# Industry Life Cycle Explained: Introduction, Growth, Maturity, and Decline

![Industry Life Cycle](https://www.investopedia.com/thmb/ZON1SnaSVDcQCeGafwethg4YprY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/industrylifecycle.asp-final-fe9de85f0c2d4b08ba2229553ff4a276.png)

*— Investopedia / Sydney Saporito*

## What Is the Industry Life Cycle?

The industry life cycle illustrates the progression of an industry through four pivotal stages: introduction, growth, maturity, and decline. Each stage reflects distinct business characteristics, affecting market players and informing strategic decisions. Understanding these phases aids investors and companies in navigating markets effectively.

### Key Takeaways

*   The industry life cycle progresses through four stages: introduction, growth, maturity, and decline.  
    
*   Each phase of the life cycle has distinct business characteristics, such as rapid growth in the introduction phase and consolidation in the maturity phase.  
    
*   Understanding the industry life cycle helps investors make informed decisions and anticipate changes in market dynamics.  
    
*   The decline phase often leads to further consolidation, as obsolescence and changing end markets reduce demand for the industry's products.  
    
*   While the standard model applies to manufacturing, service and technology industries may experience different life cycle dynamics.

## Comprehensive Overview of the Industry Life Cycle

There is no universal definition for the various stages of the industry life cycle, but commonly, it can be organized into introduction, growth, maturity, and decline.

Life cycles are present in all aspects of life. The industry life cycle can relate to youth, inexperience, and determination (introduction), learning, improvement, and social expansion (growth), achievement and fulfillment (maturity), and the decreasing ability to compete, win, and thrive (decline).

Each phase of the industry life cycle can last different amounts of time across industries. The typical model is for manufacturing, but service industries, especially [tech](https://www.investopedia.com/terms/t/technology_sector.asp), may be different.

> **Fast Fact**
>
> Sales, profits, and cash flows are typical financial metrics followed closely in every phase of the industry life cycle.

## Exploring the Phases of the Industry Life Cycle

### Introduction Phase

The introduction, or startup, phase involves the development and early marketing of a new product or service. Innovators often create new businesses to enable the production and proliferation of the new offering.

Information about the products and industry participants is often limited, so demand tends to be unclear. During this stage, consumers of the goods and services need to learn more about them, while the new providers are still developing and honing the offering.

The industry or business tends to be highly [fragmented](https://www.investopedia.com/terms/f/fragmentation.asp) in the introduction stage. Participants tend to be unprofitable because expenses are incurred to develop and market the offering while revenues are still low.

### Growth Phase

In this second phase, consumers have come to understand the value of the new offering, business, or industry. Demand grows rapidly.

A handful of important players usually becomes apparent, and they compete to establish a share of the new market. Immediate profits usually are not a top priority as companies spend on research and development or marketing.

[Business processes](https://www.investopedia.com/articles/personal-finance/090815/basics-business-development.asp) are improved, and geographical expansion is common. Once the new product has demonstrated viability, larger companies in adjacent industries tend to enter the market through acquisitions or internal development.

### Maturity Phase

The maturity phase begins with a [shakeout](https://www.investopedia.com/terms/s/shakeout.asp) period, during which sales growth slows, focus shifts toward expense reduction, and consolidation occurs (as companies begin to merge or acquire each other).

Some firms attain economies of scale, hampering the sustainability of smaller competitors. [Growth can continue](https://www.investopedia.com/terms/l/lifecycle.asp).

As maturity is achieved, barriers to entry become higher, and the competitive landscape becomes more clear. Market share, cash flow, and profitability become the primary goals of the remaining companies now that growth is relatively less important.

Price competition becomes much more relevant as product differentiation declines with consolidation.

Businesses may prolong the maturity phase by repositioning their offerings, investing in new markets and technology, and spurring new growth.

### Decline Phase

The [decline phase](https://www.investopedia.com/terms/d/decliningindustry.asp) is when an industry stops growing. Outdated products and changing markets lower demand and revenue. This pressures profits and often pushes weaker companies out.

Further consolidation is common as participants seek synergies and further gains from scale. The decline phase often signals the end of viability for the incumbent [business model](https://www.investopedia.com/terms/b/businessmodel.asp), pushing industry participants into adjacent markets.

As with the maturity phase, the decline phase can be delayed with large-scale product improvements or repurposing. However, these tend simply to prolong the decline and ultimate market exit.

## Examples of Industry Life Cycle Phases

### Introduction Phase

Industries in the startup stage include artificial intelligence, self-driving vehicles, biotechnology, and virtual reality.

### Growth Phase

Coca-Cola is an example of a savvy life cycle survivor. In western countries, it is considered to be in the maturity stage because its market offers no room for expansion. But its ability to change its business efficiently and effectively to serve huge populations in Asia also put it in the growth phase.

The [computer industry](https://www.investopedia.com/terms/t/technology_sector.asp) stays in growth by updating hardware, features, and functions.

### Maturity Phase

In the U.S., [mature industries](https://www.investopedia.com/terms/m/mature-firm.asp) include food and agriculture, mining, and financial services. Companies such as Apple, Xerox, Intel, IBM, and Procter & Gamble are considered mature-phase companies.

### Decline Phase

Certain revenue analysis research indicates that the fastest declining industries in the U.S. include:

*   Iron and steel manufacturing
*   Natural gas distribution
*   Semiconductor machinery manufacturing
*   Oil drilling and gas extraction
*   Chicken egg production

## Does the Industry Life Cycle Apply to All Businesses?

Ultimately, yes. However, the discrete stages may occur differently, and have different durations depending on a business and its industry.

## What Can Prolong the Industry Life Cycle?

Production efficiencies, new developments that position the industry/business for greater achievements, effective management, new technologies that are harnessed properly, and ongoing customer base and relationship development can all help maintain the growth and maturity phases.

## Why Does the Industry Life Cycle Matter?

For companies, life cycle stages are important because they can drive strategies and actions related to sales, research, expenses, competition, and more. For investors, understanding life cycles and the stage that an industry or business is in can help them decide whether to get in or out of an investment.

## The Bottom Line

The industry life cycle outlines the progression of an industry or business through introduction, growth, maturity, and decline stages. Recognizing these phases empowers companies to strategically navigate operational and financial decisions, aligning their efforts with critical objectives like enhancing product development, boosting profitability, and expanding their market reach. For investors, understanding industry life cycles is crucial for making informed investment decisions, as the phase an industry is in can significantly impact its growth prospects and competitive dynamics.

> **Article Sources**
>
> 1.  Linkedin. "[Strategic Management Cont'd: Industry Life Cycle Model, The Growth Stage](https://www.linkedin.com/pulse/strategic-management-contd-industry-life-cycle-model-balint)."
>     
> 2.  IBISWorld. "[Fastest Declining Industries in the U.S. by Revenue Growth (%) in 2023](https://www.ibisworld.com/united-states/industry-trends/fastest-declining-industries/)."