An industry life cycle refers to the stages that an industry goes through in its course in the market. The life cycle starts in the introduction stage then to the growth, maturity and decline stages, respectively. In each of these stages, an industry or a business will have different characteristics in terms of types of buyers, market concentration, product pricing, and marketing. These characteristics determine the stage of a company or industry.
U.S. Automobile Industry
The traditional car companies are in their declining stage of the industry life cycle. It is evident that the Big Three automakers – GM, Ford, and Chrysler are facing competition from innovations that they are not keeping pace with leading to a shift in demand for their products. Their sales and revenue declined up until GM and Chrysler filed bankruptcy in 2009 while Ford was struggling to keep up with the declining profits. The competition affecting the industry in the maturity stage has led to a decrease in market share between the Big Three. The strategies that the three automakers are using are exit and consolidation to keep up with the great changes in the industry. Today, new entrants like Tesla and foreign automakers overtake the market share for this traditional U.S. automobile industry.
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Tesla Motors
Tesla models are renowned for their outstanding specifications as well as the high prices. The high pricing strategy of the company is an obstacle to get to the next stage of the industry life cycle. In the case, Tesla charges higher than competitors hence do buyers have a large bargaining power due to the cheaper competition. Musk, CEO Tesla, also wants to increase production capacity and reduce their production costs. This strategy is paramount in reducing the pricing at Tesla for the company to adopt cost leadership.
Market growth in the U.S. will increase rapidly as more and more buyers demand cars. Tesla can only meet this high demand by increasing their production capacity. Increased production capacity will drive up the market growth while reduced prices will increase their market share in the industry. It is important for Tesla to find an integration strategy that will render their production process very effective. This strategy will help reduce the product prices and increase production capacity and in the end, the firm will advance to the next stage.
Research and development is a gap that Tesla has to fill up to ensure that their products do not have a large number of substitutes. Specialization in electric vehicles has led to so many controversies and buyers are reluctant to invest in the company’s vehicles. Tesla has also incurred so many losses from their products. A product can only withstand competition and disruptive innovations if the research is right and proper differentiation strategies are taken up. As discussed earlier, cost leadership is a concept that will help the firm and so is dealing with the issues that are making buyers reluctant to buy.
