Presentation on theme: "Industry Evolution OUTLINE The industry life cycle"— Presentation transcript:
1 Industry Evolution OUTLINE The industry life cycle Industry structure, competition, and success factors over the life cycle.Anticipating and shaping the future.37
2 The Industry Life Cycle Industry SalesIntroduction Growth Maturity DeclineTimeDrivers of industry evolution :demand growthcreation and diffusion of knowledge38
3 Product and Process Innovation Over Time Product InnovationProcess InnovationRate of innovationTime39
4 Standardization of Product Features in Autos FEATURE INTRODUCTION GENERAL ADOPTIONSpeedometer by Oldsmobile Circa Automatic transmission 1st installed 1904 Introduced by Packard as an option, Standard on Cadillacs early 1950sElectric headlamps GM introduces, 1908 Standard equipment by 1916All-steel body GM adoptes 1912 Standard by early 1920sAll-steel enclosed body Dodge, Becomes standard late 1920sRadio Optional extra 1923 Standard equipment, 1946Four-wheel drive Appeared 1924 Only limited availability by 1994Hydraulic brakes Introduced Became standard 1939Shatterproof glass 1st used Standard features in Fords 1938Power steering Introduced 1952 Standard equipment by 1969Antilock brakes Introduced 1972 Standard on GM cars in Air bags GM introduces, 1974 By 1994 most new cars equipped with air bags41
5 How Typical is the Life Cycle Pattern? Technology-intensive industries (e.g. pharmaceuticals, semiconductors, computers) may retain features of emerging industries.Other industries (especially those providing basic necessities, e.g. food processing, construction, apparel) reach maturity, but not decline.Industries may experience life cycle regeneration.Sales Sales1900 ‘50 ‘60 ‘MOTORCYCLES TV’sLife cycle model can help us to anticipate industry evolution—but dangerous to assume any common, pre-determined pattern of industy development.ColorPortableB&WHDTV ?42
6 Evolution of Industry Structure over the Life Cycle INTRODUCTION GROWTH MATURITY DECLINEDEMAND Affluent buyers Increasing Mass market Knowledgeable,penetration replacement customers, resi-demand dual segmentsTECHNOLOGY Rapid product Product and Incremental Well-diffusedinnovation process innovation innovation technologyPRODUCTS Wide variety, Standardization Commoditiz Continued rapid design change ation commoditizationMANUFACT- Short-runs, skill Capacity shortage, Deskilling OvercapacityURING intensive mass-productionTRADE Production shifts from advanced to developing countries-----COMPETITION Technology- Entry & exit Shakeout & Price wars,consolidation exitKSFs Product innovation Process techno Cost efficiency Overhead red logy. Design for uction, ration alization, lowcost sourcing43
7 The Driving Forces of Industry Evolution BASIC CONDITIONS INDUSTRY STRUCTURE COMPETITIONCustomers becomemore knowledgeable& experiencedCustomers becomemore price consciousQuest for newsources ofdifferentiationProducts becomemore standardizedDiffusion oftechnologyPrice competitionintensifiesProductionbecomes less R&D& skill-intensiveProduction shiftsto low-wagecountriesExcess capacityincreasesBargaining powerof distributorsincreasesDemand growthslows as marketsaturation approachesDistribution channelsconsolidate44
8 ROI at Different Stages of the Industry Life Cycle
9 Strategy and Performance at across the Industry Life Cycle Note: The figure showsstandardized means for each variable for businesses at each stage of the life cycle.
10 Preparing for the Future : The Role of Scenario Analysis in Adapting to Industry Change Stages in undertaking multiple Scenario Analysis:Identify major forces driving industry changePredict possible impacts of each force on the industry environmentIdentify interactions between different external forcesAmong range of outcomes, identify 2-4 most likely/ most interesting scenarios: configurations of changeforces and outcomesConsider implications of each scenario for the companyIdentify key signposts pointing toward the emergence of each scenarioPrepare contingency plan
11 Innovation & Renewal over the Industry Life Cycle: Retailing WarehouseClubse.g. Price ClubSam’s ClubInternetRetailerse.g. Amazon;WebvanDiscountStorese.g. K-MartWal-Mart“CategoryKillers”e.g. Toys-R-Us,Home DepotMail order,catalogueretailinge.g. SearsRoebuckChainStorese.g. A&P1880s s s
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