Show how different strategic positions fit with various stages of the Industry Life Cycle.
Carpenter and Sanders (2008) note that there are four stages of an industry life cycle: embryotic, growth, mature and decline. The first stage of the life cycle strategies is the embryonic stage. Audretsch and Feldman (1996) tacit knowledge plays an important role in the generation of innovative activity, playing the most important role during the early stages of the industry life cycle. Carpenter and Sanders (2008) mention that a firm in the embryonic stage tends to be unproven and have no standardized technology which gives early movers the opportunity to set themselves to be in a strong position.
The next stage is the growth stage Carpenter and Sander (2008) in which growth decreases the learning curve presenting an opportunity to establish low-cost positions difficult to imitate. Technology changes as new entrants improve early movers work. Mazzucato and Semmler (1999) suggest that the growth stage usually is characterized by high levels of diversity between firms, such as unstandardized products, high product variation, and market share instability. With new entries into the market, each firm differentiates themselves by the resources that they bring. These differences across products, resources, and capabilities ultimately lead to substantial variance in market positions and profitability across competitors (Karniouchina, Carson, Short, and Ketchen, 2013).
The third stage is the maturity stage in which firms begin to become familiar to consumers and growth begins to slow down (Carpenter and Sanders, 2008). It is noted that product information is more available and quality becomes a vital factor to consumers which leads to premium prices for differentiated strategies. Karniouchina et al. (2013) during the maturity stage changes become less radical and more incremental, industry effects will tend to become more important than they are during growth. Karniouchina et al. (2013) cite Carroll (1985) indicating that a shakeout occurs during the transition from growth to maturity whereby weak competitors exit and concentration increases among the competitors that remain.
The final stage is the decline stage, in which the price competition is intense, costs are vital giving low-cost position firms an advantage (Carpenter and Sanders, 2008). Growth vanishes, resulting in intensified rivalry and shakeout except for the strongest competitors (Porter, 1980). Karniouchina et al. (2013) indicate that efforts to differentiate often fail and the surviving firms look to scale economies, international markets, and other efficiency or process-oriented advantages to compete.
The article that was presented by MacFarquhar (2012) which focus on Clayton Christensen and his insight in industries. The question here is why do big, companies fail which MacFarquhar (2012) indicate that the elimination of lower profit product margin products allow others to jump into the market to fill the market need. For example, I had previously mentioned the removal of the Mitsubishi Evolution in my MT1. This elimination on their part which they used to compete with Subaru allowed a new competitor to jump into the market, Honda. Christensen indicates that people go looking not for a product but for a solution to a problem they have. The article was interesting especially when Christensen brings up online learning. Christensen indicates that when he went to his dean and asked he replied with Whatâ€s going to happen to your brand? And Christensen replied that Itâ€s the low-end today that is the mainstream tomorrow. Many of us can relate to this because for many of us the problem we had was that we didnâ€t have time to go to a school. The issue was that we have a career, a family and can not sit in a class during a specific time frame. Online learning allowed us to solve this problem.
References
Audretsch, D. B., & Feldman, M. P. (1996). Innovative clusters and the industry life cycle. Review of industrial organization, 11(2), 253-273.
Carpenter, M. A., & Sanders, W. M. (2008). Strategic management: A dynamic perspective—Integrated StratSim simulation experience. Upper Saddle River, NJ: Pearson Prentice Hall.
MacFarquhar, L., (2012). When giants fail: what business has learned from Clayton Christensen.Retrieved from http://csumb.elearningctr.com/mod/forum/discuss.ph…
Karniouchina, E. V., Carson, S. J., Short, J. C. and Ketchen, D. J. (2013), Extending the firm vs. industry debate: Does industry life cycle stage matter?. Strat. Mgmt. J., 34: 1010–1018. doi:10.1002/smj.2042
Mazzucato M, Semmler W. 1999. Market share instability and stock price volatility during the industry life cycle: the U.S. automobile industry. Journal of Evolutionary Economics 9(1): 67–96.
Porter M. 1980. Competitive Strategy. Free Press: New York.
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