As an industry evolves, its rate
of growth eventually declines. This “transition to maturity” is
accompanied by several changes in its competitive
environment.Competition for market share becomes more intense as
firms in the industry are forced to achieve sales growth at one
another's expense. Strategy elements of successful firms in maturing
industries often include the following:
- Product line pruning, or dropping unprofitable product models, sizes, and options from the firm's product mix.
- Emphasis on process innovation that permits low-cost product design, manufacturing methods, and distribution synergy.
- Emphasis on cost reduction through exerting pressure on suppliers for lower prices, switching to cheaper components, introducing operation efficiencies, and lowering administrative and sales overhead.
- Careful buyer selection to focus on buyers who are less aggressive, more closely tied to the firm, and able to buy more from the firm.
- Horizontal integration to acquire rival firms whose weaknesses can be used to gain a bargain price and that are correctable by the acquiring firms.
- International expansion to markets where attractive growth and limited competition still exist and the opportunity for lower-cost manufacturing can influence both domestic and international costs.
- Build new, more flexible competitive capabilities.
- Purchase rivals at bargain prices.
Business
strategies in maturing industries must avoid several pitfalls. First,
they must make a clear choice among the three generic strategies and
avoid a middle-ground approach, which would confuse both
knowledgeable buyers and the firm's personnel. Second, they must
avoid sacrificing market share too quickly for short term profit.
Finally, they must avoid waiting too long to respond to price
reductions, retaining unneeded excess capacity, engaging in sporadic
or irrational efforts to boost sales, and placing their hope on “new”
products, rather than aggressively selling existing products.
