of the product was prolonged. Often so-called "dog" products can find new life in other parts of the world.
However, once world saturation is reached, the eventual maturity and decline of the industry or product line will result. Countries have life cycles, for example, and we traditionally classify them as ranging from the First World countries to Third World or developing countries, depending on their levels of capital, technological change, infrastructure, or stability.