Twyla Garrett ~ Creating and Sustaining High Performance

twyla-garrett-growth-of-businessLife cycle models are not just a event of the life sciences. company experience a similar cycle of life. Just as a person is born, grows, matures, and eventually experiences decline or ultimately death, so too do industries and product lines. The stages are the same for all company, yet every firm will experience these stages differently, they will last longer for some or pass quickly for others. Even within the same industry, various companies may be at different life cycle stages.

The growth of an company’s sales over time is used to chart the life cycle. The distinct phase of an companies life cycle are- introduction, growth, maturity, and decline. Sales typically begin slowly at the introduction phase, Then take off rapidly during the growth phase.

STAGES OF THE Business life Cycle

Introduction

In the introduction stage of the Business life cycle, an industry is in its infancy. Perhaps a new, unique product offering has been developed or patented, thus beginning a new industry. Some analysts even add an embryonic stage before introduction. At the introduction phase, the firm may be alone in the industry. It may be a small entrepreneurial company and a proven company which used research or development funds and expertise to develop something new.

Growth

Like the introduction phase, the growth stage also needed a significant amount of capital. The aim of marketing efforts at this stage is to differentiate a firm’s offerings from other competitors within the industry. Thus the growth stage needed funds to launch a newly focused marketing campaign as well as funds for continued investment in property, plant, or equipment to facilitate the growth required by the market demands. However, the industry is experiencing more product standardization at this phase, which may encourage economies of scale or facilitate development of a line-flow layout for production efficiency.

Research or development funds will be required to make changes to the product and services to better reflect customers’ needs or suggestions. In this stage, if the company is successful in the market, growing demand will create sales growth. Earnings or accompanying assets will also grow or profits will be positive for the company. Marketing often refers to products at the growth zone as stars. These products have high growth or market share. The key issue in this stage is market rivalry. Because there is industry-wide acceptance of the product, more new entrants join the industry and more intense competition results.

Maturity

As the company approaches maturity, the industry life cycle curve becomes noticeably flatter, indicating slowing growth. Some experts have labeled an additional phase, 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 phase. 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 latest entrants will try to steal market share from existing products. Thus, the marketing effort must remain strong and must stress the unique features of the product and the company to continue to differentiate a company’s offerings from industry competitors. companies may compete on quality to separate their product from other lower-cost offerings, or conversely the company may try a low-cost/low-price strategy to increase the volume of sales or make profits from inventory turnover. A company at this phase may have excess cash to pay dividends to shareholders. But in mature industries, there are usually fewer companies, and those that survive will be larger or more dominant. While innovations continue they are not as radical as before and may be only a change in colour and formulation to stress “new” or “improved” to consumers. Laundry detergents are examples of mature products.

Decline

Declines are almost inevitable in an Companies. If product innovation has not kept pace with other competing products or service, if new innovations, technological changes have caused the industry to become obsolete, sales suffer or the life cycle experiences a decline. In this Stage, sales are decreasing at an accelerating rate. This is often accompanied by another, larger shake-out in the Company as competitors who did not leave during the maturity stage now exit the industry. Yet some company will remain to compete in the smaller market. Mergers and consolidations will also be the norm as companies try other strategies to continue to be competitive or grow through acquisition and diversification.

PROLONGING THE LIFE CYCLE

Management efficiency can help to prolong the maturity phase of the life cycle. Production improvements, like just-in-time methods or lean manufacturing, can result in extra profits. Technology, automation, or linking suppliers and customers in a tight supply chain are also methods to improve efficiency.

Today uses of a product can also revitalize an old brand. A prime example is Arm and Hammer baking soda. In 1969, sales were dropping due to the introduction of packaged foods with baking soda as an added ingredient or decline in home baking. Today uses for the product as a deodorizer for refrigerators or later as a laundry additive, toothpaste additive, and carpet freshener extended the life cycle of the baking soda industry. Promoting fresh uses for old brands can increase sales by increasing usage frequency. In some cases, this strategy is cheaper than trying to convert fresh users in a mature market.

To extend the growth stage as well as industry profits, company approaching maturity can pursue expansion into other countries or 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.

LIFE CYCLES ARE EVERYWHERE

Just as industries experience life cycles, studies have documented life cycles in many other areas. 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. Products also experience life cycles. Even within an industry, various individual companies may be at different life cycle phase depending upon when they entered the industry. The life cycle phenomenon is an important and universally accepted concept to help managers better understand sales growth and change over time.

Thanks

Business PDF files by Twyla Garrett

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Twyla Garrett – Author, Speaker, Educator, and Serial Entrepreneur – President and CEO – Investment Management Enterprise – Washington, DC – Twyla Garrett, CBM, CHS III is an extraordinary serial entrepreneur, corporate speaker, and compelling author who has been personally invited to speak at The White House about creating jobs, economic

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