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adms 1000

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Administrative Studies
ADMS 1000
Len Karakowsky

Session 4: Competitive Context & Technological Context Chapter 3: The Competitive Context (Pages 43 – 56) The Industry Lifecycle Model • Given a long enough period of observation, almost all industries exhibit an inverted U-shaped growth pattern, with the number of organizations rising initially up to a peak, and then declining as the industry ages • The pace of an industries evolution along its lifecycle is closely related to the evolution of technology within the industry • Technological innovations will often trigger the start of a new lifecycle or the creation of an entirely new industry • The industry lifecycle model divides industry evolution into four distinct phases: introduction, growth, maturity and decline • According to the model, new industries tend to be highly fragmented and characterized by experimentation with novel technologies and business models • Introductory phase sees many entrepreneurial firms enter the industry, hoping to emerge as a market leader. As the industry comes together around a particular approach and this dominant model is adopted by customers, suppliers, and other key constituents, the firms whose approach does not conform to the emerging standards exit the industry during a shakeout. The widespread diffusion of an industry standard or dominant design is a critical step in facilitating an industries transition to the growth phase. • Over time, the industry reaches the mature phase, where the market stabilizes and sales grow more slowly. Firms must become more efficient producers to lower costs and compensate for slower revenue growth. This is often achieved through mergers and acquisitions that result in higher industry concentration. • In the decline phases, aggregate sales drop and rivalry further heats up as the industry undergoes greater consideration through more mergers and the exit of inefficient firms. The Introduction Phase: Industry Emergence and Creation • New industries emerge as the result of changes (usually technology or regulatory) that create opportunities for entrepreneurs to leverage novel combinations of resources to develop innovative products, services or processes • Some industries are the result of important technological breakthroughs • Some industries are the outcome of government regulation (deregulation) that creates markets for new products or services • The early years of an industry are generally a chaotic period where there is tremendous uncertainty about the future of the market • There is no dominant technology or business model and it is far from certain that the market will ever grow sufficiently to provide attractive financial returns and growth opportunities • At the same time, this is also a period of unbridled optimism among entrepreneurs jockeying for position as the future of the market unfolds • Firms are intensely focused on research and development activities during this period. This results in a high degree of product innovation with many different versions of products incorporating different features and technologies. • Is a period of extraordinary creativity and innovation The Growth Phase: Dominant Designs and Shakeouts • At this phase the game becomes all about sales and market share • As the standard or dominant model spreads across the industry, the producers that persist with a
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