Question

USING THE FOLLOWING DATA PLEASE ANSWER QUESTIONS 11 Your firm is in a high tech. area. The industry began about seven years ago with a lot of rapid growth in the early years. Consider the following information that your firm has gathered in your situational analysis for the 8th year. “Market potential” for the industry is estimated at $850 million; “current industry sales” at the end of the 7th year was $849 million; there are 4 firms competing in this industry; both market potential and industry sales have been declining at a steep rate of 20% per year for the past four years; your firm’s current company sales at the end of the 7th year was $510 million; unlike industry sales your firm’s sales have been declining by only 2% per year for the past four years; and your profits have been declining but for year seven you still posted profits of $75 million. (Week 2 lecture notes on market measurements)

11. Given the above data, (1) what stage of the product life cycle is the “industry” most likely in? (2) Give your reasons why using the market measures above to help support your answer? (Week 5 lecture notes on Product Life Cycle and Ch. 9 Product Life Cycle Strategies)

Answer 1

The industry is most likely in decline phase.

• The current industry sales are 849 million and potential for next year is 850 million, just a headroom of 1 million.
• Further, both market potential and industry sales are declining at 20% YOY last 4 years and our firm though has held strong, still, the sales are declining by 2%
• Profits are also on the decline which is a sign of a mature market that has moved to decline market