Industry Life Cycle Investment Analysis, Industry Life Cycle

a) Infancy.

Only a handful of startups are investing in this emerging industry; Startups may not only not be profitable financially, but generally lose money; Businesses can also be in danger of bankruptcy due to financial difficulties, so they are more suitable for speculators than investors; In the later stage of the infancy period, with the improvement of production technology, the reduction of production costs and the expansion of market demand, the new industry will gradually shift from the start-up period of high risk and low return to the growth period of high risk and high return.

2) Growth period.

After extensive publicity and consumer trial, the products of the new industry have gradually won the popularity or preference of the public with their own characteristics, and the market demand has begun to rise, and the new industry has also prospered; In the new industry, manufacturers and products compete with each other. This can last for years or decades. For this reason, this phase is sometimes referred to as the period of investment opportunity; The continuation of this situation will lead to the continuous development of market competition and the continuous increase in product output, and the demand of the market will become increasingly saturated.

Manufacturers can not simply rely on expanding production and increasing market share to increase revenue, but must rely on additional production, improve production technology, reduce costs, and research and development of new products to strive for competitive advantage, defeat competitors and maintain the survival of enterprises; During this period, although the profits of enterprises increased rapidly, the competitive risks faced by enterprises were also very large, and the bankruptcy rate and merger rate were quite high; In the latter part of the growth period, the number of manufacturers in the market began to stabilize after a significant decline.

3) Maturity period.

The means of competition between manufacturers and products have gradually shifted from first-class means to various non-first-class means, such as improving quality, improving performance and strengthening after-sales maintenance services; The profits of the industry have reached a high level due to a certain degree of monopoly, while the risks are low because the market proportion is relatively stable and it is difficult for new enterprises to hit the mature market.

4) Recession period.

The original industry has seen a depression with a decrease in the number of manufacturers and a decline in profits; The market is shrinking, and profit margins are stagnant or declining. When normal profits can no longer be maintained or existing investments are depreciated, the industry gradually disintegrates.

The life cycle of the investment industry.

How to understand an industry? What is the current stage of development of the industry?

The life cycle of the industry mainly includes four stages of development: infancy, growth, maturity and decline.

The industry life cycle is a qualitative theory, and the industry life cycle curve is an approximate hypothetical curve.

Specific stages of development and characteristics:

1. The scale of the enterprise may be very small, and there are different views on how the enterprise in the industry develops, and the product type, characteristics, performance and target market are constantly changing. The market is filled with a variety of newly invented products or services, and management takes a strategic approach to support the product to market. The product design is not yet mature, the development of industry products is relatively slow, the profit margin is low, and the market growth rate is high.

Strategy: Track opponents, engage, or wait and see.

2. Growth period The industry has been formed and developed rapidly, and most companies continue to exist in the industry due to high growth rates. Management needs to ensure that production is sufficiently expanded to achieve the target market share. A large amount of capital is needed to achieve high growth rates and expansion plans, and cash is scarce.

Use patents or cost reductions to set up barriers to entry (built-in economies of scale) and prevent competitors from entering the industry.

Strategy: Increase investment, increase market share, and discourage new entrants.

3. The growth rate of the mature period has dropped to a more normal level, which is relatively stable, and the changes in sales volume and profit growth in each year are smaller, and the competition is more intense. In the later stage, some companies withdrew from the industry due to unsatisfactory return on investment, and a small number of enterprises dominated the industry, which needed to monitor potential merger opportunities (beer industry), explore new markets (Chinese tractor exports), develop new technologies, and develop new products with different characteristic functions. Strategic management is crucial.

Strategy: Improve efficiency, cost control, entry and control of market segmentation. M&A expansion, research and development of new products.

4. Recession period The industry has excess productivity, the substitutes that appear after the technology is imitated floods the market, the market growth rate is seriously reduced, the product variety is reduced, the level of industry activity declines as companies withdraw from the industry, and the industry may cease to exist or be merged into another industry. The industry has been around longer than any single product. It is important to make full use of strategic management.

Strategy: Exit in time.

1. The industry life cycle is the process of industry change, that is, the industry life cycle is divided into four stages: formation period, growth period, maturity period and decline period.

2. An industry is generally divided into four stages, one is the start-up period of the industry, one is the growth period, and the other is the basic stable and mature period, just as people's life, old age, sickness and death are basically the same.

3. Generally, we use sales and profits to reflect, the most important of which is sales. In general, your income is higher to drive the corresponding profits, and the corresponding profits will increase.

The industry life cycle refers to the entire process of an industry from birth to death, including the initial stage, the growth stage, the maturity stage and the decline stage. According to the characteristics of different industries and market environments, the length of the industry life cycle and the characteristics of the stage will also be different. In general, the industry life cycle can be divided into the following four phases:

Introduction stage: At this stage, the industry is in an emerging stage, and the market size and sales are relatively small. Usually by some innovative enterprises or new products to enter the market, need to carry out a lot of publicity and promotion, consumer demand for these products is not very strong, the degree of competition is relatively low.

Growth stage: At this stage, the industry has entered a period of rapid growth, and the market size and sales have shown a rapid growth trend. Due to the increase in market demand and the promotion of technological innovation, the competition in the industry has intensified, and more and more competitors have emerged in the market.

Companies at this stage usually need to invest more and expand their scale to meet market demand and increase market share.

Maturity stage: At this stage, the industry enters a saturation period, and the market size and sales growth begin to slow down. The competition between competitors tends to be fierce, the distribution of market share tends to be stable, and the growth of enterprises mainly depends on the competition for market share and product differentiation competition.

At this stage, companies need to focus on improving cost-effectiveness and product quality to improve market competitiveness and maintain profitability.

Decline Stage: In this stage, the industry enters a period of recession, and the market size and sales begin to decline. Due to the reduction of market demand and the lack of technological innovation, industry competition has gradually weakened, and the number of enterprises in the market is getting smaller and smaller.

Enterprises at this stage usually need to carry out structural adjustment and resource optimization to reduce costs and improve efficiency, and extend the life cycle of the enterprise as much as possible.

In conclusion, the industry life cycle is a dynamic process, and different stages of the industry have different characteristics and laws. Enterprises should flexibly adjust their business strategies and market strategies according to the changes in the life cycle of the industry to adapt to changes in market competition and industry development, so as to maintain competitive advantage and profitability.

According to the life cycle of industry development, it is generally divided into introduction period, growth period, maturity period and decline period.

With the exception of bankruptcy and reorganization**, general investment mainly focuses on three cycles, namely the introduction period, the growth period and the maturity period.

From the revenue growth curve and the cost growth curve:

The main performance of the industry introduction period is the initial investment, including product research and development, team building, channel development and other cost investment, and the income is relatively small. During this period, there is generally less income and more losses, and the risk of corporate death is high.

Look at the enterprises in this period, mainly focus on the advanced nature of enterprise technology, how is it? As a non-technical personnel is not easy to evaluate, it can be judged by analyzing the quality of enterprise product customers and the use of batches, generally speaking, if the customers who use enterprise products are sufficient, it can be considered that the industrial product technology is advanced in the industry.

The second concern is the composition of the company's technical team, and it is generally difficult to believe that a team without a professional academic background can provide continuous R&D capabilities.

The third needs to pay attention to the size of the market space in which the enterprise is located, and the market space is the ceiling of the industry, which determines how big the cake of the industry is.

The fourth concern is how competitive the company is in the industry. What is the position of the company in the industry?

1. The life cycle of the general industry mainly includes the formative period. There are four stages: growth period, maturity stage and decline stage. Take the bicycle industry as an example, when the bicycle was just invented, it was the formative period, and when the bicycle industry expanded rapidly, it was the growth period, similar to our Phoenix bicycle era at that time.

And when everyone accepts bicycles, and a bicycle can be purchased for only a few hundred yuan, it will reach maturity. Now, bicycles have entered a period of recession because we have more convenient transportation.

2. When an industry reaches a period of recession. When we make investments, we should avoid being in this kind of industry. That is, it is necessary to choose the start-up stage to do the long-term, and the long-term to do the mid-term or the long-term failure, and the remaining three stages can be done - start-up, growth, and stability can be chosen.

3. When the mu beam stock reaches the growth period and maturity period. All the news and expectations are in front of us at this time, so this is the time when we best participate. When we study these companies thoroughly, i.e., the industry life cycle is well understood, then it will be beneficial for our investment and allow us to obtain excess returns.