The level of market maturity has a strong influence on the degree and intensity of competition. The industry life cycle sets specific rules for the enterprises. Organizations need to understand the market development stages to form an effective strategy for survival and market capture. There are four stages in the market life cycle: introduction, growth, maturity, and decline. It is essential to analyze the changes occurring throughout four phases from the perspective of customers, competitors and the variety of products/services and determine the differences between the introduction and maturity stages.
The initial stage is characterized by high rates of market growth and a low number of competitors. However, it is not reliable for all sectors, as, for instance, the smartphone industry shows an increased number of firms at the first stages and a decline over time (Calvosa, 2020). Nevertheless, there is no threat from substitute products; businesses actively use new technologies. During the introduction phase, the market penetration of a product or service is low (Maylín-Aguilar and Montoro-Sánchez, 2020). Regarding the growth stage, the market is strengthening and continues to grow, showing high rates in sales and profits. Competition remains moderate; therefore, companies in the industry obtain profit from their previous investments. The price level is stable; at this phase, new market actors gradually enter the industry. By the end of the growth stage, the penetration of a product or service reaches its maximum.
Market maturity is described as the maximum of the organizations’ performance; it is defined by a slowdown in growth rates. Concerning competition, it continues to increase due to the rising number of players. Moreover, the production capacity grows; consequently, demand is exceeded by supply. It is the stage when the differentiation between numerous goods starts, and the price level is decreasing. For instance, companies plan mergers and acquisitions that are considered effective (Bauer et al., 2017). Customers are actively buying a product or service; thus, the frequency of use is also growing. Finally, at the decline stage, there is a decrease in sales and demand. There are options for development: steady or shakeout business states (Dieli, 2020). For instance, businesses withdraw from a market; only big corporations can maintain profit and focus on the market share.
The five operational objectives are cost, dependability, flexibility, quality, and speed. Concerning differences between the introduction and the maturity phase, the first requires financial stability and dependability (O’Sullivan, 2020). The stage emphasizes the importance of cost optimization, working capital management, and an increase in sales profitability (Maylín-Aguilar and Montoro-Sánchez, 2020). Businesses are flexible; the main factor is quality, which affects the development and promotion of new products and services, construction and expansion of production facilities, creation and development of a client base.
Concerning the maturity stage, the main task is to maintain the level of profit. It can be achieved by accelerating working capital turnover, efficient cost management and tax optimization. For example, a reduction in production costs can be performed by increasing labor productivity and effective use of resources (Bauer et al., 2017). At the stage of maturity, there is a high level of dependability; simultaneously, the industry is characterized by an increased production risk that can lead to a decrease in quality (Bauer et al., 2017). As a result, financial flexibility is formed and accumulated in the companies, contributing to the companies’ value growth.
To sum up, each market has its predictable development model from introduction to decline. The industry goes through several stages of development during its life cycle, including introduction, growth, maturity and decline. At the initial phase, changes in the industry are carried out dynamically; as the market develops, the rate of innovation slows down, and a rise in market share supports growth. Finally, as maturity is reached, market growth rates and profitability decline while competition progresses.
References
Bauer, F., Dao, M. A., Matzler, K., & Tarba, S. Y. (2017). How industry lifecycle sets boundary conditions for M&A integration. Long Range Planning, 50(4), 501-517.
Calvosa, P. (2020). Entry, exit and innovation over the industry life cycle in converging sectors: An analysis of the smartphone industry. International Journal of Business and Management, 15(12), 151-168.
Dieli, O. J. (2020). Industry lifecycle of Nigeria’s telecom sector: Possible trajectories after deregulation. Journal of Applied Business & Economics, 22(2), 11-16.
Maylín-Aguilar, C., & Montoro-Sánchez, Á. (2020). The industry life cycle in an economic downturn: Lessons from firm’s behavior in Spain, 2007–2012. Journal of Business Cycle Research, 1-30.
O’Sullivan, M. (2020). Industrial life cycle: Relevance of national markets in the development of new industries for energy technologies–the case of wind energy. Journal of Evolutionary Economics, 30, 1063-1107.