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What Is a Declining Industry?

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  • Written By: A. Lyke
  • Edited By: Michelle Arevalo
  • Last Modified Date: 05 September 2016
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The term product life cycle describes the various stages of a good’s existence in terms of cost, popularity, and other factors. Which stage a product is in generally tells a marketer about its current opportunities and challenges. Introduction, growth, maturity, and decline are the four stages of this cycle. Just like products, entire industries may go through such a cycle, eventually entering the decline stage when consumer demand for the industry’s products slows, and sales become stagnant.

When a new item is brought to market, the introductory stage can be identified by slow sales growth, few companies offering the product, and low demand as consumers learn about the industry. Then, as a few customers buy the product, the growth stage is marked by a period of rapid consumer acceptance and an increase in sales. A mature industry typically has a slowdown in growth as sales stabilize and more competitors enter the market. Sometimes, an industry stays in maturity and never reaches the declining industry stage.

Indicators of a declining industry can include diminishing profitability, to the point that the cost of production outweighs the profits from sales. Several companies may withdraw from the declining industry, as was the case with photographic film and film cameras when digital photography took over the market. Other indicators may include a weakening of trade channels, lowered promotional budgets, and a reduction in product prices.

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Declining industry generally has several causes, such as market saturation and technological advances. Market saturation means that everyone who would buy the product has already bought it. This usually happens with items like microwaves and flat-screen televisions. Advancing technology can also cause industry decline, and an example of this is the way in which word processing computer software made typewriters obsolete.

Maintaining a company in a declining industry typically requires a large amount of effort and expense. Products with weak sales require frequent inventory and price adjustments. The goods may require more advertising and sales efforts than popular products. Occasionally, the company becomes associated with the declining industry, which can damage to the company’s image.

Businesses functioning within declining industries usually have several options for dealing with the reduction in sales. Industries with low exit barriers often allow companies to abandon the product and refocus on more profitable endeavors. Sometimes, executives reinvest in the industry, researching and developing new product features in an attempt to rejuvenate the industry. Successful industry rejuvenation may lead to a return to industry maturity, or even a return to the growth stage of the product life cycle.

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