Show how different strategic positions fit with various stages of the Industry Life Cycle.
There are four main phases in an industry life cycle: embryonic, growth, mature, and decline (Carpenter & Sanders, 2008). Each stage influences how a firm strategically positions itself in the industry, particularly because each stage holds various factors that impact who the competitors are, barriers to entry, key differentiators, alliances, pricing, and globalization (Carpenter & Sanders, 2008). A firm must assess the industry life stage in order to accurate put together a strategy that will allow the firm to compete and obtain high profit-margins.
In the embryonic industry life cycle stage there lacks business models, standardized practices and technology, and limited capital and resources (Carpenter & Sanders, 2008). During this stage arenas are kept local due to the industry being new, vehicles drive internal development and alliances to secure missing information to distribution, differentiators are minimal due to limited competitors, staging involves strategies that strive to capture early wins, and prices and costs tend to be high (Carpenter & Sanders, 2008). A good example of an embryonic industry would be when the streaming device market first got launched, and only Roku and Apple TV were competing. The industry was new, technologies were still being developed, and customer segments were still being defined.
The second stage in the industry life cycle is growth. In this stage companiesâ€™ work to put together a strategic position that ensure the company will rapidly grow and take advantages of opportunities early (Carpenter & Sanders, 2008). Christensen mentions that companies must grow a certain amount each year to remain competitive and achieve high profit margins (Ac cited in MacFarquhar, 2012). The growth stage is where firmsâ€™ work to enter adjacent markets, find alliances to fill knowledge gaps, identify and capitalize on low cost practices, differentiate through cost initiatives, and improve margins through rapid growth and scalability (Carpenter & Sanders, 2008). Carpenter and Sanders (2008) mention that companies use acquisitions to gain competitive positioning, while also being a vehicle to add to corporate knowledge growth and improving the learning curve. Acquisitions is a strategy my company utilizes to gain new or existing market knowledge. We acquire existing companies and capitalize on the established knowledge and processes theyâ€™ve established to gain stronger market positioning in an industry we would otherwise not be able to enter.
The third stage in the industry life cycle is the mature stage. In this stage products are mature and well known, customer bases and markets are well established, and competition is consolidated (Carpenter & Sanders, 2008). â€œProduct information becomes more widely available, and quality becomes a more important factor in consumer choice.â€ (Carpenter & Sanders, 2008, p. 153). Additionally in this stage, firmsâ€™ seek to gain more market share by expanding globally, diversifying, consolidating acquisitions, and stabilizing market position (Carpenter & Sanders, 2008). In the mature stage the strategy is more of consolidating in the arenas, vehicles, differentiators, staging and economic logic practices.
The fourth stage in the industry life cycle is decline. In this stage pricing is competitive, costs are critical to success, and low cost positions hold an advantage (Carpenter & Sanders, 2008). â€œAlthough customers donâ€™t entirely ignore differentiated products, declining sales discourage firms from investing in significant innovations.â€ (Carpenter & Sanders, 2008, p. 153). In this stage a firm starts to assess abandonment, selling the firm to a competitor, or reassessing costs to maintain profitability. This can be a challenging stage because if a firm decides to sell to a competitor, it means one less firm competing, leaving the market less saturated (Carpenter & Sanders, 2008).
What I found interesting about the Christensen article when comparing concepts to the industry life cycle is that a firm must continue to grow if there are stake holders to keep happy, competitors knocking on your door, and new opportunities to pursue. Companies use technology to grow and maintain satisfied, happy customers.
According to Christensen: Meanwhile, the big companies kept doing what they were supposed to, listening to their customer and improving their products in ways that mattered to those customers, until they had improved them too much, climbed so far upmarket that they sailed right off the upper-right hand corner of the graph, adding more features and power and degrees of perfection that anyone could possibly use, and by that time the bad, cheap, low-end product had improved to the point where it could finally appeal to the big companies customers, and the big companies fail.â€ (As cited in MacFarquhar, 2012, p. 4).
This observation really stood out to me because all too often companies get pushed out because they grew too quick, developed a product that was easily imitated, or was pushed out due to a saturated market and more competitors offering similar product benefits to theirs. Christensen (2012) labels this as a trap, or vicious cycle of chasing, developing, improving, reevaluating to stay competitive and on top of the market (As cited in MacFarquhar, 2012). This disruption changes the business environment, and alters how companies strive to competitively positing themselves. His suggested solution was to strive for long-term growth, rather than short-term gains (As cited in MacFarquhar, 2012).
Carpenter, M. A. & Sanders, Wm., G. (2008). Strategic management: A dynamic perspective. Upper Saddle River, NJ: Pearson Prentice Hall.
MacFarquhar, L. (2012). When giants fail: What business has learned from clayton Christensen. The New Yorker. Retrieved from http://archives.newyorker.com/global/print.asp?pat… Nast/New Yorker/2012