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The industrial life cycle is a term used for classifying industry vitality over time. Industry life cycle classification generally groups industries into one of four stages: pioneer, growth, maturity and decline.

In the pioneer phase, the product has not been widely accepted or adopted. Business strategies are developing, and there is high risk of failure. However, successful companies can grow at extraordinary rates.

In the growth phase, the product market has been established and there is at least some historical guide to ground demand estimates. The industry is growing rapidly, often at an accelerating rate of sales and earnings growth. Companies will still face relatively frequent execution issues.

As the product matures, growth slows as penetration reaches practical limits. Companies began to focus on market share rather than growth. Industry demand tends to follow the overall economy.

At some point, many industries peak and begin a steady decline. Shifting tastes or new technologies render some products less relevant. Some firms exit the industry by focusing on other products, bankruptcy or being acquired by rivals. The focus for management shifts to managing expenses and exiting gracefully.

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See also:

Conducting an Industry Analysis

Industry Classification: Business Cycle Reaction

Dow Jones Industrial Average

Normalizing Price to Earnings Ratio for Business Cycle Effects

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