Strategic Analysis of Business and Industry Life Cycles

Posted on Oct 6, 2025 in Business Administration and Management (BAM)

Business Life Cycle Strategies

Diversification Strategy

A diversification strategy involves penetrating several different markets simultaneously. This approach allows a company to diversify its risk by not depending on a single market, managing resources and investments across various categories, and typically achieving a large scale in terms of revenue. For example, Unilever operates in markets as different as deodorants (Rexona), chocolates (Milka), ice creams (Frigo), and shower gels (Dove).

However, this strategy has several disadvantages:

  • A lack of specialization in any one market.
  • Categories may not be properly developed, failing to create new segments.
  • Investment problems can arise in some markets if they are not a top priority for the board, sometimes for years.
  • It may be difficult to take advantage of economies of scale and logistics due to different commercialization and distribution methods.

Pure Player Strategy

A pure player strategy consists of operating in only one or two very similar markets to leverage synergies. This provides the company with enormous know-how and expertise about its consumers, buyers, and competitors. This strategy allows the company to increase economies of scale, typically through innovation, developing new segments, taking advantage of consumer trends, and maintaining market agility by reacting quickly to environmental changes. Logistics, production, and the supply chain can operate at near-optimal levels.

The main disadvantages are related to the dependence on a single market:

  • Vulnerability to competitor reactions, changes in consumer behavior, or new substitute products.
  • If market trends are negative or the market is mature and declining, the company might even disappear in the long term.

For example, SAB Miller is the largest beer company in the world and operates in Spain through the Mahou-San Miguel group. This allows the company a perfect approach in a very fragmented market, developing new segments through innovation and excellent positioning and differentiation between its different brands.

Industry Analysis

Analysis of Mature Industries

  1. Growth slows down, but maturity does not occur at a fixed point in development.
  2. Maturity can be delayed by innovations or other events that maintain growth. Strategic breakthroughs may even lead mature industries to resume rapid growth, and industries can experience more than one transition to maturity.
  3. Significant changes take place in the competitive environment.
  4. A decline in the industry growth rate means that firms cannot maintain their growth rate simply by holding their market share.
  5. Maintaining sales growth requires increasing market share at the expense of competitors.
  6. Competitors who have coexisted amicably may view such a strategic change as aggressive and irrational, potentially leading to substantial retaliation.
  7. New promotional activities and additional services may become common.
  8. As customers become accustomed to the product, they grow more critical in their appraisal of offerings and become more brand-conscious.
  9. Competition is based more on service levels and cost control.
  10. Overcapacity can lead to overproduction and subsequently to price wars to utilize production capacity, limiting the benefits of economies of scale. The development of economies of scale implies an improvement in the competitive approach because of the continuous reduction of the unit product cost.
  11. The ability to find new products and applications diminishes as an industry matures, and when they are found, they tend to be riskier and more costly.
  12. Some international competitors possess radically different cost structures, meaning those who are most favorably placed can often enter foreign markets with a distinct advantage over domestic producers.

Analysis of Emerging and Developing Industries

  1. Emerging industries are newly formed or reformed industries created by technological innovations, shifts in cost relationships, the emergence of new consumer needs, or other economic and sociological changes that make a new product or service a potentially viable business opportunity.
  2. There is uncertainty about the technology and strategic approaches adopted by industry participants. Information about competitors, customers, and industry happenings is scarce or poor, and reliable industry sales and market share data are often unavailable.
  3. The initial low production volume and lack of experience with the product often combine to create high costs relative to what the industry can potentially achieve.
  4. From the customer’s point of view, switching costs from what they currently use can be high.