Industry lifecycle

Industry lifecycle is a theory linking the intensity of competition in a particular market with the time since the breakthrough innovation that made that market possible.

These exist different variations of Industry Lifecycle model'':

Philip Kotler suggests 4 stages of Industry Lifecycle: fragmentation, shake-out, maturity and decline.

Fox (1973) suggests 5 stages: Pre-commercialisation, introduction, growth, maturity and decline.

Wasson (1974) suggests 5 stages: market development, rapid growth, competitive turbulence, saturation/maturity and decline.

Anderson & Zeithaml (1984) suggest 4 stages: introduction, growth, maturity and decline.

Hill & Jones (1998) suggest 5 stages: fragmentation, growth, shake-out, maturity and decline.

The lifecycle passes through 5 distinct stages:

• I - dormant stage with low numbers of competitors enjoying high monopoly profits
• II - "takeoff" stage with soaring entry and virtually non-existent exit from the market
• III - high turnover stage with many firms entering the market and leaving it
• IV - "shakeout" stage with mass exit via mergers, bankruptcies, etc.
• V - stabilization stage during which a stable oligopoly emerges

Industry lifecycle is commonly correlated with Product lifecycle and process innovation. Other factors that may launch industry lifecycle include:

• government intervention (e.g., deregulation),
• liberalization of external trade,
• lower transportation costs.

References

• Michael Gort, Steven Klepper. Time paths in the diffusion of product innovations. Economic Journal, vol.92, no.367. (September, 1982) Pp.630-653.