© Dr Adrian Kuah 2008 Applied Strategic
Management
Life Cycle Approach
© Dr Adrian Kuah 2008
Life-cycle Approaches to
strategy Formulation
Products and industry sales
https://www.51lunwen.org/englishpaper.html volumes, and industry profits are assumed to follow
a 4-stage cycle:
Introduction
Growth
Maturity
Decline.
© Dr Adrian Kuah 2008
Sales, cashflow and profits over the industry life-cycle
Sales
Profit
Cashflow
0
Source: Arthur D Little, Inc
Embryonic Growth Maturity Ageing
© Dr Adrian Kuah 2008
Introduction stage
• Strategies emphasise a buyer focus, build on
advertising and increased purchase
frequency, high prices, product design, short
production runs with high costs.
• This stage is characterised by few
competitors, is high risk with low
margins.
© Dr Adrian Kuah 2008
Growth stage
• Buyer group widens, products
differentiated by technical and
performance characteristics, quality
improvements, efficiencies in production
and marketing with high advertising
expenditure to create brand awareness,
with mass distribution channels.
• This stage is characterised by many
competitors entering the market,
mergers, casualties, higher profits and
falling prices.
© Dr Adrian Kuah 2008
Maturity stage
• Focus on process efficiency, reduction in
marketing and distribution costs, more
product differentiation and market
segmentation. Quality high, product
standardised. Creative marketing to extend
life-cycle, packaging important, mass
production, long production runs, some over
capacity.
• This stage is characterised by price
competition, shake-outs, cyclicality, lower
prices and margins.
© Dr Adrian Kuah 2008
Decline stage
• Sophisticated buyers, little product
differentiation, variable product quality.
Cost control by cutting advertising and
marketing efforts, specialising channels,
simplifying production lines, relying on
mass production, reducing differentiation
and cutting R&D expenses.
• This stage is characterised by substantial
over capacity therefore more exits and fewer
competitors, falling prices and lower
margins.
© Dr Adrian Kuah 2008
Fragmented - many suppliers
No Brand Loyalty
Poor Quality - High Risk
Changing Production
Techniques
High Prices - high profits as
volume growth
Cash required for growth.
Undercapacity
Mergers and Failures.
Recession Resistant
High Advertising
Some overcapacity Lower
(relative) prices
and profitability FEW LARGE
competitors
Product standardisation Service
important
Advertising less important
Poor climate for acquisitions
Susceptible to recession
Significant overcapacity price
wars and lower profitability
Move to commodity like
products, little or no
differentiation Very susceptible
to a recession
Me - too
Moderately
Competitive
Product
Focus on Quality
and Reliability
Establish Brand
Loyalty
Acquisition
Attack a segment
Become lowest
cost producer
Acquisition but
only at the
right price
Seek significant
competitive
advantage
D O N ' T
unless you can
fundamentally
change the
industry
Very Easy
Fairly Easy
Difficult
Very
Difficult
Development
Growth
Maturity
Decline
Stage in
the
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